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FAR
11.501: Liquidated damages |
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Comptroller
General |
Southern principally maintains that
liquidated damages are inappropriate where, as here, a sales
contract is to be awarded. According to Southern, since the
agency is paid for the vessel under the sales contract, and the
sales program as a whole generates revenue for the government,
there is no basis for the agency to be compensated for increases
in program costs that result from performance delays by the
contractor. This argument is without merit.
Liquidated damages are fixed amounts set forth in a contract at
the time it is executed that one party to the contract can
recover from another upon proof of violation of the contract
terms, without the need for proof of actual damages sustained.
Wheeler Bros., Inc., B-223263.2, Nov. 18, 1986, 86-2 CPD para.
575 at 6. Under Federal Acquisition Regulation (FAR) sect.
11.501(a), liquidated damages provisions are authorized where
timely performance is so important that the government
reasonably expects to suffer damages if there is a delay, and
the extent of such damages is difficult to ascertain.
We find nothing in the FAR standard or elsewhere--and the
protester has cited no authority--that precludes an agency from
including a liquidated damages provision in a contract simply
because the program under which the contract is issued generates
revenue from sales proceeds or otherwise. To the contrary, since
a liquidated damages provision is part of a particular contract,
the propriety of such a provision necessarily must turn on the
circumstances surrounding that contract. See generally Integrity
Mgmt. Int'l, Inc., B‑260595, B‑260595.2, June 27, 1995, 95-2 CPD
para. 126 at 5 (liquidated damages to be assessed may properly
consider losses beyond the reduced value of the services
performed under the contract). Under the current solicitation,
the contractor will be required to purchase the vessel,
remediate hazardous wastes, and dismantle the vessel, in
accordance with a schedule that the contractor proposes and to
which the agency agrees. We see nothing inherent in the contract
to be awarded--and, again, the protester cites nothing--that
would make it legally impermissible for the agency to provide
for recovery of liquidated damages reflecting the monetary harm
to the agency that will result if the contractor breaches the
contract terms by delaying performance.
The record shows that the agency has determined that it will be
harmed monetarily if the purchased vessel is not dismantled in
accordance with the schedule under the contract. It has
determined that $600 per day reasonably reflects the measurable
portion of that monetary harm (other more difficult to assess
damages--in particular, environmental impact--are omitted from
this amount). We find nothing objectionable in this provision
addressing the eventuality of the contractor's delaying the
dismantling of the vessels in violation of the terms of the
contract. Again, the fact that the agency will receive proceeds
from the sale of the vessel, or that the vessel
sale/dismantlement program generates revenue for the government,
has no bearing on the propriety of this liquidated damages
provision. (Southern Scrap
Material Company, B-401059, April 29, 2009) (pdf) |
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Comptroller
General - Listing of Decisions |
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For
the Government |
For
the Protester |
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Southern Scrap
Material Company, B-401059, April 29, 2009 (pdf) |
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U.
S. Court of Federal Claims |
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U.
S. Court of Federal Claims - Listing of Decisions |
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For
the Government |
For
the Protester |
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