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GEORGE HYMAN CONSTR. CO. v. WASHINGTON METRO. AREA

October 11, 1985.

THE GEORGE HYMAN CONSTRUCTION COMPANY, Plaintiff
v.
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, et al., Defendants



The opinion of the court was delivered by: OBERDORFER

 I.

 The plaintiff, George Hyman Construction Company ("Hyman"), in 1974 contracted with WMATA for the "finish work" *fn1" on the Metro's Pentagon Station. After commencing work under the contract, Hyman was, for various reasons, on a number of occasions denied access to some parts of the site. Although Hyman was never completely foreclosed from the site as a result of the partial and intermittent interruptions, the project required 941 days to complete rather than the 480 days originally estimated by Hyman. See generally id. at 89,337-41.

 Construction began in 1974. Between 1975 and 1978, Hyman submitted claims to WMATA based on additional costs allegedly incurred because of WMATA's failure to provide timely access to the site. The parties negotiated unsuccessfully from 1978 to 1980 with respect to these claims. See Plaintiff's Statement of Material Facts as to Which There Is No Genuine Issue at paras. 4-6. Hyman then resorted to the "Disputes" clause in the contract. *fn2" In 1981, WMATA's Contracting Officer denied the relief sought by Hyman and assessed liquidated damages. The dispute was then submitted to the United States Army Corps of Engineers Board of Contract Appeals ("Board"), *fn3" which decided the dispute in plaintiff's favor after an extensive trial-type proceeding conducted January 25 - February 12, 1982. The Board's lengthy decision was rendered January 10, 1985, and addressed Hyman's claim and the claims of its subcontractors.

 After the Board issued its decision, the General Counsel of WMATA prepared a staff memorandum for WMATA's General Manager, who is empowered to make the final decision under the disputes clause of the contract. This memorandum recommended that the General Manager ratify most of the Board's decision, but concluded that "the recommendation for allowance of 'Eichleay' overhead and interest are erroneous as a matter of law." Notice of Administrative Record Submittal, "Counsel's Memos" at 2. On May 1, 1985, the General Manager issued a five-page decision which denied Hyman's Eichleay and cost-of-capital claims. The General Manager noted that she had considered the Board's opinion, the General Counsel's memorandum, and a reply letter from Hyman's attorney. Notice of Administrative Record Submittal, Final Decision at 1.

 Under the terms of the disputes clause, *fn5" the General Manager's Final Decision is "final and conclusive unless determined by a court of competent jurisdiction to have been fraudulent, or capricious, or arbitrary, or so grossly erroneous as necessarily to imply bad faith, or is not supported by substantial evidence." The matter is now before the Court on plaintiff's motion for partial summary judgment and defendants' dispositive summary judgment motion. Plaintiff's statement of material undisputed facts is not contradicted by defendants.

 The question before the Court is a legal one: whether the General Manager erred as a matter of law by refusing to apply the Eichleay formula and by disallowing the cost of equity capital. The plaintiff's pending motion for summary judgment is partial in that the plaintiff asks only for a ruling on these disputed issues of law. The question of damages is to be addressed in further proceedings. The defendants' cross-motion, which would simply uphold the General Manager's decision, is dispositive.

 II.

 A.

 Plaintiff contends that the Board properly relied on the " Eichleay method" in reaching its decision on Hyman's claims for certain costs attributable to overhead. The Eichleay method requires that the total overhead pool of the contractor be multiplied by a percentage derived by dividing the billings on a particular contract by the contractor's total billings for the contract period. The resulting "allocable" overhead is divided by the total days of performance to determine the daily overhead rate. The daily overhead rate is then multiplied by the number of days in the delay period to determine the overhead allocable to that period. The Eichleay method has been endorsed as a rule of thumb for attributing overhead costs to a delay period -- it serves as an approximation that substitutes for a line-by-line determination of how much of the home office overhead was actually devoted to the delayed project during the period of delay. See, e.g. Capital Electric Co. v. United States, 729 F.2d 743 (Fed. Cir. 1984).

 WMATA's General Manager concluded, however, that

 
the main problem with the [Board's] decision is that it simply assumes that Hyman and its subcontractors are entitled to an "Eichleay" type recovery without any showing of damage. The [Board] failed to analyze the period of delay to determine whether Hyman or its subcontractors were precluded from obtaining other work to absorb their overhead. . . . Further, and more importantly, the [Board] failed to analyze the extended period to determine if the fact that this work was pushed to a later period by WMATA caused delay and somehow precluded these ...

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