David Kelly brought the audience through an examination of the “unabsorbed” or “unallocated” portion of head office overheads, being that part of a contractor’s overhead costs that cannot be attributed to specific variation orders or events. Getting down to the nuts and bolts, we considered the various components of head office overheads and elements of proof needed to quantify such a claim.

 

Whilst we were given the opportunity to consider as many as seven different formulas (plus further variants within the Hudson’s and Eichleay formulas), it was not immediately apparent which of these formulas would be more appropriate or advantageous for different types of corporate entities pursuing such a claim. For this, one would have to undertake a comparative examination of the formulas using a set of available data.

By an informal poll by raising of hands, it was apparent that amongst the audience, this type of claim is largely unchartered territory. Further, with exclusion clauses prohibiting claims for indirect losses being fairly common, there may be limited situations in which such claims may be brought. Nonetheless, for those amongst us who represent contractors, this possible head of claim warrants further consideration.