XL EagleLiquidated damages (Liquidated damages (LDs))
Liquidated damages stands for Liquidated damages (LDs). Liquidated damages are a fixed amount, set in the contract, that the contractor must pay if it finishes late. They are often stated as a dollar amount per calendar day of delay and are common in construction and time-sensitive supply contracts.
The amount must be a reasonable forecast of the government's actual harm from delay, not a penalty. The government can generally withhold liquidated damages from payments. Excusable delays, like government-caused delays or certain unforeseeable events, can reduce or eliminate them.
Why it matters to a small contractor
Find the liquidated damages rate in the solicitation and multiply it by realistic delay days to see your real risk. During the job, document every government delay and ask for time extensions in writing promptly, since that is how you avoid paying LDs you did not cause.
Example
A paving contract sets liquidated damages per day for late completion. Rain and a government-ordered design change cause delays, so the contractor requests a time extension in writing for the change days to avoid being charged.
Liquidated damages: common questions
Are liquidated damages a penalty?
No. They must be a reasonable estimate of the government's actual losses from delay. A penalty would not be enforceable.
Can liquidated damages be waived?
They can be reduced or removed for excusable delays, and contracting officers have some authority to remit them in certain cases. Ask in writing with support.
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