Court of Appeal of Louisiana, Fourth Circuit

Case no.: 2025-CA-0356
Date filed: January 7, 2026

A Louisiana appeals court has allowed recovery of unabsorbed home office overhead, calculated according to the Eichleay formula. The court did not endorse the formula but said its use was within the discretion of the trial court.

Plaquemines Parish Government awarded a fixed-price contract to Couvillion Group, LLC to replace a dock facility that had been destroyed by a hurricane. The deadline for substantial completion, as extended by change orders, was August 15, 2012.

Early in 2012, the Federal Emergency Management Agency (FEMA) informed the parish that the design for the fuel tank platform would have to be significantly revised. The platform would have to be raised two feet in order for the project to be reimbursable by FEMA. The parish— through its consulting engineer, Professional Engineering Consultants (PEC)—issued a Partial Stop Work Order.

The stop work order was not lifted until November 27, 2012. The elevation issue between FEMA and the parish had apparently been resolved, as Couvillion was instructed to proceed with the work at the original elevation. The contractor achieved substantial completion on November 1, 2013.

The contractor requested reimbursement for the increased costs it had incurred as a result of the partial stop work order. The project engineer, PEC, recommended payment of more than $1.1 million. The parish refused to pay anything, so Couvillion filed suit. A bench trial was held in Plaquemines District Court. The delay damages sought by the contractor included unabsorbed home office overhead. This claim was supported by the report and testimony of the contractor’s scheduling expert, Don Carlow.

Home office overhead consists of a company’s general and administrative costs that benefit the entire business and cannot be attributed or charged to an individual contract. When a construction company signs a fixed-price contract to be performed over a stipulated period of time, the company reasonably expects that contract to “absorb” a certain share of the home office overhead. If the project owner suspends the contractor’s work, the contractor cannot perform and bill work at the anticipated rate.

The recovery of “unabsorbed” home office overhead was first recognized in a 1960 Armed Services Board decision involving Eichleay Corporation. The formula used to calculate the unabsorbed overhead bears that company’s name. Originally applied only to federal construction contract disputes, the recovery of unabsorbed overhead has spread to other construction disputes and has been adopted in a number of state courts.

The parish and Couvillion argued about the extent to which the contractor had been prevented from performing construction activities and the question of whether the appellate courts of Louisiana had authorized the use of the Eichleay formula. Nonetheless, the district court awarded the contractor delay damages that included unabsorbed home office overhead in an amount not stated in the appellate opinion. The parish appealed on a number of grounds, including the recovery of unabsorbed home office overhead.

The Court of Appeal of Louisiana, Fourth Circuit, said a separate circuit court had analyzed a home office overhead claim using the Eichleay formula and its application as interpreted by the federal courts. The only other unabsorbed overhead case came from the Fourth Circuit. The court had briefly reviewed the Eichleay doctrine but neither approved nor repudiated it. The court had ruled that the award of unabsorbed home office overhead was within the discretion of the district court when calculating delay damages. “We find the same is true in this case.”

The court noted that the district court had evaluated the entire factual record and credibility of the witnesses. The appellate court would not disturb the lower court’s proper exercise of its discretion. With a slight adjustment to remobilization costs, reflecting an agreement between owner and contractor, the court affirmed the $2,782,724 award in favor of Couvillion Group as well as statutory interest commencing on the date of substantial completion.

The Eichleay formula is expressed as follows:

(contract billings / total billings for contract period) * total overhead for contract period = overhead allocable to the contract

allocable overhead / days of performance = daily contract overhead

daily contract overhead * days of suspension = amount recoverable

Federal precedent requires that the contractor be placed in a “standby” position in order to recover unabsorbed home office overhead. Consequently, project owners try to leave some work available to the contractor. Note the “partial stop work order” in this case. Yet the primary “standby” case from the Court of Appeals for the Federal Circuit requires only that work on “much, if not all” of the contract be suspended for an indefinite duration. P.J. Dick Incorporated v. Principi, 324 F.3d 1364 (Fed. Cir. 2003).

Participants:
For Couvillion Group: George Pivach, II, Belle Chasse, Louisiana
For Plaquemines Parish: Jimmy A. Castrex, Jr., New Orleans, Louisiana

Before: Judges Belsome, Brown, and Johnson

Opinion by: Judge Brown

Outcome: Judgment affirmed as amended

Source: Please click here to read the complete opinion.