Subpart 11.5
Liquidated Damages
FAR Subpart 11.5 requires agencies to use liquidated damages clauses only when timely performance is critical and actual damages are hard to estimate, ensuring both government protection and fair contractor treatment.
Overview
FAR Subpart 11.5 addresses the use of liquidated damages in federal contracts. Liquidated damages are predetermined amounts set in the contract to be paid by the contractor if they fail to meet specified performance or delivery requirements. This subpart outlines when and how liquidated damages clauses should be included, the policy rationale for their use, the procedures for determining appropriate amounts, and the required contract clauses. The intent is to protect the government’s interests when timely performance is critical and actual damages would be difficult to quantify.
Key Rules
- Scope (11.500)
- Applies to contracts where timely performance or delivery is essential and delays could harm the government.
- Policy (11.501)
- Liquidated damages should only be used when the time of delivery or performance is so important that the government may suffer damage if the contract is not fulfilled on time, and the extent or amount of such damage would be difficult or impossible to estimate accurately.
- Procedures (11.502)
- Contracting officers must determine if a liquidated damages clause is appropriate, calculate a reasonable amount, and document the rationale for its use.
- Contract Clauses (11.503)
- Specifies the required FAR clauses to be included in contracts where liquidated damages apply, such as FAR 52.211-11 for supplies, services, or research and development.
Responsibilities
- Contracting Officers: Assess the need for liquidated damages, determine appropriate amounts, include the correct clauses, and document decisions.
- Contractors: Understand and comply with liquidated damages provisions, ensuring timely performance to avoid penalties.
- Agencies: Oversee proper application and enforcement of liquidated damages clauses.
Practical Implications
- Ensures the government has a remedy for late performance when actual damages are hard to quantify.
- Impacts contract pricing and risk assessment for contractors.
- Common issues include disputes over the reasonableness of the damages amount and enforcement of the clause.