Opinion ID: 815367
Heading Depth: 2
Heading Rank: 2

Heading: The Overhead Claim

Text: M.E.S. claims that the Board erred in denying its claim for additional home office overhead. As a general rule, home office overhead damages are calculated in government contract cases by applying a fixed percentage to the additional direct costs included in the contract modification or in the claim for equitable adjustment. See C.B.C. Enters., Inc. v. United States, 978 F.2d 669, 674-75 (Fed. Cir. 1992). Indeed, the Corps included an allowance for home office overhead in at least one of the modifications it issued to M.E.S., and M.E.S. was awarded a fixed percentage for overhead in one of the two claims allowed by the Board. M.E.S.’s second claim on appeal does not rely on this theory, however. 3 Rather, the overhead claim relies on the so-called Eichleay formula, derived from the Board’s decision in Eichleay Corp., ASBCA No. 5183, 60-2 BCA ¶ 2688, aff’d on reconsid., 61-1 BCA ¶ 2894. 4 In certain limited circumstances, this court has approved the use of the Eichleay formula, which relies on a daily allocable overhead rate, as an alternative to the fixed-percentage method. In order to recover Eichleay 3 M.E.S. did include a fixed percentage of over- head in the damages it sought in its first claim on appeal, the cost-overrun claim. 4 In its reply brief, M.E.S. asserts for the first time that the damages it seeks are not Eichleay damages, but rather “insufficient compensation for its general and administrative expenses associated with contract modifications.” Reply Br. 26. The formula it used to calculate its alleged damages is clearly based on Eichleay, however, and it previously claimed to be “using the Eikley [sic] formula,” see J.A. 70. In its briefs, M.E.S. refers interchangeably to “overhead” and “G&A,” or “general and administrative,” expenses. 8 M.E.S., INC. v. ARMY damages, however, a contractor must demonstrate, among other elements, that “performance of the contract [was] suspended or significantly interrupted” by the government, and not merely that the period of contract performance was extended and an additional stream of direct costs created. See Interstate Gen. Gov’t Contractors, Inc. v. West, 12 F.3d 1053, 1056-58 (Fed. Cir. 1993); see also Cmty. Heating & Plumbing Co. v. Kelso, 987 F.2d 1575, 1581-82 (Fed. Cir. 1993), modified on reh’g, 1993 U.S. App. LEXIS 31453 (Fed. Cir. May 21, 1993); C.B.C. Enters., 978 F.2d at 674-75. The requirement that the work on the contract must have been suspended or interrupted is one facet of the more general requirement that the government must have placed the contractor on “standby.” See Interstate, 12 F.3d at 1056-57 & n.5; see also P.J. Dick, Inc. v. Principi, 324 F.3d 1364, 1371-73 (Fed. Cir. 2003) (outlining the elements of the standby requirement). Here, the Board found “no persuasive evidence that [M.E.S.] was required to remain on standby” during any of the additional time periods, J.A. 12, and we find no reason to disturb this finding. 5 Even if M.E.S. in this claim had proceeded on the theory that it is entitled to home office overhead as a fixed percentage of the additional direct costs caused by the 5 On appeal, M.E.S. points to evidence showing that it had no other contracts during most of the time that it was engaged by the Corps. The “standby” element requires a contractor to show more than just that delays rendered it idle; it must also show that the government required it to remain idle, or that circumstances otherwise rendered mitigation “impractical.” See Daly Constr., Inc. v. Garrett, 5 F.3d 520, 522 (Fed. Cir. 1993); see also Cmty. Heating, 987 F.2d at 1582 (requiring the contractor to “demonstrate[] that it could not have taken on any other jobs during the contract period”). M.E.S., INC. v. ARMY 9 contract modifications, M.E.S. could not prevail. M.E.S. has failed to present, at any stage of the litigation, a sufficient calculation of such damages. The Board found M.E.S.’s home office overhead calculation to be deficient both for its lack of substantiation and for its failure to account for those home office overhead amounts already included by the Corps in its price adjustments. Substantial evidence supports the Board’s determination that “the alleged increased home office expense incurred for compensable government delays is not proven in any amount.” J.A. 13. Thus, substantial evidence supports the Board’s findings that M.E.S. failed to prove that its overruns were caused by government delays; that any “acceleration” of the contract took place; or that M.E.S. is entitled to additional compensation for home office overhead. AFFIRMED