2017 - Practical Problems with pricing Delay Using Eichleay

Since 1960 the Eichleay Formula has been used to price extended and/or unabsorbed home office overhead. Most 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 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. And, from the contractor’s perspective, there are issues with the applicability and the use of the formula. This webinar examines the traditional Eichleay Formula from all three viewpoints to identify the problems and offer some recommendations on how to alleviate them. The session will provide attendees with a better understanding of the Eichleay Formula including its weaknesses and flaws from the perspectives of the accountant/auditor, the contractor and the owner. The session offers attendees 19 different alternatives to the Eichleay Formula which may be employed through incorporation in the contract documents prior to bidding.