Overview
This section mandates that Contracting Officers (COs) perform a formal evaluation to determine if liquidated damages are necessary for a specific construction contract based on established criteria.
Key Rules
- Mandatory Evaluation: The Contracting Officer is required to assess the need for liquidated damages; they are not automatically included in every construction contract.
- FAR 11.502 Compliance: The evaluation must follow the policy and procedures outlined in FAR Subpart 11.5, which specifies that liquidated damages are appropriate when time is of the essence and damages would be difficult to estimate.
- Agency Consistency: The CO must ensure the decision aligns with specific agency-level supplemental regulations and guidelines.
Practical Implications
- Justification Requirement: COs must document the rationale for the liquidated damages rate to ensure it represents a reasonable forecast of compensatory damages rather than an unenforceable penalty.
- Cost Impact: For contractors, this section signals that construction schedules are strictly monitored, and failure to meet completion dates will likely result in pre-calculated daily deductions from the contract price.