The calculations of head office overheads or “extended home office overheads” have been puzzling many in the construction industry for a number of years. As we could see later in this article, case laws continue to refine and define head office overheads until today.
Simplistically, Clark and Lorenzni (1997) cited “These fixed (overhead) costs include items, such as office rental, utilities, janitorial services and corporate management.” The RICS (2000) defined it as “..expenditure on support services and general running costs, Overheads refer to the contractor’s general running of business as distinct from site costs of any particular contract. Overheads include, the rental of the contractor’s building and general support staff, and if they are proved to have been increased by the contract’s delay, there is no doubt, in principle, that they can be claimed (Finnegan and Sheffield City Council 1998).”
This article discusses claims for head office overheads and the relevant case laws to elaborate the background which defined the methods of calculating before briefly moving into contractual definitions and formulas, and proceeding to, illustrating the application of the additional overheads methods discussed in a real project.