Recent DCAA Guidance on Recovering Unabsorbed Overhead - Modifications to the Formula
Auditors are encouraged to be on the lookout for modifications to the components of the Eichleay formula that may result in excess recovery of unabsorbed overhead or duplicate recovery of costs included in the original contract price. Common modifications to be on the lookout for include:
a. Use of original price as opposed to actual billings (revenue) in the numerator of Step 1
b. Original or planned days of performance rather than complete performance period in the denominator of Step 2.
c. Actual delay days rather than extension days beyond the original revised date.
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