Payne Hackenbracht & Sullivan

Eichleay Formula

The Eichleay formula requires three steps:

1) to find allocable contract overhead, multiply the total overhead cost incurred during the contract period times the ratio of billings from the delayed contract to total billings of the firm during the contract period;

2) to get the daily contract overhead rate, divide allocable contract overhead by days of contract performance;and

3) to get the amount recoverable, multiply the daily contract overhead rate times days of government-caused delay.

FORMULA

Contract Billings

Total Billings during period of performance x Total Overhead (General and Administrative Expense) during period of contract performance = Overhead allocated to Contract

Allocated Overhead

Days of Performance = Daily Contract Overhead

Daily Contract Overhead x days of delay = Claim Amount

Example

Contract Notice to Proceed - November 1, 1986
Contract Completion Date - November 1, 1987
Performance Time - 365 days
Actual Completion Date - December 1, 1987
Days of Delay - 30 days
Contract Billings (Amount plus change orders) - $1,000,000
Contract Billings for Company 11/1/1986 to 12/1/87 - $2,000,000
Overhead (General and Administrative Expenses) 11/1/1986 to 12/1/1987 - $400,000

Calculation

$1,000,000 x $400,000 = $200,000

$2,000,000

$2,000,000/395 days = $506.33/day

$506.33 x 30 days = $15,189.90