Present: All the Justices 

FAIRFAX COUNTY REDEVELOPMENT AND 

HOUSING AUTHORITY 

 OPINION BY 

v. Record No. 980731 JUSTICE LAWRENCE L. KOONTZ, JR. 

February 26, 1999 

WORCESTER BROTHERS COMPANY, INC. 

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 

Arthur B. Vieregg, Jr., Judge 

In this appeal, we consider whether the trial court’s award 

of unabsorbed home office expenses to the contractor on a public 

construction project following an unreasonable delay by the 

contracting government agency was based upon sufficient proof of 

the existence and amount of those damages. 

BACKGROUND

Under well established principles, we recount only those 

facts relevant to our resolution of the appeal. On September 

14, 1995, the Fairfax County Redevelopment and Housing Authority 

(the Authority) entered into a contract with Worcester Brothers 

Company, Inc. (Worcester Brothers), a general construction 

contractor, for site renovations and improvements of Washington 

Plaza in Lake Anne Village (the project) in Reston. 

The Authority had originally solicited bids for the project 

based on a projected start date in July 1995, with completion of 

the work in 150 calendar days from the notice to proceed. Thus, 

the proposed date of substantial completion at the time bids 
were solicited was mid-December 1995. Worcester Brothers based 

its bid on these conditions. However, because the Authority did 

not award the contract to Worcester Brothers until September 14, 

1995, the substantial completion date for the project was moved 

back to mid-February 1996. 

It is not disputed that at the time Worcester Brothers 

commenced work on the project, the Authority had not yet 

obtained the necessary clearances from an adjoining property 

owner to allow work to proceed on a portion of the project site. 

The Authority did not obtain the clearances until March 6, 1996. 

After the work was completed, Worcester Brothers filed 

notice of potential change #15 (NPC 15) with the Authority’s 

architect seeking additional payment for field office expenses 

incurred on the job site due to the Authority’s delay in 

obtaining the clearances. Worcester Brothers also claimed it 

had unabsorbed home office expenses attributable to the delay. 

In NPC 15, Worcester Brothers calculated its additional field 

office expenses based upon its daily field office overhead rate 

multiplied by the 98 days of delay it attributed to the 

Authority.1 To calculate its unabsorbed home office expenses, 

 

1

This figure was later revised to represent the actual costs 

Worcester Brothers incurred in maintaining its workforce on the 

project site during the delay period. 

2
Worcester Brothers used the so-called “Eichleay formula,”2 to 

determine a daily home office overhead rate and multiplied that 

rate by the same 98 days of delay. The architect, acting on 

behalf of the Authority, denied the claims made in NPC 15. 

On November 4, 1996, Worcester Brothers filed a motion for 

judgment against the Authority seeking damages for breach of 

contract based upon the failure to pay NPC 15.3 The Authority 

filed an answer denying the allegations of the motion for 

judgment and raising as an affirmative defense the claim that 

“[h]ome office damages based on the Eichleay formula are 

prohibited by Virginia law.” 

At trial, Worcester Brothers contended that during the 

delay it incurred both additional field office expenses as a 

result of having to maintain its personnel at the job site and 

unabsorbed home office expenses. It presented evidence of its 

actual field office expenses related to the delay in the amount 

 

2

The Eichleay formula is “the prevailing method” used for 

calculating a contractor’s home office expenses attributable to 

a government-caused delay on a federal contract. Capital 

Electric Company v. United States, 729 F.2d 743, 744 (Fed. Cir. 

1984). 

3

Worcester Brothers also claimed damages resulting from the 

cost of snow removal and protecting its equipment from winter 

weather as a result of the delay in awarding the contract. The 

trial court dismissed this claim, and Worcester Brothers has not 

assigned cross-error challenging that ruling. 

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of $46,359.11. Worcester Brothers’ accounting system did not 

allocate its home office expenses to particular contracts. 

However, Joseph P. Noonan, Worcester Brothers’ president, 

testified that the unabsorbed home office expenses attributable 

to the delay amounted to $34,495.89. According to Noonan, that 

figure was calculated from statements prepared by Worcester 

Brothers’ accountants reflecting the total general and 

administrative expenses of the company during the relevant 

contract period and the application of the Eichleay formula to 

those expenses. 

The Authority asserted numerous objections to Worcester 

Brothers’ evidence of damages. Pertinent to the issue presented 

on appeal, the Authority contended that Worcester Brothers had 

proven no actual damages as a result of the delay. It contended 

that the Eichleay formula calculation did not constitute proof 

of actual damages to a reasonable degree of certainty, but, 

rather, is merely a method for determining the amount of 

unabsorbed home office expenses attributable to a particular 

contract once the existence of such damages has been proven by 

other evidence. The Authority contended that Worcester Brothers 

had not shown that its workforce was actually idle as a result 

of the delay in obtaining the clearances and, thus, that none of 

its home office expenses was incurred as a result of the delay. 

Moreover, the Authority contended that the Eichleay formula was 

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“totally and wholly irrelevant” to “a contract governed by state 

law.” 

At the conclusion of the evidence, the trial court 

addressed the Authority’s contentions and reasoned that in order 

to succeed on a breach of contract damage claim for unabsorbed 

home office expenses resulting from a delay, the contractor was 

first required to show that it had incurred such damages by 

establishing that the government had caused the delay; that the 

contractor’s workforce was placed on standby as a result; and 

that the contractor was not free to engage in work on other 

projects during the delay. The trial court then found that the 

Authority’s delay was “manifest on this record” and was 

“egregious” and “frankly inexcusable.” The trial court further 

found that Worcester Brothers’ workforce had been on “standby” 

because the Authority “never could advise the contractor that 

the area would not be available until a particular date. 

Instead it was a rolling deadline.” Finally, the trial court 

found that the “rolling deadline” also inhibited Worcester 

Brothers from seeking other contracts, and thereby minimizing 

the damage caused by the delay, since it could not be assured of 

the availability of its workforce for another project. 

Having found that Worcester Brothers had satisfied its 

initial “burden of proving [home office] damages with reasonable 

certainty,” the trial court turned to the question whether the 

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Eichleay formula could be used to calculate the amount of those 

damages. Recognizing that other courts had found the Eichleay

formula to be “a fair way of approximating” such damages, the 

trial court noted that after auditing Worcester Brothers’ books, 

the Authority did not contend that any of the specific expenses 

were inappropriately claimed and that the Authority’s witnesses 

failed “to present any reasoned analysis of why Eichleay is 

inappropriate.” Accordingly, the trial court entered judgment 

for Worcester Brothers for both the field office expenses 

($46,359.11) and the unabsorbed home office expenses as 

calculated by the Eichleay formula ($34,495.89). The trial 

court granted the Authority’s motion to reconsider, and, after 

receiving briefs from the parties, sustained its original 

ruling. We awarded the Authority this appeal. 

DISCUSSION

The Authority does not challenge the trial court’s 

determination that the Authority was liable for damages caused 

by the delay. Nor does the Authority challenge that portion of 

the judgment attributable to field office expenses. 

Accordingly, our discussion is necessarily limited to a 

determination of whether, as specified by the Authority’s 

assignment of error, “[t]he trial court erred in finding that a 

contractor had proved its home office damages with reasonable 

certainty.” (Emphasis added.) We agree with the trial court’s 

6
reasoning that the resolution of this issue requires that we 

first consider whether Worcester Brothers established that it 

suffered damages in the form of unabsorbed home office expenses 

attributable to the Authority’s delay, and, if so, whether there 

was adequate proof of the amount of those damages. 

Home office expenses, commonly called overhead, include 

those costs that a contractor must expend for the benefit of its 

business as a whole. These expenses include, for example, the 

salaries of office staff, accounting expenses, dues and 

subscriptions, equipment costs, and utility services. 

Unabsorbed home office expenses comprise “those overhead costs 

needlessly consumed by a partially or totally idle contractor. 

A contractor continues to incur overhead costs during periods of 

reduced activity or delay on a particular contract. When this 

occurs, the ‘reduced activity’ contract no longer ‘absorbs’ its 

share of overhead costs.” Michael W. Kauffman and Craig A. 

Holman, The Eichleay Formula: A Resilient Means for Recovering 

Unabsorbed Overhead, 24 Pub. Contr. L.J. 319, 321 

(1995)(footnotes omitted). 

When a breach by one party imposes a delay on the ability 

of the other party to perform its obligations under a contract, 

“the damages are to be measured by the direct cost of all labor 

and material . . . plus fair and reasonable overhead expenses

properly chargeable . . . during the reasonable time required” 

7
to complete performance. E.I. duPont deNemours & Co. v. 

Universal Moulded Prod., 191 Va. 525, 581, 62 S.E.2d 233, 259 

(1950)(emphasis added). In such cases, while the plaintiff must 

prove its damages with reasonable certainty, “‘[a]n absolute 

certainty as to the amount of the damages is not essential when 

the existence of a loss has been established. The quantum may 

be fixed when the facts and circumstances are such as to permit 

. . . an intelligent and probable estimate thereof.’” Pebble 

Building Co. v. G.J. Hopkins, Inc., 223 Va. 188, 191, 288 S.E.2d 

437, 438 (1982)(citation omitted). 

We recognize that not every instance of a delay caused by 

the other party to a contract will result in a contractor 

incurring either direct or overhead damages. However, where the 

evidence shows that a contractor has incurred direct damages as 

a result of the delay such as additional cost of labor and 

material, the question whether the contractor also suffered 

unabsorbed overhead damages necessarily must be determined from 

the facts and circumstances of the individual case. It is not 

necessary for the contractor to show that its overhead was 

increased as a result of the delay, but only that it could not 

otherwise reasonably recoup its pro rata home office expenses 

incurred while its workforce was idled by the delay. 

Here, the evidence showed that Worcester Brothers incurred 

actual direct damages as a result of having to maintain its 

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personnel on the job site far beyond the anticipated date of 

substantial completion. The record supports the trial court’s 

finding that the Authority was responsible for a delay that 

caused Worcester Brothers’ workforce to be “on standby” and this 

further prohibited Worcester Brothers from recouping its 

unabsorbed home office expenses by seeking other contracts 

during the delay period. Accordingly, we agree with the trial 

court’s ruling that Worcester Brothers met its burden of proof 

with respect to the existence of unabsorbed home office expenses 

attributable to the Authority’s delay. 

The Authority contends, however, that even if Worcester 

Brothers proved that it incurred unabsorbed home office expenses 

as a result of the Authority’s delay, the trial court erred in 

accepting the Eichleay formula as the method for determining the 

amount of these expenses. The Authority asserts that the 

contract provides that disputes between the parties will be 

governed by Virginia law and, since no legislative act, 

administrative rule, or case law in Virginia has “adopt[ed] the 

use of the Eichleay formula in claims against public bodies in 

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Virginia,” the use of the formula “was not within the parties’ 

contemplation at the time the contract was executed.”4

The Authority is correct in noting that use of the Eichleay

formula has not been previously approved in this Commonwealth by 

legislative or administrative act, nor has its use been 

addressed in a published appellate court decision relating to a 

public contract. However, we are not persuaded by the 

Authority’s contention that a lack of prior authoritative 

application of the Eichleay formula to a Virginia public 

contract prevents its application in this instance. The 

Eichleay formula is not a legal standard that must be formally 

approved or adopted; rather, it is merely a mathematical method 

of prorating a contractor’s total overhead expenses for a 

particular contract.5 As such, the question before the trial 

 

4

On brief, the Authority asserts that certain items were 

improperly included in the overhead expenses used by Worcester 

Brothers in calculating its damages. At trial, the Authority 

did not object to the introduction of the accounting records on 

this ground. Accordingly, that issue is not before us. Rule 

5:25. We also reject the Authority’s contention that the 

contract provision for a 15% mark-up for “changes in the work” 

should be applied to field office damages to determine a 

liquidated award of home office expenses. Assuming that this 

argument can be subsumed within the assignment of error, we are 

not persuaded that the 15% mark-up applies to an award of 

damages for delay. 

5

To make that proration, the total amount billed on the 

particular contract by the contractor (Bc) is divided by the 

10
court was not whether, in the absence of an express term, the 

parties contemplated using the Eichleay formula, or any other 

method of calculating unabsorbed overhead damages, but whether 

the resulting quantum was “an intelligent and probable estimate” 

of the actual damages. Pebble, 223 Va. at 191, 228 S.E.2d at 

438. 

As an abstract proposition, the Eichleay formula has been 

criticized as an inadequate substitute for direct evidence of 

the actual amount of damages and “no less speculative” than 

other unsupported opinion evidence simply “because it was cast 

in a mathematical milieu.” Berley Indus., Inc. v. City of New 

York, 385 N.E.2d 281, 283 (N.Y. 1978). In Berley, the New York 

 

contractor’s total billings during the contract period (Bt) and 

this quotient is then multiplied by the contractor’s home office 

expenses attributable to the contract period (Ht) to determine 

the amount of home office expenses allocable to the contract. 

Next, the amount of home office expenses allocable to the 

contract is divided by the total number of days of the 

contractor’s performance under the contract (Dt) to determine a 

daily contract home office expense rate. Finally, the daily 

contract home office expense rate is multiplied by the number of 

days of delay (Dd) to determine the amount of damages (A). See

Capital Electric, 729 F.2d at 747. This method of proration is 

the Eichleay formula in its most basic application, and may be 

stated mathematically in this way: 

BB

c

⎯ × Ht

BB

t

⎯⎯⎯⎯ × Dd = A 

 Dt 

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Court of Appeals rejected the use of the Eichleay formula as an 

“administrative convenience,” where there was no supporting 

evidence that any of the home office expenses were attributable 

to the delay. Id.

Distinguishing Berley, the Florida District Court of 

Appeals held that use of the Eichleay formula for calculating 

unabsorbed home office expenses attributable to a delay is 

proper so long as there is competent evidence of actual damage 

having been sustained by the party seeking relief. Broward 

County v. Russell, Inc., 589 So.2d 983, 984 (Fla. Dist. Ct. App. 

1991). Similarly, other jurisdictions have held that where 

there is sufficient proof that the plaintiff has suffered 

damages as a result of the delay, the Eichleay formula affords a 

reasonable basis for estimating the amount of those damages with 

respect to unabsorbed home office expenses. See, e.g., Conti 

Corp. v. Ohio Dept. of Admin. Serv’s, 629 N.E.2d 1073, 1077 

(Ohio Ct. App. 1993); Golf Landscaping, Inc. v. Century Const. 

Co., 696 P.2d 590, 593 (Wash. Ct. App. 1984). 

We are of opinion that the rationale of the latter cases is 

in accord with the general principles of law applicable to 

proving damages for delay as outlined in the duPont and Pebble, 

cases. Accordingly, where, as here, there is evidence that a 

contractor has suffered actual damages as a result of an 

unreasonable owner-caused delay, the Eichleay formula is an 

12
acceptable method, though not the only possible method, of 

calculating the portion of home office expenses attributable to 

delay. Cf. Southern New England Contracting Co. v. State, 345 

A.2d. 550, 559-60 (Conn. 1974); PDM Plumbing & Heating, Inc. v. 

Findlen, 431 N.E.2d 594, 595 (Mass. Ct. App. 1982). 

In recognizing the adequacy of the evidence in this case to 

support the use of the Eichleay formula to determine unabsorbed 

overhead damages for the delay in this contract, we do not adopt 

it as the standard for determining such damages generally. 

Rather, as with any fact-specific question, the individual 

circumstances of a given case will determine whether “an 

intelligent and probable estimate” of such damages has been 

proven. Pebble, 223 Va. at 191, 228 S.E.2d at 438. 

CONCLUSION

For the reasons stated above, we will affirm the judgment 

of the trial court. 

Affirmed. 

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