Practical Problems With Pricing Delay Using Eichleay

摘要

Since 1960, the Eichleay Formula has been used to price extended and/or unabsorbed home office overhead. Most in the construction industry treat the Eichleay Formula as an accounting mechanism - seldom understanding that the US Armed Services Board of Contract Appeals created this "formula" as an estimating tool, not an accounting method. There are some practical problems with the Eichleay Formula. From the accounting perspective, there are several major flaws built into the formula. From the project owner's perspective, there is a risk of overcompensation unless certain contractual defenses are employed. And, from the contractor's perspective, there are issues with the applicability and the use of the formula. This article examines the traditional Eichleay Formula from all three viewpoints, to identify the problems and offer some recommendations on how to alleviate them.