Recovery of Unabsorbed Home Office Overhead
Summer 2012

Last year, the U.S. Court of Federal Claims issued an opinion discussing recovery of unabsorbed home office overhead in The Redland Company, Inc. v. United States, 97 Fed. Cl. 736 (2011). This decision is worth noting because it serves as a mini-treatise on unabsorbed home office overhead, i.e. what it is, when contractors may be entitled to recover such costs and how they must go about proving these damages.

In this case, Redland filed a complaint under the Contract Disputes Act seeking compensation on various claims arising from a paving contract with the Air Force. Performance was to begin soon after contract award. On December 1, 2000, Redland received a notice to proceed from the contracting officer. On that same date, however, the contracting officer issued a second order suspending work until further notice. This suspension lasted almost four years. Eventually, the suspension was lifted on October 18, 2004. Redland then completed all of the work under the contract.

In its complaint, Redland asserted a variety of claims. Among them, Redland sought to recover unabsorbed home office overhead for the time period during which the start of work was suspended. Redland asked the court to grant summary judgment on this claim.

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