Overview
This section outlines the mandatory procedural requirements for including liquidated damages in federal solicitations and contracts, emphasizing the need for transparency in rates and the specific components required for construction contract calculations.
Key Rules
- Solicitation Requirements: If a contract is to include liquidated damages, the Contracting Officer must ensure the applicable clause and the specific rates are included in the solicitation.
- Rate Specification for Construction: Construction contracts must explicitly state the rate(s) to be assessed for each day of delay.
- Mandatory Calculation Components: In construction, the daily rate must include the estimated cost of Government inspection and superintendence.
- Additional Expense Inclusion: The rate should account for other foreseeable costs resulting from delay, specifically mentioning:
- Costs for renting substitute property.
- Additional allowances for living quarters.
Practical Implications
- Administrative Record: Contracting Officers must document how the liquidated damages rate was calculated to ensure it is a "reasonable forecast" of damages and not a penalty, which would be legally unenforceable.
- Solicitation Accuracy: Contractors use these stated rates to assess risk during the bidding process; therefore, omitting or changing these rates after the solicitation stage can lead to disputes or protests.