How to calculate head office overheads and profit
Contents |
[edit] Introduction
The Society of Construction Law Delay and Disruption Protocol, 2nd edition, published in February 2017 by the Society of Construction Law (UK) describes three different ways for calculating head office overheads and profit:
[edit] Hudson formula
(Overheads & profit / 100) x (contract sum x period of delay / contract period)
Overheads & profit: head office overheads and profit percentage in tender.
[edit] Emden formula
(Overheads & profit / 100) x (contract sum x period of delay / contract period)
Overheads & profit: head office overheads and profit percentage (actual).
[edit] Eichleay formula
- Step 1: Establish the head office overhead costs attributable to the contract by dividing the final contract sum (excluding the claim for head office overhead) by the total revenue for the contract period, then multiply the result by the total head office overhead costs incurred during the actual period of performance of the contract.
- Step 2: Divide the resulting figure by the number of days of actual performance of the contract, to establish a daily rate.
- Step 3: Multiply the resulting figure by the number of days compensable delay.
Ref https://www.scl.org.uk/resources/delay-disruption-protocol
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