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    In reviewing any information available, to include VAAA construction & claims classes, I cannot seem to understand what step 1 of the Eichleay is talking about: Contract billings/Total billings during contract. 1. Does contract billings mean the award value of the contract or value of amounts billed to date? In this case, work was not started and therefore no billing. 2. Does the 'total billings during contract' mean the total award value of other contracts? If so, does this amount include the value of the contract for the contractor that's filing the REA? Does the date of 'total billings during contract start at the date of award of the contract that is the subject of the REA, or the date of the REA itself? Please advise. Thank you.


    Answer

    The Eichleay formula is one method for calculating home office overhead on construction contracts when negotiating Government delay damages. Whether using the Eichleay method or other method for determining overhead, the vast majority of the information to support the overhead rates must be provided by the contractor and may require an audit. Require the contractor to provide whatever level of detail you need to substantiate the contractor's proposal including a complete breakdown of the total cost in the home office overhead pool. An analysis of the allowability (IAW FAR Part 31) is required prior to application. A simple statement by the contractor that their home office overhead for the period is $100,000, for example, is not acceptable.
     
    Rather than go into a detailed explanation of the formula application, I identified an example of the formula at the following website that should assist you with the development of a Government negation position.
     
    http://www.constructionguy.com/litigation/eichleay.htm#basic

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