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Section D-3
Liquidated Damages

The Joint Committee recommends that Liquidated Damage Clauses be used sparingly and with discretion because these clauses can create adversarial relationships amongst the project team and add additional costs to a bid. Furthermore the Joint Committee recommends use of Liquidated Damage Clauses only in cases to provide monetary relief for specific and identifiable damages resulting from the project not being completed on schedule for reasons attributable to a contractor's non-performance. It is important to understand the full impact of the time of completion, especially if exceptional efforts will be needed to meet the schedule. If the owner is considering liquidated damages, a bonus for early completion is recommended. Additionally, the owner should not consider liquidated damage clauses as a mechanism to achieve an unrealistic completion date.

Where such clauses are necessary, the contract should be based on a reasonable completion time, the amount of damages should be factual and calculable, and adequate provisions should be made for extension of time for delays not caused by the Contractor.

This dollar amount of said Liquidated Damages shall be identified as part of the bidding process prior to the time of bidding.

Glossary Terms for the Best Practices Guide

History of Recommendation:
Revised May, 2009
Revised April, 1987
Reviewed February, 1983
Reviewed September, 1976
Revised November, 1971
Approved January, 1967

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