Wiсkham Contracting Company appeals from a decision of the General Services Administration Board of Contract Appeals (Board), denying Wickham’s claim for an equitable adjustment for overhead expenses incurred under a contract with the General Services Administration (GSA) as a result of GSA-imposed delays.
Wickham Contracting Co.,
GSBCA No. 8675,
I. BACKGROUND
On July 28, 1977, Wickham entered into a contract with GSA to renovate the Federal Post Office and Courthouse in Albany, New York, for the sum of $2,968,000. The contract allowed 365 days from the notice to proceed to perform the wоrk which was due to be completed on August 15, 1978. Early in the renovation process, GSA became concerned about structural problems with the building and ordered many delays in the work. The parties agree that, due to GSA-imposed delays, the work was not substantially complete until April 10, 1981, 969 days after the contracted date. Many of Wick-ham’s claims against the government for additional costs due to such delays have been *1576 settled. However, certain costs associated with home office overhead have not.
Wickham’s home office staff during the renovation work consisted of the president, a construction engineer, the project manager, and thrеe secretaries. In addition to the Albany project, Wickham performed only two other major contracts during the same time frame — the West Point project and the Foley Square project. Both of these projects were managed mainly on site while the Albany project was managed mainly from the home office.
In June 1986, the contracting officer awarded Wickham an additional $333,084 on its claim for unabsorbed home office overhead due to the delay, based on the Eichleay formula. 2 Before the Board, Wickham argued that, for three reasons, it was due a larger amount for the unabsorbed home office overhead. Wickham complained that the percentage of the home office overhead pool allocated to the Albany contract based on the Eichleay formula, approximately 34%, was too low and did not fairly compensate Wick-ham for its overhead expenses. The contractor argued that it was entitled to be reimbursed for 80% of its overhead expenses incurred during the delay period because 80% of its home office activity and, therefore, 80% of its home office overhead expense was devoted to the Albany contract during that time frame. Wickham made the argument first to the contracting officer, then to the Board.
On appeal to us, Wickham repeatedly states that the 80% figure is undisputed. However, the government points out that Wickham did not keep current books or records which could document the 80% figure and that Wickham did not develop that figure until January 1985. The record supports the government’s assertions. Therefore, we conclude the figure is disputed.
The Board did not make a clear finding as to whether Wickham actually proved that 80% of its home office activity was devoted to the Albany contract. Instead, the Board rejected Wickham’s theory of recovery on the basis that unabsorbed overhead is always calculated according to the Eichleay formula when a contractor meets the Eichleay requirements after government-imposed dеlay. The Board applied the Eichleay formula based on the notion that it is a theoretical construct of the amount of unabsorbed overhead caused by the contract delay and, therefore, the actual amount of overhead allegedly caused by the contract was not relevant.
The parties agree on many of the components of the overhead pool. The components of the overhead pool to which the Board applied the
Eichleay
formula are general and administrative salaries, rent, insurance, depreciation, hospitalization and medical costs, dues and subscriptions, office expenses, auto and truck maintenance, utilities, plans and specifications, cleaning, protection, taxes and licenses, and officer’s salaries.
Before the Board, however, Wickham also argued that the contracting officer wrongly excluded several specific field costs from the overhead pool. The field costs are for travel and business meetings, telephones, professional fees, union welfare benefits, payroll taxes and equipment rental. Their inclusion would increase the amount paid to Wickham under either the Eichleay formula or Wick-ham’s allocation figure of 80%. The Board, however, found that as direct, not overhead costs, they may not be included in the overhead pool.
In addition, Wickham argued that the com-pensable delay period was actually 1029 days rather than the 969 days admitted by GSA. The longer delay would entitle Wickham to a larger payment under either the Eichleay formula or its preferred figure of 80%. Wickham measures the delay from its projected early finish date of June 15,. 1978, suggested by the critical path method schedule, rather than the finish date of August 15, 1978, set by the contract. The Board found that Wickham was not entitled to reimbursement based on the longer delay period be *1577 cause it did not prove that it would have finished by the earlier date.
Finally, Wickham sought reimbursement for the cost of use of its equity capital and alleged use of borrowed funds during the delay. The Board rejected this claim also, the former as unallowable and the latter as unproven.
Wickham appealed to this court pursuant to the Contract Disputes Act of 1978 (CDA), 41 U.S.C. § 607(g)(1) (1988). Our jurisdiction rests on that Act and 28 U.S.C. § 1295(a)(10) (1988).
II. STANDARD OF REVIEW
The CDA dictates the standard this court applies in reviewing decisions of agency contract appeal boards. 41 U.S.C. § 609(b). To the extent that Wickham challenges the Board’s factual findings, it must show that those findings were either: (1) fraudulent, (2) arbitrary or capricious, (3) so grossly erroneous as to necessarily imply bad faith, or (4) not supported by substantial evidence.
Id.
Even though the record may contаin evidence which supports a contrary finding, we will not overturn a board’s finding if substantial evidence supports it.
Erickson Air Crane, Inc. v. United States,
III. ANALYSIS
A The Eichleay Formula is Exclusive
1. Federal Circuit Law on Eichleay
The Board used the
Eichleay
formula
3
to calculate the amount of home office overhead costs for which Wickham would be reimbursed due to the GSA-imposed delay. Application of the
Eichleay
formula requires “that compensable delay occurred, and that the contractor could not have taken on any other jobs during the contract period.”
4
C.B.C. Enters., Inc. v. United States,
Suspension or delay of contract performance results in interruption or reduction of the contractor’s stream of income from payments for direct costs incurred. This in turn causes an interruption or reduction in payments for overhead, derived as a percentage of direct costs, which is set by the contract. Home office overhead costs continue to accrue during such periods, however, regardless of direct contract activity. Consequently, this decrease in payments for direct costs creates unabsorbed overhead, unless home office workers are laid off or given additional work during such suspension or delay periods. When the period of delay is uncertain and the contractor is required by the government to remain ready to resume performance on short notice (referred to as “standby”), the contractor is effectively prohibited from making reductions in home office staff or
*1578
facilities or by taking on additional work.
See Capital Elec. Co. v. United States,
For the purpose of compensating Wickham for the effects of a project delay on home office overhead, the Board properly defined overhead as “those costs which are expended for the benefit of the business as a whole and which usually accrue over time.”
The Armed Services Board of Contract Appeals devised the
Eichleay
formula to provide a fair method for allocating home office overhead costs, otherwise inallocable, to specific contracts.
Eichleay Corp.,
ASBCA No. 5183,
2. Wickham’s Arguments
In this case the ratio of billings from the delayed contract to total billings is about 34%. Thus, under the Eichleay formula, 34% of Wickham’s overhead expense, incurred during the contract period, is alloca-ble to the contract. However, Wickham claims that approximately 80% of its home office activity and, therefore, 80% of its home office overhead expense was devoted to the Albany contract during the delay period. 6 Thus, Wickham seeks compensation for 80% of the home office overhead costs actually incurred during the delay because, according to Wickham, they are directly attributable to the Albany contract. Wickham argues the Eichleay calculation is unfair because it is less than the actual percentage of overhead devoted to the delayed project. Therefore, per Wickham, the Eichleay formula shоuld be used only when overhead costs cannot otherwise be accurately determined. In short, Wickham seeks to completely avoid the Eichleay formula.
Wickham’s argument fails for a fundamental reason — Wickham confuses direct and overhead costs. As the Board noted, overhead costs benefit and are caused by the business as a whole, not any one project. Thus, overhead costs are never attributable to or caused by any one contract. Wick-ham’s claim to “directly attributable” home office overhead is a non sequitur. If a cost is directly attributable to a contract, then it is a direct cost, not an overhead cost.
Wickham attemрts to blur the distinction between overhead and direct costs simply to avoid the clear rule that the Eichleay formula governs the calculation of unabsorbed overhead. A contractor who wishes reimbursement for a cost directly attributable to *1579 a contract must submit it as a direct cost. In a case such as this, where a contractor and the government have already consistently treated a cost as overhead, we will not upset their agreement by ourselves treating that cost as a direct cost and ordering reimbursement as such. In any event, we would lack jurisdiction under the CDA to do so because there were no contracting officer and board decisions denying such costs as direct costs. Therefore, there is no fact finding or ruling for us to review; and, of course, as an appellate court we may not make fact findings or initial rulings, generally or in the circumstances of this case.
Responding to Wickham’s argument, the Board said, “[i]t makes no difference what the actual overhead effort was. We are here dealing with theoretics which produce approximations because more precise results cannot be obtained.”
Unlike direct costs which are incurred only because of a particular contract, overhead costs are incurred even if the contractor had not undertaken a particular project. Ordinarily, all home office expenses fall into the overhead category because the contractor must operate a home office in order to seek work and administer contracts whether or not he is performing a particular contract. For instance, a contractor must provide for the home office space, pay for utilities pertaining to that space, pay licensing fees and officer’s salaries even when the contractor has no current contracts and is merely seeking work.
Given this established definition of overhead costs, the very premise of Wickham’s argument is incorrect. Wickham contends that because 80% of its home office activity related to the Albany contract, 80% of its home office costs is directly attributable to that contract. Wickham fails to recognize that a cost is directly attributable to a contract only when the cost is caused by the contract. The Albany project did not cause 80% of Wickham’s home office costs because Wickham would have incurred the individual cost components of the home office overhead whether or not it ever undertook the Albany project. For instance, the Albany project did not cause 80% of Wickham’s home office rent even if 80% of the activity in that office related to the Albany project. 8 Because Wickham would have incurred the same or similar rental expense in any event, no portion of the rent is directly attributable to the Albany project.
3. Alternatives to Eichleay Disapproved
Wickham relies on
Miles Construction,
VABCA No. 1674,
Both the facts and the analysis of Miles are distinguishable from this case. The Miles Board decreased the award to the contractor from the amount calculated according to the Eichleay formulа because the contractor’s financial statements indicated that he may have performed undisclosed work during the delay period. The implication of the undisclosed work is that the contractor may have received undisclosed income during the contract period, which would have decreased the percentage of overhead allocable to the delayed contract. The Miles Board did not deviate from the Eichleay formula based on the rationale that any portion of the contractor’s overhead was directly attributable to or caused by the delayed contract. Thus, Miles does not support Wick-ham’s position.
In addition, the “jury verdict” approach of
Miles
has not subsequently been followed by any board, including the Veterans Board. Morеover, board decisions since
Miles,
including those of the Veterans Board, have uniformly rejected the use of other formulas in place of the
Eichleay
formula.
See Bridgewater Constr. Corp.,
VABCA No. 2956,
Finally, beyond concluding that Miles does not support Wickham’s position, we hold that the “jury verdict” approach which was used in Miles and which Wickham effectively asks us to apply here is an improper method for allocating overhead to a delayed government contract to compensate a contractor for unabsorbed overhead. When a contractor satisfies the prerequisites for application of the Eichleay formula, that formula is the exclusive means available for calculating unabsorbed overhead to the delayed contract. 9
Due to the nature of overhead expenses, a precise method for allocating overhead to specific contracts cannot be devised, but the Eichleay formula provides a feasible, equitable and predictable method of compensating a contractor for unabsorbed overhead. By allocating a pro-rata share of the overhead expense to the delayed contract, the Ei-chleay formula fairly distributes the overhead. By reimbursing the contractor based on the length of the delay, the Eichleay formula compensates the contractor, but only for unabsorbed overhead, recognizing that a portion of the overhead allocable to the delayed contract will be absorbed by the direct costs of that contract. Thus it adequately compensates the contractor without unduly burdening the taxpayers.
In sum, because it is impossible to determine the amount of unabsorbed overhead caused by the delay of any particular contract, and because the Eichleay formula provides an equitable method of compensating a contractor for unabsorbed overhead without costing taxpayers more than they shоuld pay, we hold that the Eichleay formula is the *1581 exclusive means for compensating a contractor for unabsorbed overhead when it otherwise meets the Eichleay prerequisites.
B. Direct Field Costs are not Overhead
Wickham asserts that several direct field costs should be considered components of the overhead pool. Wickham had initially included these disputed costs in its original claim as direct field costs for travel and business meetings, telephones charges attributable to the field offices of its three projects, professional fees, union welfare benefits and payroll taxes paid in connection with construction labor, and rental charges for equipment used to accomplish the three projects.
According to Wickham, it removed these costs from its claim for direct costs due to GSA concerns that they represented potential double billing. Wickham then resubmitted these cost as overhead claims. Wickham contends that the government asked that these costs be removed from direct cost settlement claims, and then refused to consider these costs as overhead. Without so describing it, Wickham suggests that the government be judicially estopped from changing positions. ' On these facts, no estoppel has been shown.
The Board made specific findings regarding each individual category, explaining that each category included direсt costs of the Albany project and Wickham’s other two projects, and not overhead costs. In addition, the Board found that Wickham failed to carry its burden of proving that a disputed portion of the travel and business meetings expense and that the professional fees were allocable to overhead.
As explained above, the overhead pool may include only those costs expended for the benefit of the business as a whole, those that cannot be attributed to a particular project. Therefore, the Board correctly did not allow any part of the field costs that was directly attributable to either the Albany project or another project to be added to the overhead pool.
Wickham further argues that the disputed expenses were submitted as overhead costs after being withdrawn as direct costs pursuant to an agreement between the parties. However, Wickham does not cite any statement by the government making such an agreement. Wickham relies solely on its own unilateral statement that the costs will be withdrawn as direct costs and resubmitted as overhead costs. Nor did the Board find any such agreement. Because Wickham chose to settle disputed direct costs by withdrawing them, it cannot now properly claim those disputed costs as overhead. They are not overhead and Wickham’s withdrawal of these items was unilateral and voluntary. To preserve the issue for our review, Wickham would have had to insist on these costs as direct costs and then аppeal a denial by the contracting officer to the Board and, if necessary, to us. It chose not to do so. That its choice binds it here is only a natural consequence of such a deliberate waiver.
C. The Early Finishing Date was not Proven
Wickham claims that it would have finished the renovation work in ten months instead of the 12 allowed by the contract if the government had not delayed the work. Measuring the delay from the early finish date would give a 1029 day, rather than a 969 day, delay period for use in the Eichleay formula. To support its claim of an early finish date, Wickham points to the critical path method schedule (CPM) completed by GSA’s independent scheduling consultant which showed a ten month comрletion date. Wickham argues that the CPM schedule is sufficient evidence to meet its burden of showing that, but for the delay, it would have completed the work by the projected early finish date. Wickham’s project manager also stated that the contract could have been completed within ten months.
*1582 Wickham further argues that its evidence of early completion is undisputed by GSA. However, GSA asserts that it never approved the early completion date, but only used the CPM schedule for the purpose of making progress payments to Wickham.
The Board found that Wickham did not meet its burden of showing that it would have finished by the early date absent government delays, аnd, therefore, held it not entitled to be compensated for the longer delay period. The Board reasoned that even assuming GSA did agree to the early finish date, it is still Wickham’s burden to show that it would have finished by that date. The Board found that Wickham lacked sufficient evidence that it would have finished early, so any statement to that effect was simply “speculative.”
Wickham charges that the Board totally disregarded its evidence. This argument is not convincing. It was Wickham’s burden to show that it
could
have finished the contract work early and
would
have done so but for the delay by GSA.
See Metropolitan Paving Co. v. United States,
Thus, the Board’s determination that delay damages should be calculated from the contract’s specified completion date is supported by substantial evidence and not arbitrary or capricious.
D. Interеst on Equity Capital is not Allowable and Borrowed Funds were not Used
Wickham seeks reimbursement for $196,182 for the “cost” of using equity capital and borrowed funds to finance the Albany contract. Wickham maintains that it was forced to counter the severe cash flow problems caused by delay of the Albany contract by using its equity and borrowings to subsidize the contract work. For this reason, Wickham claims entitlement to additional compensation. Wickham’s expert arrived at the requested amount through a formula using the average of the equity capital utilized during the contract period, the average Treasury interest rate, the average overhead, and the totаl direct job costs.
The Board rejected Wickham’s claim for two reasons. First, by requesting “the additional costs of supporting and financing the Project with the company’s equity capital” (Appellant’s Brief at 32), Wickham is essentially trying to recover interest on equity capital. Wickham even applied the average interest rate paid by the Treasury in its calculation of the sum it seeks to recover.
This court rejected a claim for the cost of using equity capital to finance additional expenses due to government delays in
Gevyn Constr. Corp. v. United States,
Although interest on equity capital is not recoverable, a contractor may recover interest actually paid on funds borrowed because of the government’s delay in payments and used on the delayed contract.
Id.
(“[28 U.S.C. §] 2516(a) does not bar an interest award as part of an equitable adjustment under a fixed-price contract if the contraсtor
*1583
has actually paid interest because of the government’s delay in payment”). Nevertheless, the Board rejected Wickham’s claim because it showed neither that borrowed funds were used in connection with the Albany project, nor that the borrowing resulted from the delay. Wickham’s own accounting expert testified that although Wickham borrowed between $200,000 and $350,000 during the contract period, he could not determine if any of those funds were used on the Albany project.
We conclude that the Board’s finding that Wickham did not show that the amount sought based on the borrowed funds was incurred in connection with the Albany project is supported by substantial evidence. In response to the Board’s finding, Wickham has made only conclusory statements about a “substantial negative cash flow as a consequence of the delay.” Such statements cannot undermine the Board’s finding which after all was not based only on lack of evidence, but also on the testimony of Wick-ham’s own expert. Therefore, the Board’s conclusion that Wickham failed to carry its burden is supported by substantial evidence.
IV. CONCLUSION
We affirm the Board’s decision that Wick-ham is not entitled to additional compensation for home office overhead expenses incurred under a contract with the GSA as a result of GSA-imposed delays. The Eichleay formula and not a “directly attributable” percentage is the proper method, and the only proper method, for calculating unabsorbed home office overhead when a contractor otherwise satisfies the Eichleay requirements. Moreover, Wickham cannot expand the overhead pool by including direct costs, especially after withdrawing them. Wickham’s claim to an extended delay period was also properly rejected; the Board’s finding that Wickham did not show that absent the GSA delay it would have finished by the projected early date is supported by substantial evidence. Finally, for the different reasons stated above, Wickham is not entitled to the interest pаyments claimed for use of either equity capital or borrowed funds.
The Board’s decision is therefore, in all respects,
AFFIRMED.
Notes
.
Eichleay Corp.,
ASBCA No. 5183,
. Wickham had already been partially compensated for. overhead costs because the original contract price included a markup for overhead. In addition, when GSA issued change orders to pay Wickham for additional work, almost all of the orders included a markup of 10% for overhead.
. The
Eichleay
formula requires three steps: 1) to find allocable contract overhead, multiply the total overhead cost incurred during the contract period times the ratio of billings from the delayed contract to total billings of the firm during the contract period; 2) to get the daily contrаct overhead rate, divide allocable contract overhead by days of contract performance; and 3) to get the amount recoverable, multiply the daily contract overhead rate times days of government-caused delay.
Capital Elec. Co. v. United States,
. The parties stipulated that the government caused delay and disruption in Wickham's performance of the GSA contract such that Wick-ham satisfies the requirements for application of the Eichleay formula. GSA admitted to the Board that GSA had caused compensable delay of 969 days. Wickham’s witness testified that because of the disruption, it was unable to commit to any additional contract work during the delay аnd GSA did not dispute this testimony.
. Whether or not a cost is a proper component of the Eichleay pool will also depend on whether that cost is considered allowable by the government under applicable regulations, normally incorporated into the contract. But allowability is not an issue here.
. This is because Wickham's other two contracts were managed mainly on site while the Albany project was managed from the home office.
. Even assuming a home office cost is measurable and divisible between a contractor's various contracts, if that cost has been properly classified as overhead, it becomes part of the Eichleay pool and may only be allocated to a contract based on the Eichleay formula.
. While it is true that some home office expenses may increase slightly due to a particular contract (due to increased photocopying, for instance), generally the amount of the increase is sufficiently small and difficult to trace and quantify that the increase is still treated as an overhead cost.
. In a case such as
Miles
in which a contractor provides inadequate financial data for an accurate and fair
Eichleay
calculation, the contracting officer and appeals board have options beyond the "jury verdict” approach of
Miles.
For instance, the board may estimate the contractor’s total billings for the contract period.
See Bridgewater Constr. Corp.,
VABCA No. 2956,