Liquidated damages in contract documents are provided to reinforce the Owner's requirements that time-is-of-the-essence. The liquidated damages article (Example Section III-Article 8.0) in the general provisions portion of the contract is typically a brief statement. The article specifies the damages each day of delay in achieving performance milestones and the mechanism for assessing the accrued damages on contract invoices.
However, most Owner's prefer that the contractor achieve critical dates and establish controls for assuring the milestones are met without the need to make adjustments in payments. In order to more clearly convey the Owner's expectations, the liquidated damages article in the general provisions should amplify the expectations by creating requirements that allow the contractor to establish recovery plans before there is a financial penalty.
Here is the suggested text for community feedback and comments:
8.0.G Contractor shall submit a LD Response Plan within 20 days from notice by Owner that accrued liquidated damages exceed 25% of the specified damages cap or 5% of the contract amount. The Plan shall meet Section 8.0.J.
8.0.H Contractor shall submit a LD Corrective Action Plan within 20 days from notice by Owner that accrued liquidated damages exceed 50% of the specified damages cap or 10% of the contract amount. The Plan shall meet Section 8.0.J.
8.0.I Contractor shall submit LD Final Action Plan within 20 days from notice by Owner that accrued liquidated damages exceed 75% of the smaller amount of the specified damages cap or 15% of the contract amount. The Plan shall meet Section 8.0.J.
8.0.J Contractor's Plan shall be a comprehensive narrative and a schedule covering topics including but no limited to: A) Reasons for the accrual of damages from the delay. B) Activities and dates to achieve the remaining performance milestones. C) Assumptions and Conditions for implementation. As needed, the Plan shall identify interdependent activities required by the Contractor from the Owner or other project participants to support the Plan(s). Saving Changes...