Process Model for Identifying and Computing Allowable Home Office Overhead Cost Claims

摘要

Construction change often leads to both direct and indirect cost damages. Direct costs are the bricks and mortar costs, which arise from extra craft labor and extra material. Indirect costs include the overhead costs associated with supporting a project. Those indirect costs include the contractor's home office overhead costs. When a project is delayed, those overhead costs may be extended and the contractor may seek to recover some portion of these costs. Claims for such home office overhead damages are frequently controversial and hard to compute. A widely used method to calculate these costs is the Eichleay formula. However, its application is not always successful, partly due to misunderstanding and partly due to misapplication. Based on a review of the project management literature and legal decisions, this paper presents a process model and guidelines for identifying circumstances eligible for home office overhead damage claims and for applying the Eichleay formula. These guidelines and the model can help contractors, owners, and other interested parties resolve home office overhead disputes faster and more economically.