The Eichleay formula in Naval Facilities Engineering Command (NAVFACENGCOM) contracting.

摘要

When a delay causes contractors to be shut down or turn idle for a period oftime, fixed overhead as well as general and administrative expenses continue to beincurred. However, the amount of direct costs to which these expenses can be allocatedor expensed is reduced. The result is an amount of overhead that is unabsorbed, whichcan be allocated to that specific delay. Various pricing methods for calculating theseunabsorbed home office overhead expenses currently exist in the construction litigationprocess today. The per diem Eichleay method is the most frequently utilized method.In this era of financial austerity, the armed forces are facing challenges to maintainoperational readiness with fewer personnel and leaner operating capital due to shrinkingdefense budgets. One way to optimize these precious and limited resources is the efficientand effective use of construction funds and personnel in Naval Facilities EngineeringCommand (NAVFACENGCOM) construction administration. This report focuses on the commonly utilized Eichleay method of computation, aswell as alternative methods currently utilized in today's construction industry. Researchand analysis was conducted on current litigated construction claims resulting fromdisputes involving the Eichleay formula. Assumptions about the Eichleay formula methodand its shortcomings have been provided. Emphasis on utilizing other methods ofcalculating these damages to the contractor as well as situation specific modifications ofthe Eichleay formula itself are also included. Conclusions were drawn from the data thatidentify significant strengths and weaknesses among these common place case situations.Recommendations were made for future possible improvements regarding the recognitionand avoidance of potential claims by contractors.The target audience of this report is the junior construction project manager(Naval Civil Engineer Corps officer/civilian government personnel) and is to be utilized asa guide in the NAVFACENGCOM construction organization atmosphere for calculatinglegitimate contractor's unabsorbed home office overhead expense for a government causedsuspension, delay, or disruption to the contract performance.