FAR 11.502—Procedures.
Plain-English Summary
FAR 11.502 explains how contracting officers must handle liquidated damages in solicitations and construction contracts. It covers two main topics: including the applicable liquidated damages clause and liquidated damages rates in the solicitation, and stating the daily liquidated damages rate(s) in construction contracts that contain such provisions. The section also explains what the rate should reflect in practice: the estimated daily cost of Government inspection and superintendence, plus other expected delay-related expenses such as renting substitute property or paying additional living-quarters allowances. Its purpose is to make liquidated damages transparent up front, tie the rate to a reasonable estimate of anticipated Government losses from delay, and reduce disputes by ensuring offerors know the consequences of late completion before they bid. In day-to-day contracting, this section matters because it affects solicitation drafting, pricing, and the defensibility of the liquidated damages amount if it is later challenged.
Key Rules
Include clause and rate
When the contract will contain liquidated damages provisions, the solicitation must include the applicable liquidated damages clause and the liquidated damages rates. This gives offerors notice of the potential delay charge before they submit offers.
State daily rates in construction
Construction contracts that include liquidated damages must describe the rate or rates assessed per day of delay. The contract language should make clear how the daily charge will be applied.
Base rate on Government costs
The liquidated damages rate should include the estimated daily cost of Government inspection and superintendence. The rate is meant to approximate expected Government losses, not serve as a penalty.
Include other delay expenses
The rate should also include other expected expenses caused by delayed completion, such as renting substitute property or paying additional allowances for living quarters. These costs should be considered when setting the daily amount.
Responsibilities
Contracting Officer
Insert the applicable liquidated damages clause and rates into the solicitation when the contract will include liquidated damages. For construction contracts, ensure the contract states the daily rate(s) and that the rate is based on estimated Government delay-related costs.
Agency
Provide the cost information and policy support needed to estimate inspection, superintendence, and other delay-related expenses so the liquidated damages rate can be set reasonably and consistently.
Offeror/Contractor
Review the solicitation and contract terms to understand the liquidated damages clause and daily rate(s), and price the work with awareness of the potential financial consequences of late completion.
Practical Implications
Liquidated damages must be visible before award, so omissions in the solicitation can create avoidable disputes or require amendment.
The daily rate should be supportable as a reasonable estimate of expected loss; if it looks arbitrary or punitive, it may be vulnerable to challenge.
Construction contracts need clear daily-rate language so there is no confusion about when and how damages accrue.
Contracting officers should document the basis for the rate, including inspection/superintendence costs and any other delay-related expenses.
Contractors should pay close attention to the stated rate because it can materially affect schedule risk, pricing, and claims strategy if completion slips.
Official Regulatory Text
(a) Include the applicable liquidated damages clause and liquidated damages rates in solicitations when the contract will contain liquidated damages provisions. (b) Construction contracts with liquidated damages provisions must describe the rate(s) of liquidated damages assessed per day of delay. The rate(s) should include the estimated daily cost of Government inspection and superintendence. The rate(s) should also include an amount for other expected expenses associated with delayed completion such as- (1) Renting substitute property; or (2) Paying additional allowance for living quarters.