When a contractor encounters delays on a project, it will no doubt incur additional indirect costs to support the project for the extended duration. Such indirect costs are often referred to as extended site overhead costs. In addition, the extended duration of the project also may affect a contractor's home office overhead costs in one of two ways. More commonly, a delay suffered on a project results in unabsorbed/underabsorbed home office overhead because the contractor's forces and equipment must remain on the project for a longer period of time and are thus foreclosed from earning revenue on other projects that would contribute to, or absorb, the contractor's home office expenses. Less commonly, a contractor also might incur increased home office expenses if the dedication of home office personnel to a troubled project requires the hiring of additional personnel. This is typically referred to as extended home office overhead.
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