Civil Engineering Reference
In-Depth Information
This approach is open to some of the same criticisms as the Hudson
formula. It can be useful as an approach where actual costs of head office
staff directly engaged upon the individual contract are not obtainable. In
that case, the proportion of the contractor's overall overhead costs that can
be shown from his accounts to be spent upon staff directly engaged on
contracts can be substituted for the element
h
to obtain a rough and ready
approximation of the cost of staff engaged on the particular contract during
the period of delay. However, clearly this approach does not make an
allowance for the cost of greater staff involvement during the original
contract period due to disruption.
This formula has been accepted in
Finnegan
v.
Sheffield City Council
318
and
Beechwood Development Company (Scotland) Ltd
v.
Stuart Mitchell (t/a Discovery
Land Surveys)
319
if there is no practicable means of otherwise calculating the
amount. In both instances, the court incorrectly referred to the formula as
'Hudson's'.
The Eichleay formula
This is an American version of the Hudson formula, and is a three-stage
calculation which applies daily rates. It is usually expressed as follows:
Contract billings
Total contractor billings
Total HO overheads for
¼
Allocable
for contract period
(1)
contract period
overhead
(2)
Allocable overhead
Days of performance
¼
Daily contract HO overhead
(3) Daily contract HO overhead
Days of compensable delay
¼
Amount of recovery
Once again, the formula gives only a rough approximation; it does not
require any proof from the contractor of his actual increased overhead
costs from the delay and there is the possibility of double-recovery. In
order to allow for this it is necessary at least to deduct any head office
overhead recovery allowed under the normal valuation rules. Furthermore,
although it is widely used in American Federal Government Contracts and
has been adopted in some other cases, it has been subject to judicial criticism
and it is not universally accepted
320
. A very sensible view is expressed by
the editors of
Building Law Reports
:
'Criticism of the formula is not of course criticism of the proposition that
in a period of reduced activity on site a contractor will incur off-site
overheads for which payment is not being recovered from revenue gen-
318
(1988) 43 BLR 124.
319
(2001) CILL 1727.
320
See the comments of the USA Court in
E. Berley Industries
v.
City of New York
(1978) 385 NE (2d)
281.
