52.219-16 Liquidated Damages-Subcontracting Plan
Source: FAR 52.219-16 on acquisition.gov
Contractors who do not make a good faith effort to meet their small business subcontracting goals may face significant liquidated damages and other government remedies.
Overview
FAR 52.219-16, Liquidated Damages-Subcontracting Plan, establishes the consequences for contractors who fail to make a good faith effort to comply with their approved small business subcontracting plans. The clause defines what constitutes a failure, outlines how performance is measured, and details the process for assessing and collecting liquidated damages if goals are not met due to lack of good faith effort. It also provides contractors with an opportunity to respond before a final decision is made and clarifies the right to appeal and the applicability of additional remedies.
Key Rules
- Definition of Failure to Make Good Faith Effort
- Willful or intentional failure to comply with the subcontracting plan, or actions intended to frustrate the plan, are considered failures.
- Measurement and Assessment of Damages
- Performance is measured against subcontracting goals; if unmet due to lack of good faith, liquidated damages equal to the shortfall are assessed.
- Notice and Opportunity to Respond
- Contractors must be given written notice and a chance to demonstrate good faith efforts before damages are finalized.
- Commercial Plans
- For commercial plans, the approving Contracting Officer acts on behalf of all covered agencies.
- Right of Appeal
- Contractors may appeal the Contracting Officer’s final decision under the Disputes clause.
- Additional Remedies
- Liquidated damages are in addition to any other remedies available to the Government.
Responsibilities
- Contracting Officers: Assess compliance, provide notice, consider contractor responses, issue final decisions, and enforce liquidated damages.
- Contractors: Make good faith efforts to meet subcontracting goals, respond to notices, and maintain documentation of efforts.
- Agencies: For commercial plans, coordinate through the approving Contracting Officer.
Practical Implications
- This clause enforces accountability for meeting small business subcontracting goals and deters willful noncompliance.
- Contractors must document and demonstrate good faith efforts to avoid penalties.
- Failure to respond to notices or provide evidence can result in significant financial penalties and additional government remedies.
As prescribed in 19.708(b)(2), insert the following clause:
Liquidated Damages-Subcontracting Plan (Sep 2021)
(a) "Failure to make a good faith effort to comply with the subcontracting plan," as used in this clause, means a willful or intentional failure to perform in accordance with the requirements of the subcontracting plan approved under the clause in this contract entitled "Small Business Subcontracting Plan," or willful or intentional action to frustrate the plan.
(b) Performance shall be measured by applying the percentage goals to the total actual subcontracting dollars or, if a commercial plan is involved, to the pro rata share of actual subcontracting dollars attributable to Government contracts covered by the commercial plan. If, at contract completion or, in the case of a commercial plan, at the close of the fiscal year for which the plan is applicable, the Contractor has failed to meet its subcontracting goals and the Contracting Officer decides in accordance with paragraph (c) of this clause that the Contractor failed to make a good faith effort to comply with its subcontracting plan (see 19.705-7), established in accordance with the clause in this contract entitled "Small Business Subcontracting Plan," the Contractor shall pay the Government liquidated damages in an amount stated. The amount of probable damages attributable to the Contractor’s failure to comply shall be an amount equal to the actual dollar amount by which the Contractor failed to achieve each subcontract goal.
(c) Before the Contracting Officer makes a final decision that the Contractor has failed to make such good faith effort, the Contracting Officer shall give the Contractor written notice specifying the failure and permitting the Contractor to demonstrate what good faith efforts have been made and to discuss the matter. Failure to respond to the notice may be taken as an admission that no valid explanation exists. If, after consideration of all the pertinent data, the Contracting Officer finds that the Contractor failed to make a good faith effort to comply with the subcontracting plan, the Contracting Officer shall issue a final decision to that effect and require that the Contractor pay the Government liquidated damages as provided in paragraph (b) of this clause.
(d) With respect to commercial plans, the Contracting Officer who approved the plan will perform the functions of the Contracting Officer under this clause on behalf of all agencies with contracts covered by the commercial plan.
(e) The Contractor shall have the right of appeal, under the clause in this contract entitled, Disputes, from any final decision of the Contracting Officer.
(f) Liquidated damages shall be in addition to any other remedies that the Government may have.
(End of clause)