In the previous posting, I discuss the Civilian Board of Contract Appeals’ case of Quality Trust, Inc. That case deals with a claim known as constructive suspension. However, the case also discusses unabsorbed home office overhead damages known as Eichleay damages, which are hard damages to prove. Below describes the elements a party MUST prove to substantiate Eichleay damages:
The Eichleay formula is used to calculate the amount of unabsorbed home office overhead a contractor can recover when the [G] overnment suspends or delays work on a contract for an indefinite period.” To establish entitlement to Eichleay damages, the contactor must show three elements: (1) “there must have been a government-caused delay of uncertain duration;” (2) “the delay extended the original time for performance or that, even though the contract was finished within the required time period, the contractor incurred additional costs because he had planned to finish earlier;” and (3) “the contractor must have been on standby and unable to take on other work during the delay.” Importantly, in claims for Eichleay damages, similar to a suspension of work claim, the alleged government-caused delay cannot be “concurrent with a delay caused by the contactor or some other reason.”
Quality Trust, Inc. v. Department of the Interior, 2025 WL 1092348 (CBCA 2025) (internal citations omitted).
Keep these elements in mind when you think you have a basis for unabsorbed home office overhead damages / Eichleay damages.
Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.