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					                                 11.500                                                                 48 CFR Ch. 1 (10–1–03 Edition)

                                 proceed by a certain day, the con-                         the probable damage to the Govern-
                                 tracting officer may use the clause                        ment to change over the contract pe-
                                 with its Alternate I.                                      riod of performance.
                                 [48 FR 42159, Sept. 19, 1983, as amended at 56               (c) The contracting officer must take
                                 FR 41732, Aug. 22, 1991. Redesignated and                  all reasonable steps to mitigate liq-
                                 amended at 60 FR 48241, Sept. 18, 1995]                    uidated damages. If the contract con-
                                                                                            tains a liquidated damages clause and
                                           Subpart 11.5—Liquidated                          the contracting officer is considering
                                                  Damages                                   terminating the contract for default,
                                                                                            the contracting officer should seek ex-
                                                                                            peditiously to obtain performance by
                                   SOURCE: 65 FR 46064, July 26, 2000, unless
                                 otherwise noted.
                                                                                            the contractor or terminate the con-
                                                                                            tract and repurchase (see subpart 49.4).
                                 11.500      Scope.                                         Prompt contracting officer action will
                                                                                            prevent excessive loss to defaulting
                                   This subpart prescribes policies and
                                 procedures for using liquidated dam-                       contractors and protect the interests of
                                 ages clauses in solicitations and con-                     the Government.
                                 tracts for supplies, services, research                      (d) The head of the agency may re-
                                 and development, and construction.                         duce or waive the amount of liquidated
                                 This subpart does not apply to liq-                        damages assessed under a contract, if
                                 uidated damages for subcontracting                         the Commissioner, Financial Manage-
                                 plans (see 19.705–7) or liquidated dam-                    ment Service, or designee approves (see
                                 ages related to the Contract Work                          Treasury Order 145–10).
                                 Hours and Safety Standards Act (see
                                 subpart 22.3).                                             11.502     Procedures.
                                                                                              (a) Include the applicable liquidated
                                 11.501      Policy.                                        damages clause and liquidated damages
                                   (a) The contracting officer must con-                    rates in solicitations when the con-
                                 sider the potential impact on pricing,                     tract will contain liquidated damages
                                 competition, and contract administra-                      provisions.
                                 tion before using a liquidated damages                       (b) Construction contracts with liq-
                                 clause. Use liquidated damages clauses                     uidated damages provisions must de-
                                 only when—                                                 scribe the rate(s) of liquidated damages
                                   (1) The time of delivery or timely                       assessed per day of delay. The rate(s)
                                 performance is so important that the                       should include the estimated daily cost
                                 Government may reasonably expect to                        of Government inspection and super-
                                 suffer damage if the delivery or per-                      intendence. The rate(s) should also in-
                                 formance is delinquent; and                                clude an amount for other expected ex-
                                   (2) The extent or amount of such                         penses associated with delayed comple-
                                 damage would be difficult or impos-                        tion such as—
                                 sible to estimate accurately or prove.                       (1) Renting substitute property; or
                                   (b) Liquidated damages are not puni-
                                                                                              (2) Paying additional allowance for
                                 tive and are not negative performance
                                                                                            living quarters.
                                 incentives (see 16.402–2). Liquidated
                                 damages are used to compensate the                         11.503     Contract clauses.
                                 Government for probable damages.
                                 Therefore, the liquidated damages rate                       (a) Use the clause at 52.211–11, Liq-
                                 must be a reasonable forecast of just                      uidated Damages—Supplies, Services,
                                 compensation for the harm that is                          or Research and Development, in fixed-
                                 caused by late delivery or untimely                        price solicitations and contracts for
                                 performance of the particular contract.                    supplies, services, or research and de-
                                 Use a maximum amount or a maximum                          velopment when the contracting officer
                                 period for assessing liquidated damages                    determines that liquidated damages
                                 if these limits reflect the maximum                        are appropriate (see 11.501(a)).
                                 probable damage to the Government.                           (b) Use the clause at 52.211–12, Liq-
                                 Also, the contracting officer may use                      uidated Damages—Construction, in so-
                                 more than one liquidated damages rate                      licitations and contracts for construc-
                                 when the contracting officer expects                       tion, other than cost-plus-fixed-fee,


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