This presentation examines the traditional Eichleay Formula, which has been used since 1960 to price extended and/or unabsorbed home office overhead, from the accounting, owner, and contractor's perspective to identify problems and offer some recommendations. Most professionals in the construction industry treat the Eichleay Formula as an accounting mechanism, seldom understanding that the Armed Services Board of Contract Appeals created this "formula" as an estimating tool, not an accounting method. There are also some practical problems with the Eichleay Formula. From the accounting perspective, there are several major flaws built into the formula. From the project owner's perspective, there is a risk of overcompensation unless certain contractual defenses are employed. Lastly, from the contractor's perspective, there are issues with the applicability and the use of the formula.
Duration: 1 hour | PDHs: 1 | Subscription: Members Only
Presented by: Jim Zack and Peter V. Badala