[Code of Federal Regulations]

[Title 48, Volume 1]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 48CFR11.501]



[Page 189-190]

 

            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

 

                CHAPTER 1--FEDERAL ACQUISITION REGULATION

 

PART 11_DESCRIBING AGENCY NEEDS--Table of Contents

 

                     Subpart 11.5_Liquidated Damages

 

Sec. 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



[[Page 190]]



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).