FAR 52.219-16—Liquidated Damages-Subcontracting Plan.
Plain-English Summary
FAR 52.219-16 establishes the Government’s liquidated damages remedy when a contractor fails to make a good faith effort to comply with an approved small business subcontracting plan. It defines what “failure to make a good faith effort” means, explains how compliance is measured against subcontracting goals, and states when liquidated damages may be assessed at contract completion or, for commercial plans, at the end of the applicable fiscal year. The clause also sets out the required notice-and-response process before the Contracting Officer can make a final determination, including the contractor’s opportunity to explain its efforts and the rule that silence may be treated as an admission that no valid explanation exists. It further addresses who acts for the Government in the case of commercial plans, preserves the contractor’s right to appeal under the Disputes clause, and makes clear that liquidated damages are in addition to any other Government remedies. In practice, this clause gives contractors a strong incentive to document and execute their subcontracting plan in good faith, and it gives contracting officers a structured enforcement tool when goals are missed because of intentional or willful noncompliance rather than mere shortfall.
Key Rules
Good faith effort standard
The clause does not punish every failure to meet subcontracting goals. Liquidated damages apply only if the Contracting Officer finds the contractor willfully or intentionally failed to follow the approved subcontracting plan or intentionally frustrated it.
Performance measured by actual dollars
Compliance is measured by applying the subcontracting percentage goals to total actual subcontracting dollars, or for a commercial plan, to the pro rata share of actual subcontracting dollars attributable to Government contracts covered by that plan.
Damages tied to shortfall
If the contractor misses its goals and is found not to have made a good faith effort, the contractor must pay liquidated damages. The amount is based on the actual dollar amount by which the contractor failed to achieve each subcontracting goal.
Notice and opportunity to respond
Before issuing a final decision, the Contracting Officer must give written notice identifying the failure and allow the contractor to show what good faith efforts were made and discuss the matter. Failure to respond may be treated as an admission that no valid explanation exists.
Final decision after review
After considering all pertinent data, the Contracting Officer may issue a final decision that the contractor failed to make a good faith effort and require payment of liquidated damages.
Commercial plan administration
For commercial plans, the Contracting Officer who approved the plan performs the clause functions on behalf of all agencies with contracts covered by that commercial plan.
Appeal rights preserved
The contractor may appeal any final decision under the Disputes clause, so the liquidated damages determination is not the end of the matter.
Additional remedy, not exclusive
Liquidated damages are in addition to any other remedies the Government may have, so the Government is not limited to this clause alone.
Responsibilities
Contracting Officer
Monitor subcontracting plan performance, determine whether the contractor failed to make a good faith effort, provide written notice of the alleged failure, consider the contractor’s explanation and supporting data, issue a final decision if warranted, and require payment of liquidated damages. For commercial plans, the approving Contracting Officer acts for all agencies covered by the plan.
Contractor
Make a good faith effort to comply with the approved subcontracting plan, track and report subcontracting performance against goals, respond promptly to any written notice from the Contracting Officer, and pay liquidated damages if a final decision is issued. The contractor also may appeal the final decision under the Disputes clause.
Government
Use the clause as an enforcement mechanism to protect small business subcontracting policy objectives and recover liquidated damages when a contractor’s noncompliance is willful or intentional. The Government may also pursue other available remedies.
Small business subcontracting plan administrator or approving agency official
For commercial plans, coordinate administration through the Contracting Officer who approved the plan so that one official performs the clause functions for all affected agencies.
Practical Implications
Missing subcontracting goals alone is not enough; the key issue is whether the contractor made a good faith effort, so documentation of outreach, solicitations, negotiations, and award decisions matters a lot.
Contractors should maintain contemporaneous records showing why goals were missed and what actions were taken to meet them, because the notice process gives only a limited chance to explain after the fact.
Contracting Officers should not jump straight from a numerical shortfall to damages; they must evaluate intent, effort, and the full record before making a final decision.
For commercial plans, contractors need to track subcontracting data carefully by fiscal year and by Government-covered portion of the plan, since the measurement is different from individual contract plans.
Liquidated damages can stack with other remedies, so a contractor facing a finding of bad faith may also face additional contractual or administrative consequences beyond the payment itself.
Official Regulatory Text
As prescribed in 19.708 (b)(2) , insert the following clause: Liquidated Damages-Subcontracting Plan (Sep 2021) (a) "Failure to make a good faith effort to comply with the subcontracting plan," as used in this clause, means a willful or intentional failure to perform in accordance with the requirements of the subcontracting plan approved under the clause in this contract entitled "Small Business Subcontracting Plan," or willful or intentional action to frustrate the plan. (b) Performance shall be measured by applying the percentage goals to the total actual subcontracting dollars or, if a commercial plan is involved, to the pro rata share of actual subcontracting dollars attributable to Government contracts covered by the commercial plan. If, at contract completion or, in the case of a commercial plan, at the close of the fiscal year for which the plan is applicable, the Contractor has failed to meet its subcontracting goals and the Contracting Officer decides in accordance with paragraph (c) of this clause that the Contractor failed to make a good faith effort to comply with its subcontracting plan (see 19.705-7), established in accordance with the clause in this contract entitled "Small Business Subcontracting Plan," the Contractor shall pay the Government liquidated damages in an amount stated. The amount of probable damages attributable to the Contractor’s failure to comply shall be an amount equal to the actual dollar amount by which the Contractor failed to achieve each subcontract goal. (c) Before the Contracting Officer makes a final decision that the Contractor has failed to make such good faith effort, the Contracting Officer shall give the Contractor written notice specifying the failure and permitting the Contractor to demonstrate what good faith efforts have been made and to discuss the matter. Failure to respond to the notice may be taken as an admission that no valid explanation exists. If, after consideration of all the pertinent data, the Contracting Officer finds that the Contractor failed to make a good faith effort to comply with the subcontracting plan, the Contracting Officer shall issue a final decision to that effect and require that the Contractor pay the Government liquidated damages as provided in paragraph (b) of this clause. (d) With respect to commercial plans, the Contracting Officer who approved the plan will perform the functions of the Contracting Officer under this clause on behalf of all agencies with contracts covered by the commercial plan. (e) The Contractor shall have the right of appeal, under the clause in this contract entitled, Disputes, from any final decision of the Contracting Officer. (f) Liquidated damages shall be in addition to any other remedies that the Government may have. (End of clause)