Can head-office overhead loss be recovered using the Hudson, Emden or Eichleay formula?
A formula may assist valuation after entitlement, causation and actual loss are established. It cannot prove that a compensable delay caused unabsorbed overhead, lost opportunity or additional head-office expenditure.
Formulae are valuation tools, not evidence that head-office loss occurred
The contractor must identify the contractual entitlement, the employer-risk delay period and the loss said to follow. For unabsorbed overhead or lost opportunity, it should prove available work, resource or financial constraint, reduced turnover or overhead recovery, and the absence of offsetting contribution from variations or other projects. Actual management or head-office cost may be claimed by direct evidence instead. Select the formula only after deciding which loss is proved and why its inputs are reliable.
| Issue | Position |
|---|---|
| Entitlement and delay | Must be established before valuation |
| Unabsorbed overhead | Requires proof of lost recovery or opportunity |
| Hudson formula | Uses the tender allowance and requires caution |
| Emden formula | Uses audited business overhead data |
| Eichleay formula | Allocates company overhead by turnover proportions |
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