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177 Subpart 11.5—Liquidated Damages

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177 Subpart 11.5—Liquidated Damages Federal Acquisition Regulation 11.503 proceed by a certain day, the contract- and a basis for termination for default ing officer may use the clause with its exists, the contracting officer should Alternate I. take appropriate action expeditiously to obtain performance by the contrac- [48 FR 42159, Sept. 19, 1983, as amended at 56 FR 41732, Aug. 22, 1991. Redesignated and tor or to terminate the contract (see amended at 60 FR 48241, Sept. 18, 1995] subpart 49.4). If delivery or perform- ance is desired after termination for default, efforts must be made to obtain Subpart 11.5ÐLiquidated the delivery or performance elsewhere Damages within a reasonable time. Efficient ad- ministration of contracts containing a SOURCE: 48 FR 42159, Sept. 19, 1983, unless liquidated damages clause is impera- otherwise noted. Redesignated at 60 FR 48241, tive to prevent undue loss to defaulting Sept. 18, 1995. contractors and to protect the inter- 11.501 General. ests of the Government. (d) If a contract provides for liq- This subpart provides policies and uidated damages for delay, the Comp- procedures for the use of liquidated troller General, on the recommenda- damages clauses in solicitations and tion of the head of the agency con- contracts for supplies, services, and cerned, is authorized and empowered construction. by law to make a remission, that in the [48 FR 42159, Sept. 19, 1983, as amended at 50 discretion of the Comptroller General FR 1736, Jan. 11, 1985; 50 FR 52429, Dec. 23, is just and equitable, of the whole or 1985] any part of such damages. 11.502 Policy. 11.503 Procedures. (a) Liquidated damages clauses (a) If a liquidated damages clause is should be used only when both (1) the to be used in a contract, the applicable time of delivery or performance is such clause and appropriate rate(s) of liq- an important factor in the award of the uidated damages shall be included in contract that the Government may the solicitation. reasonably expect to suffer damage if (b) If a liquidated damages clause is the delivery or performance is delin- used in a construction contract, the quent, and (2) the extent or amount of rate(s) of liquidated damages to be as- such damage would be difficult or im- sessed against the contractor should be possible to ascertain or prove. In decid- for each day of delay and the rate(s) ing whether to include a liquidated should as a minimum cover the esti- damage clause in a contract, the con- mated cost of inspection and super- tracting officer should consider the intendence for each day of delay in probable effect on such matters as pric- completion. Whenever the Government ing, competition, and the costs and dif- will suffer other specific losses due to ficulties of contract administration. the failure of the contractor to com- (b) The rate of liquidated damages plete the work on time, the rate(s) used must be reasonable and considered should also include an amount for on a case-by-case basis since liquidated these items. Examples of specific losses damages fixed without any reference to areÐ probable actual damages may be held (1) The cost of substitute facilities; to be a penalty, and therefore unen- (2) The rental of buildings and/or forceable. The contract may also in- equipment; or clude an overall maximum dollar (3) The continued payment of quar- amount or period of time, or both, dur- ters allowances. ing which liquidated damages may be (c) If appropriate to reflect the prob- assessed, to ensure that the result is able damages, considering that the not an unreasonable assessment of liq- Government can terminate for default uidated damages. or take other appropriate action, the (c) The contracting officer shall take rate of assessment of liquidated dam- all reasonable steps to mitigate liq- ages may be in two or more increments uidated damages. If a liquidated dam- which provide a declining rate of as- ages clause is included in a contract sessment as the delinquency continues. 177 VerDate 08-JAN-97 14:25 Jan 09, 1997 Jkt 167187 PO 00000 Frm 00177 Fmt 8010 Sfmt 8010 E:\CFR\167187.035 167187 11.504 48 CFR Ch. 1 (10±1±96 Edition) The contract may also include an over- Agency (FEMA) for priorities and allo- all maximum dollar amount or period cations support under the Defense Pro- of time, or both, during which liq- duction Act of 1950, as amended (50 uidated damages may be assessed, to U.S.C. app. 2061, et seq.), to promote the ensure that the result is not an unrea- national defense. Schedule I of the sonable assessment of liquidated dam- DPAS lists currently authorized pro- ages. grams. Controlled materials, as used in this 11.504 Contract clauses. subpart, means the various shapes and (a) The contracting officer may in- forms of steel, copper, aluminum, and sert the clause at 52.211±11, Liquidated nickel alloys specified in Schedule II, DamagesÐSupplies, Services, or Re- and defined in Schedule III, of the search and Development, in solicita- DPAS. tions and contracts when a fixed-price Delegate Agency, as used in this sub- contract is contemplated for supplies, part, means an agency of the U.S. Gov- services, or research and development ernment authorized by delegation from (see 12.202). DOC to place priority ratings on con- (b) The contracting officer may in- tracts that support authorized pro- sert the clause at 52.211±12, Liquidated grams. Schedule I of the DPAS lists DamagesÐConstruction, in solicita- the Delegate Agencies. tions and contracts for construction, Rated order means a prime contract except construction contracts on a for any product, service, or material cost-plus-fixed-fee basis (see 12.202). If (including controlled materials) placed different completion dates are specified by a Delegate Agency under the provi- in the contract for separate parts or sions of the DPAS in support of an au- stages of the work, the contracting of- thorized program and which requires ficer shall use the clause with its Al- preferential treatment, and includes ternate I. subcontracts and purchase orders re- (c) The contracting officer shall in- sulting under such contracts. sert the clause at 52.211±13, Time Ex- [51 FR 19714, May 30, 1986. Redesignated at 60 tensions, in solicitations and contracts FR 48241, Sept. 18, 1995] for construction in which the clause at 52.211±12, Liquidated DamagesÐCon- 11.602 General. struction, is used with its Alternate I. (a) Under Title I of the Defense Pro- duction Act of 1950, as amended (50 [48 FR 42159, Sept. 19, 1983. Redesignated and U.S.C. app. 2061, et seq.), the President amended at 60 FR 48241, Sept. 18, 1995] is authorized (1) to require that con- tracts in support of the national de- Subpart 11.6ÐPriorities and fense be accepted and performed on a Allocations preferential or priority basis over all other contracts, and (2) to allocate ma- SOURCE: 51 FR 19714, May 30, 1986, unless terials and facilities in such a manner otherwise noted. Redesignated at 60 FR 48241, as to promote the national defense. Sept. 18, 1995. (b) The Office of Industrial Resource 11.600 Scope of subpart. Administration (OIRA), DOC, is respon- sible for administering and enforcing a This subpart implements the Defense system of priorities and allocations to Priorities and Allocations System carry out Title I of the Defense Produc- (DPAS), a Department of Commerce tion Act for industrial items. The (DOC) regulation in support of author- DPAS has been established to promote ized national defense programs (see 15 the timely availability of the nec- CFR part 700). essary industrial resources to meet [51 FR 19714, May 30, 1986, as amended at 56 current national defense requirements FR 41744, Aug. 22, 1991] and to provide a framework to facili- tate rapid industrial mobilization in 11.601 Definitions. case of national emergency. Authorized program, as used in this (c) The Delegate Agencies (see Sched- subpart, means a program approved by ule I of the DPAS) have been given au- the Federal Emergency Management thority by DOC to place rated orders in 178 VerDate 08-JAN-97 14:25 Jan 09, 1997 Jkt 167187 PO 00000 Frm 00178 Fmt 8010 Sfmt 8010 E:\CFR\167187.035 167187.
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