Liquidated damages are stipulated in construction contracts to compensate the project owner for the cost of late project completion. The daily rate is supposed to reflect a reasonable forecast, at the time of contract formation, of the actual costs the owner will incur in the event of late completion. In reality, however, project owners and their advisors seldom conduct such forecasts.

In a case reported this week, liquidated damages were assessed at a stipulated daily rate taken from a chart in a state transportation department’s standard specifications. The rate was based solely on the amount of the fixed price contract. No evidence was offered of how the rates in the chart were determined. Nonetheless, the liquidated damages assessment was upheld. There was no discussion of how contract price alone might not be an accurate prediction of the owner’s actual cost of late completion.

Other cases reported this week involve a project owner’s right to recoup payments made to an unlicensed contractor and the appropriate use of negotiated procurement practices. In the payment case, the unlicensed contractor was not allowed to take a set-off for the cost of materials it furnished to the project. The owner was entitled to complete disgorgement of payments. And, the Federal Circuit distinguished past performance evaluation of contractors from a contractor responsibility determination.