Eichleay Formula: New Jersey Construction Delay Cases

An Eichleay Formula, what is it? Have you ever heard of that before? Many people have got heard of it, but we use it all the time in court. Eichleay Formula is a formula that is accepted in the State of New Jersey, and in fact, throughout the country, when you're calculating damages in construction delay cases. It's very important to have a good understanding of this, when you're dealing with construction delay. What is a construction delay? Well, when you think about construction, there's three main components when someone is bidding a construction project. What are they? It's labor, material, and overhead.

So, when these big companies bid these products, they have someone draw up the bid, and you have those three expenses. They allocate to that product overhead from the company. So, if they're planning on doing this project for three months, let's say, and in the middle, let's say the second month all of a sudden there's a delay caused by somebody who didn't do what they're supposed to do.

So, they have a whole month where their incurring overhead, but they can't allocate it to a job. Think about it. The labor, okay, they can do away with that expense. A lot of these are union labors so they still get paid whether they're working, but they won't be on your payroll. Materials, well, you've got to buy the materials anyways.

So, those costs really are not relevant in construction delay cases, but what is relevant is that overhead that they're allocating from their office. They have nowhere to allocate that.

So, that's a damage that we calculate and go to court, but remember, that if you have an Eichleay Formula damage, you know, damage delay case, if you have other projects you can stick in that month, or you can't substantiate your overhead, you're going to have a very difficult time substantiate damages.

Because think about it, if you have another project you can put in there, you could allocate that overhead to that specific job, therefore, there's no damages, or if your records in your home office are a wreck, you can't substantiate them.

So, the Eichleay Formula gives you a great framework for calculating damages, but you have to do your work, too. If you have any questions on this, just give me an email.