(Editor’s Note.  The ability to apply the Eichleay formula of computing unabsorbed overhead (e.g. computing a daily rate and applying it for each day – see GCA DIGEST Vol. 3 No. 1 ) on a delay claim is an established practice when the contractor’s workforce is forced to be idle during the delay.  Controversy occurs when the workforce is not entirely idle.)

Differing site conditions required cessation of work for a 100 day period during which the contractor performed other work when it could.  Its payroll during the delay averaged 20 days where it averaged 40 days after the delay ended.  The contractor’s claim included $109,000 of unabsorbed overhead computed using the Eichleay formula and the government refused to pay the overhead portion asserting the contractor’s labor was not on standby but could have found replacement work to absorb the overhead it was claiming.

The Court disagreed with the government, stating though the contractor’s work was not totally suspended during the 100 day delay, progress was “significantly interrupted.”  The judge ruled the contractor had to remain on standby to restart work because of uncertainty of the delay duration making it impossible to take on replacement work.  He stated the term “standby” does not require a workforce to be completely idle.  In spite of the government’s argument that the contractor’s ability to move portions of its workforce to other projects meant they were not on standby, it was sufficient to show the contractor’s work was “significantly interrupted” to collect Eichleay unabsorbed overhead (Roy McGinnis & Co., ASBCA No 49867).

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