FAR 36.206—Liquidated damages.
Plain-English Summary
FAR 36.206 is a short but important cross-reference rule for construction contracting. It tells the contracting officer to evaluate whether liquidated damages should be included in a construction contract, and it requires that evaluation to be done under FAR 11.502 and any applicable agency regulations. In practice, this means the contracting officer cannot treat liquidated damages as automatic or boilerplate; the decision must be based on a proper assessment of whether the Government is likely to suffer damages from late completion and whether those damages can be reasonably estimated in advance. The section matters because liquidated damages clauses are used to protect the Government when delay will cause measurable harm, but they can also create disputes if they are inserted without a sound basis or set at an unsupported rate. This provision therefore connects construction contract planning, schedule risk, delay consequences, and agency-specific policy into one required pre-award decision point.
Key Rules
Evaluate need for liquidated damages
The contracting officer must decide whether liquidated damages are appropriate for the construction contract. This is an affirmative evaluation requirement, not a default assumption that every construction contract should include such a clause.
Apply FAR 11.502
The evaluation must be made in accordance with FAR 11.502, which governs when liquidated damages are appropriate and how they should be structured. That means the contracting officer must use the FAR’s standards for determining whether actual damages would be difficult to prove and whether a reasonable estimate can be made in advance.
Follow agency regulations
Agency-specific regulations also control the analysis. If an agency has additional procedures, thresholds, or documentation requirements for liquidated damages, the contracting officer must follow them along with the FAR.
Construction contract context
This requirement applies specifically to construction contracts. The rule is aimed at delay risk in construction performance, where late completion can affect occupancy, operations, financing, or other project-dependent outcomes.
Responsibilities
Contracting Officer
Evaluate whether liquidated damages are needed for the construction contract, using FAR 11.502 and any applicable agency regulations. The contracting officer must make a reasoned, supportable decision before including or omitting a liquidated damages clause.
Agency
Provide and enforce any supplemental regulations or internal procedures governing liquidated damages in construction contracts. The agency must ensure its policies are consistent with the FAR and give contracting officers the guidance needed to make proper determinations.
Contractor
Review the solicitation and contract terms to understand whether liquidated damages apply and what rate or trigger is proposed. If the contractor believes the clause is unsupported or unreasonable, it should raise the issue during the solicitation or negotiation stage.
Practical Implications
Liquidated damages should be analyzed early, ideally during acquisition planning, because the decision affects solicitation drafting, pricing, and schedule risk allocation.
A common mistake is treating liquidated damages as a standard clause to insert in every construction contract without documenting why they are needed and how the rate was derived.
Contracting officers should make sure the proposed liquidated damages amount is tied to a reasonable estimate of anticipated harm from delay, not used as a penalty.
Contractors should pay close attention to the clause because it can materially affect their exposure if completion is late, even when the Government cannot prove its actual damages.
Agency supplements can add important procedural steps, so both contracting officers and contractors should check for agency-specific requirements rather than relying on the FAR text alone.
Official Regulatory Text
The contracting officer must evaluate the need for liquidated damages in a construction contract in accordance with 11.502 and agency regulations.