Are Eichleay Damages Recoverable in Ohio Without an Idle Equipment Claim?
Kegler Brown Construction Newsletter April 1, 2005
Extended home office overhead damages are typically sought by a contractor whose work is delayed or suspended through no fault of his own, in an effort to compensate him for the lost revenue that would have otherwise sustained a share of the fixed home office expenses. These damages are often calculated under the Eichleay formula which is recognized in Ohio.
In view of the Ohio Supreme Court's decision in Complete General v. ODOT, a contractor must satisfy two elements for an extended home office overhead recovery under the Eichleay formula:
- The owner delayed or suspended work for an indefinite duration; and
- The delay or suspension made it impractical or impossible to find replacement work during the impacted period.
The second element will be challenged by an owner when the contractor moves his forces and equipment offsite during the period of the suspension in an effort to mitigate damages. An owner will then argue that the fact the contractor moved his forces elsewhere demonstrates he had replacement work to substitute for the delayed or suspended project.
A contractor will typically reply that just because he continues to do additional work does not mean that he in fact has replacement work for the suspended job.
This debate means it will be easier to prove entitlement to extended home office overhead when the contractor lays off personnel and leaves his equipment idle on the suspended project. Further clarification of this issue by Ohio courts may prove necessary.