{"id":894080,"date":"2018-04-26T10:09:07","date_gmt":"2018-04-26T16:09:07","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=894080"},"modified":"2018-04-26T10:09:07","modified_gmt":"2018-04-26T16:09:07","slug":"choosing-damages-methodology-certain-construction-claims","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/","title":{"rendered":"Choosing a Damages Methodology for Certain Construction Claims"},"content":{"rendered":"

Daniel B. Swaja | Kilpatrick Townsend & Stockton LLP<\/a> | April 18, 2018<\/p>\n

In any construction dispute resolution process, not only does a claimant have to prove liability of the other party, but the claimant must also prove damages to prevail on its claim.\u00a0 The proof of damages element to prevailing on a claim is often overlooked and its importance can be underestimated.\u00a0 Many times a claimant will focus its case on the facts supporting entitlement, but fail to take the time to meet all requirements establishing a particular damages claim.\u00a0 While a jury may be more forgiving of such an approach, a court on a bench trial or an experienced construction arbitrator may not be so forgiving.<\/p>\n

A common example of a construction claim requiring specific elements of proof occurs when a party seeks recovery of extended, or unabsorbed, home office overhead costs for a delay claim.\u00a0 Delays are common in the construction industry and will impact home office overhead costs. Extended home office overhead costs can include management salaries, administrative staff salaries, rent, supplies, home office equipment, and insurance, among others.\u00a0 Construction delay claims are regarded as being among the most difficult types of claims in the industry and often times require the engagement of an expert.\u00a0 This can be due in large part to the difficulty in analyzing the home office overhead costs associated with a specific project in conjunction with the percentage of the total amount of these costs for the company.\u00a0 Typically, home office overhead costs are not directly allocable to a specific construction project. As a result, it is important for a contractor to select a recognized methodology for calculating allocable home office overhead costs and ensure all elements tied to such damages methodology are satisfied.<\/p>\n

A common methodology for determining the extended home office overhead attributable to a specific project delay is the\u00a0Eichleay\u00a0<\/em>Formula.\u00a0 The\u00a0Eichleay<\/em>\u00a0Formula\u2019s foundation is in the government contracting arena and more specifically in the Armed Services Board of Contract Appeals case,\u00a0Eichleay Corporation<\/em>, ASBCA No. 5183, 60-2 BCA 2688.\u00a0 The methodology can be summarized as requiring the following steps to prove an extended home office overheard claim:<\/p>\n

    \n
  1. (Total billings for the contract\/Total billing for the Company during the original contract period) X Company Total Overhead During Contract Period = Home Office Overhead Allocable to the Contract.<\/li>\n
  2. (Overhead Allocable to the Contract)\/(Days of Contract Performance) = Daily Home Office Overhead Rate<\/li>\n
  3. (Daily Contract Overhead Rate) X (Days of Compensable Delay) = Recoverable Home Office Overhead<\/li>\n<\/ol>\n

    In doing this calculation, there are certain other legal thresholds that may be required in order to prove the claim.\u00a0 For example, in Ohio, these elements include (1) proof that the contractor was on standby; and (2) the contractor must prove that it was unable to take on other work while on standby. The Court of Appeals of Ohio recently addressed whether these elements must be met on a claim for extended home office overhead costs, using a slight variation of the\u00a0Eichleay<\/em>\u00a0Formula, in\u00a0Wood Electric, Inc. v. Ohio Facilities Construction Commission<\/em>, 90 N.E.3d 371 (10th\u00a0Dist. 2017).<\/p>\n

    In\u00a0Wood Electric, Inc.<\/em>, an electrical contractor on a multi-prime school construction project run by a construction manager brought suit against the Ohio Facilities Construction Commission (\u201cOwner\u201d). Among other issues in dispute were the damages suffered by the electrical contractor as a result of delays in the construction allegedly caused by the Owner and other contractors. The electrical contractor sought a claim for extended home office overhead and, instead of using the\u00a0Eichleay<\/em>\u00a0Formula, it used a variant called the HOOP formula. The HOOP formula is a methodology adopted by the Ohio Department of Transportation, and essentially involved the use of elements two and three of the\u00a0Eichleay<\/em>Formula. Thus, it was a similar, but not identical methodology. The electrical subcontractor prevailed on this claim in the Court of Claims, but the Owner appealed arguing that the trial court\u2019s decision was contrary to Ohio Supreme Court precedent requiring a prima facie showing of two elements for a home office overhead claim: (1) the contractor was on standby; and (2) the contractor was unable to take on work while on standby.\u00a0Id.\u00a0<\/em>at 379-380 (citing\u00a0Complete Gen. Constr. Co. v. Ohio Dept. of Transp.<\/em>, 760 N.E.2d 264 (Oh. 2002). Specifically, the Owner argued that the electrical contractor was not entitled to recovery on this claim because it failed to establish these two additional elements.<\/p>\n

    In evaluating this argument, the Court of Appeals stated that the electrical contractor never sought to use the\u00a0Eichleay<\/em>\u00a0Formula, but instead expressly relied on the ODOT adopted HOOP formula. The Court noted that the parties\u2019 contract neither forbade the HOOP formula nor mandated the use of the\u00a0Eichleay<\/em>\u00a0Formula. Further, and importantly, the Court noted that\u00a0Complete Gen. Constr. Co.\u00a0<\/em>expressly stated that \u201cwe do not find that the\u00a0Eichleay Formula<\/em>\u00a0is the exclusive manner of determining unabsorbed home office overhead.\u201d\u00a0Id.<\/em>\u00a0at 381 (citing the similar case\u00a0J&H Reinforcing & Structural Erectors, Inc. v. Ohio School Facilities Comm.<\/em>, 2013 WL 4779008 (Ohio 2013). Because the Court concluded that the two elements of prima facie proof do not necessarily apply to other formulas for calculations of home office and adhered to the recent\u00a0J&H\u00a0<\/em>ruling, the Court of Appeals concluded that the trial court did not err in failing to require proof of the\u00a0Complete Gen. Constr. Co.\u00a0<\/em>elements. Based on this ruling, and there are other factors that may come into play, it appears contractors \u2013 at least in Ohio \u2013 seeking extended home office overhead claims may want to consider using a formula other than\u00a0Eichleay\u00a0<\/em>to potentially lessen their burden in proving such a claim.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Daniel B. Swaja | Kilpatrick Townsend & Stockton LLP | April 18, 2018 In any construction dispute resolution process, not only does a claimant have to prove liability of the other party, but the claimant must also prove damages to prevail on its claim.\u00a0 The proof of damages element to prevailing on a claim is… Continue reading Choosing a Damages Methodology for Certain Construction Claims<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[164,3],"tags":[9895,188,10442,3],"class_list":["post-894080","post","type-post","status-publish","format-standard","hentry","category-construction-dispute","category-insurance-claims","tag-advise-consult","tag-construction-claims","tag-construction-dispute-resolution","tag-insurance-claims","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nChoosing a Damages Methodology for Certain Construction Claims - Advise & Consult, Inc.<\/title>\n<meta name=\"description\" content=\"In construction dispute resolution the claimant has to prove liability of the other party, but also prove damages to prevail on its construction claims\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Choosing a Damages Methodology for Certain Construction Claims - Advise & Consult, Inc.\" \/>\n<meta property=\"og:description\" content=\"In construction dispute resolution the claimant has to prove liability of the other party, but also prove damages to prevail on its construction claims\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/\" \/>\n<meta property=\"og:site_name\" content=\"Advise & Consult, Inc.\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/\" \/>\n<meta property=\"article:published_time\" content=\"2018-04-26T16:09:07+00:00\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:site\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/\"},\"author\":{\"name\":\"admin\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7\"},\"headline\":\"Choosing a Damages Methodology for Certain Construction Claims\",\"datePublished\":\"2018-04-26T16:09:07+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/\"},\"wordCount\":942,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\"},\"keywords\":[\"Advise & Consult\",\"Construction Claims\",\"Construction Dispute Resolution\",\"Insurance Claims\"],\"articleSection\":[\"Construction Dispute\",\"Insurance Claims\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/\",\"name\":\"Choosing a Damages Methodology for Certain Construction Claims - Advise & Consult, Inc.\",\"isPartOf\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#website\"},\"datePublished\":\"2018-04-26T16:09:07+00:00\",\"description\":\"In construction dispute resolution the claimant has to prove liability of the other party, but also prove damages to prevail on its construction claims\",\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/\"]}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#website\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/\",\"name\":\"Advise & Consult, Inc.\",\"description\":\"Construction Expert Witnesses\",\"publisher\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.myconstructionexpert.com\/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\",\"name\":\"Advise & Consult\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png\",\"contentUrl\":\"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png\",\"width\":162,\"height\":75,\"caption\":\"Advise & Consult\"},\"image\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/\",\"https:\/\/x.com\/adviseconsult\",\"https:\/\/www.linkedin.com\/company-beta\/204526\/\",\"https:\/\/www.youtube.com\/user\/MrConstructionExpert\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7\",\"name\":\"admin\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg\",\"caption\":\"admin\"},\"sameAs\":[\"http:\/\/www.expertwitnessinconstruction.com\"]}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Choosing a Damages Methodology for Certain Construction Claims - Advise & Consult, Inc.","description":"In construction dispute resolution the claimant has to prove liability of the other party, but also prove damages to prevail on its construction claims","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/","og_locale":"en_US","og_type":"article","og_title":"Choosing a Damages Methodology for Certain Construction Claims - Advise & Consult, Inc.","og_description":"In construction dispute resolution the claimant has to prove liability of the other party, but also prove damages to prevail on its construction claims","og_url":"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/","og_site_name":"Advise & Consult, Inc.","article_publisher":"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/","article_published_time":"2018-04-26T16:09:07+00:00","author":"admin","twitter_card":"summary_large_image","twitter_creator":"@adviseconsult","twitter_site":"@adviseconsult","twitter_misc":{"Written by":"admin","Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/#article","isPartOf":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/"},"author":{"name":"admin","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7"},"headline":"Choosing a Damages Methodology for Certain Construction Claims","datePublished":"2018-04-26T16:09:07+00:00","mainEntityOfPage":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/"},"wordCount":942,"commentCount":0,"publisher":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization"},"keywords":["Advise & Consult","Construction Claims","Construction Dispute Resolution","Insurance Claims"],"articleSection":["Construction Dispute","Insurance Claims"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/","url":"https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/","name":"Choosing a Damages Methodology for Certain Construction Claims - Advise & Consult, Inc.","isPartOf":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#website"},"datePublished":"2018-04-26T16:09:07+00:00","description":"In construction dispute resolution the claimant has to prove liability of the other party, but also prove damages to prevail on its construction claims","inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.myconstructionexpert.com\/blog\/choosing-damages-methodology-certain-construction-claims\/"]}]},{"@type":"WebSite","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#website","url":"https:\/\/www.myconstructionexpert.com\/blog\/","name":"Advise & Consult, Inc.","description":"Construction Expert Witnesses","publisher":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.myconstructionexpert.com\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization","name":"Advise & Consult","url":"https:\/\/www.myconstructionexpert.com\/blog\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/","url":"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png","contentUrl":"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png","width":162,"height":75,"caption":"Advise & Consult"},"image":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/","https:\/\/x.com\/adviseconsult","https:\/\/www.linkedin.com\/company-beta\/204526\/","https:\/\/www.youtube.com\/user\/MrConstructionExpert"]},{"@type":"Person","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7","name":"admin","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg","caption":"admin"},"sameAs":["http:\/\/www.expertwitnessinconstruction.com"]}]}},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p2ztG6-3KAE","jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/894080","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/comments?post=894080"}],"version-history":[{"count":1,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/894080\/revisions"}],"predecessor-version":[{"id":894081,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/894080\/revisions\/894081"}],"wp:attachment":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/media?parent=894080"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/categories?post=894080"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/tags?post=894080"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}