When used in a construction contract, liquidated damages are charged when a contractor fails to meet a deadline and can be taken from the money that the contractor is owed for their work. A properly drafted liquidated damages (LDs) clause is an essential element of any construction contract, in which the parties seek protection from delays.LDs provide certainty to both parties, incentivize performance and facilitate the recovery of damages without the difficulty and expense of proof. These are the damages you can charge against the money you still owe the contractor once the project is finished. A commercial office tower or residential apartment building owner might have an easier time proving loss of revenue resulting from a delayed opening than say, the opening of a library or the paving of a road. August 11, 2015 . Little Rock, AR How to Calculate Liquidated Damages in Construction Calculating liquidated damages can be tricky, depending on the project. Quite often, the liquidated damages provision in your contract can move at least some of your losses to the builder or contractor involved in the delay. Liquidated damages in EPC contracts. Bailey . Department of Civil Engineering – Auburn University . Liquidated damages on a construction project normally stop at substantial completion. CALCULATING LIQUIDATED DAMAGES RATES: ALDOT’s CURRENT REVIEW PROCEDURE . Sometimes, the parties to a contract, at the time of making the contract, agree to the amount of compensation payable in the event of the breach of contract. Using a liquidated damage provision is the easiest way for an owner to calculate the losses that they can recover if a project is not completed on time. The amount of the liquidated damages is supposed to be the parties' best estimate at the time they sign the contract of the damages … Wesley C. Zech • L.G. This amount of compensation payable, which has been agreed beforehand, may be either liquidated damages or penalty. Liquidated Damages are monies assessed or withheld from the contractor’s payment for failure to complete the project within a contractually specified period of time. A Precise Formula for Liquidated Damages in Oakville Saher Fazilat is Manager of New Construction for the Town of Oakville, Ontario. Crowley • C.B. They’re usually represented in your construction contract as a daily charge. In special cases, liquidated damages greater than the estimated field construction engineering cost may be specified provided that detailed reasons, such as project related costs for delays and public Once a project can be used for its intended purpose, any ongoing delay related damages an owner might incur before final completion should be reasonably easy to calculate and, therefore, not appropriate for liquidated damages. Liquidated damages clauses are a useful tool that should be included in construction contracts when the delay of the project completion is critical for the program or will cost the University unforeseen expense, as, for example, when a delay will impact a research program or the timely completion of a residence hall renovation. Liquidated damages are pre-agreed amounts of compensation which are to be paid to the ‘innocent’ party to a contract by the ‘contract-breaker’ on the occurrence of specified breaches of contract; liquidated damages are, for example, commonly payable when there is a delay in completing works by the agreed completion date. NHS. Liquidated damages are based on the estimated cost of field construction engineering. For projects off the NHS, this provision is optional. A liquidated damages clause specifies a predetermined amount of money that must be paid as damages for failure to perform under a contract. Liquidated Damages are not a penalty, but reimbursement for the costs to the contracting agency associated with administering the contract beyond the specified contract time.