Delay Damages: Home Office Overhead Formulas 2 of 4 (Canadian & Hudson Formulas)
This posting introduces the Canadian and Hudson Formulas and discusses how they are used to calculate a contractor’s home office overhead costs for a project that experienced an excusable and compensable delay.
Like the Eichleay Formula, the Canadian and Hudson Formulas calculate a contractor’s home office overhead damage amounts by calculating the project’s home office overhead daily rate and multiplying that rate by the compensable days of delay to calculate contractor’s home office overhead damage amount.
However, unlike the Eichleay Formula, which calculates the subject project’s share of the company’s home office overhead costs based on a percentage of revenue, the Canadian Formula relies on the contractor’s actual overhead markup percentage. The markup percentage can be either the contractor’s planned home office overhead markup percentage supported by its bid documents or its actual home office overhead percentage calculated by an audit of the contractor’s records. The formula is depicted below.
An example using the Canadian Formula to estimate a contractor’s home office overhead compensation for a 50-day compensable delay is below.
The Hudson Formula is nearly identical to the Canadian Formula. However, while the markup percentage used in the Canadian Formula only compensates the contractor for its overhead costs, the Hudson Formula’s markup percentage includes both overhead and profit.
For more on this or any other topic, please call me at 215-814-6400 or email me at mark.nagata@traunerconsulting.com.
