Subpart 11.5 - Liquidated Damages

Parent topic: Part 11 - Describing Agency Needs

11.500 Scope.

(a) This subpart prescribes policies and procedures for using liquidated damages clauses in

solicitations and contracts for supplies, services, research and development, and construction.

(b) This subpart does not apply to liquidated damages-

(1) For subcontracting plans (see 19.705-7);

(2) Related to the Contract Work Hours and Safety Standards statute (see subpart 22.3); or

(3) Related to paid sick leave for Federal contractors (see subpart 22.21).

11.501 Policy.

(a) The contracting officer must consider the potential impact on pricing, competition, and contract

administration before using a liquidated damages clause. Use liquidated damages clauses only

when-

(1) The time of delivery or timely performance is so important that the Government may reasonably

expect to suffer damage if the delivery or performance is delinquent; and

(2) The extent or amount of such damage would be difficult or impossible to estimate accurately or

prove.

(b) Liquidated damages are not punitive and are not negative performance incentives (see 16.402-2).

Liquidated damages are used to compensate the Government for probable damages. Therefore, the

liquidated damages rate must be a reasonable forecast of just compensation for the harm that is

caused by late delivery or untimely performance of the particular contract. Use a maximum amount

or a maximum period for assessing liquidated damages if these limits reflect the maximum probable

damage to the Government. Also, the contracting officer may use more than one liquidated damages

rate when the contracting officer expects the probable damage to the Government to change over

the contract period of performance.

(c) The contracting officer must take all reasonable steps to mitigate liquidated damages. If the

contract contains a liquidated damages clause and the contracting officer is considering terminating

the contract for default, the contracting officer should seek expeditiously to obtain performance by

the contractor or terminate the contract and repurchase (see subpart 49.4). Prompt contracting

officer action will prevent excessive loss to defaulting contractors and protect the interests of the

Government.

(d) The head of the agency may reduce or waive the amount of liquidated damages assessed under a

contract, if the Commissioner, Financial Management Service, or designee approves (see Treasury

Order 145-10).
11.502 Procedures.

(a) Include the applicable liquidated damages clause and liquidated damages rates in solicitations

when the contract will contain liquidated damages provisions.

(b) Construction contracts with liquidated damages provisions must describe the rate(s) of liquidated

damages assessed per day of delay. The rate(s) should include the estimated daily cost of

Government inspection and superintendence. The rate(s) should also include an amount for other

expected expenses associated with delayed completion such as-

(1) Renting substitute property; or

(2) Paying additional allowance for living quarters.

11.503 Contract clauses.

(a) Use the clause at 52.211-11, Liquidated Damages-Supplies, Services, or Research and

Development, in fixed-price solicitations and contracts for supplies, services, or research and

development when the contracting officer determines that liquidated damages are appropriate (see

11.501(a)).

(b) Use the clause at 52.211-12, Liquidated Damages-Construction, in solicitations and contracts for

construction, other than cost-plus-fixed-fee, when the contracting officer determines that liquidated

damages are appropriate (see 11.501(a)). If the contract specifies more than one completion date for

separate parts or stages of the work, revise paragraph (a) of the clause to state the amount of

liquidated damages for delay of each separate part or stage of the work.

(c) Use the clause at 52.211-13, Time Extensions, in solicitations and contracts for construction that

use the clause at 52.211-12, Liquidated Damages-Construction, when that clause has been revised

as provided in paragraph (b) of this section.