Fairfax County Redevelopment & Housing Authority v. Worcester Bros.
257 Va. 382, 514 S.E.2d 147, 1999 Va. LEXIS 48 (1999)
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Rule of Law:
Where a contractor proves it has suffered actual damages from an owner-caused delay that idled its workforce, the Eichleay formula is an acceptable, though not exclusive, method for calculating the portion of unabsorbed home office overhead expenses attributable to that delay.
Facts:
- On September 14, 1995, the Fairfax County Redevelopment and Housing Authority (the Authority) contracted with Worcester Brothers Company, Inc. (Worcester Brothers) for a construction project.
- The contract award was delayed, pushing the substantial completion date from December 1995 to February 1996.
- When Worcester Brothers began work, the Authority had not yet obtained necessary clearances from an adjoining property owner for a portion of the project site.
- The Authority did not obtain the required clearances until March 6, 1996, resulting in a 98-day delay.
- During this delay, the Authority provided a "rolling deadline," which placed Worcester Brothers' workforce on standby.
- This "rolling deadline" and standby status prevented Worcester Brothers from committing its workforce to other available projects.
- Worcester Brothers' accounting system did not allocate its general home office expenses to particular contracts.
Procedural Posture:
- Worcester Brothers submitted a claim (NPC 15) to the Authority's architect for additional field office and unabsorbed home office expenses due to the delay.
- The architect, acting for the Authority, denied the claim.
- Worcester Brothers sued the Authority in a Virginia trial court for breach of contract.
- The trial court found in favor of Worcester Brothers, awarding damages for both field office expenses and unabsorbed home office expenses calculated with the Eichleay formula.
- The Authority's motion to reconsider was denied by the trial court.
- The Authority (appellant) appealed the trial court's judgment to the Supreme Court of Virginia, challenging only the award for home office expenses.
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Issue:
Does a contractor prove its unabsorbed home office overhead damages with reasonable certainty by first establishing that an owner-caused delay placed its workforce on standby and prevented it from taking other work, and then using the Eichleay formula to calculate the amount of those damages?
Opinions:
Majority - Justice Koontz
Yes. A contractor proves its unabsorbed home office overhead damages with reasonable certainty by demonstrating both the existence and the amount of the loss. A contractor establishes the existence of such damages by showing that an owner-caused delay idled its workforce and prevented it from obtaining replacement work. Once the existence of damages is proven, the Eichleay formula is a legally acceptable mathematical method for providing an 'intelligent and probable estimate' of the amount of those damages, even if the formula has not been previously adopted in the jurisdiction.
Analysis:
This decision formally allows Virginia contractors to recover unabsorbed home office overhead, recognizing these as actual damages separate from direct field costs. By sanctioning the use of the Eichleay formula, the court provides a clear and predictable framework for quantifying these otherwise difficult-to-calculate damages. This aligns Virginia law with federal precedent and that of many other states, establishing a two-part test: first, prove the existence of harm (owner delay, standby status, inability to take other work), and second, provide a reasonable calculation of the amount. This precedent gives contractors a viable path to recovery and encourages owners to avoid unreasonable delays.
