Case Study on Home Office Overhead Claims

Abstract

Time and cost overruns impact the parties to a contract, and often the starting point of disputes and disagreements are associated with likely damages caused by delays. The most contentious aspect related to projects getting delayed is the quantum of claims. Home office overheads (HOOHs) also form one of the claim heads where quantum is disputed. This paper focuses on analysis of unabsorbed HOOH claims through a case study and as awarded in court judgments in India. It evaluates the various ways of calculating such claims and their basis using scenario analysis on the case study, highlighting the difference in their quantum. The study also details discussion on the recent case laws in India for usage, the overhead claims, and the basis for awarding them, including the records capturing factual information relied on by the court for allowing the compensation. The findings identify challenges in using HOOH formulas with scope variations and taking on new projects by the contractors. It also highlights that despite reliance on the Eichleay formula by many courts, there are other formulas that indicate better understanding of scope variation and increase in contractor’s revenue through other projects during the delay period. The insight will be helpful to contractors and owners to assess HOOH claims better in the view of scope variations and addition of new projects.