Liquidated Damages: Review of Current State of the Practice
Publication: Journal of Professional Issues in Engineering Education and Practice
Volume 134, Issue 4
Abstract
Liquidated damages (LDs) are contractually specified damages that provide restitution for additional owner costs incurred from contractor delayed completion. Established legal precedence requires owners to specify rates that are a good faith pre-estimate of actual anticipated damages. Additionally, the Federal Highway Administration provides guidance to state highway agencies (SHAs) in developing these rates. In reviewing current practices, SHAs were surveyed about individual LD practices utilized. Survey results are divided into three categories for discussion purposes: (1) contractual practices; (2) estimating practices; and (3) administrative practices. All SHAs chose to recover damages through a contractual LD clause although implementation varies. SHA estimating practices are generally not detailed and tend to place rates at the low end of actual damages. Few SHAs verify estimated rates with actual project cost experiences. Administrative practices have field personnel administering the primary element of the LD clause, contract time. These practices also reveal a high priority on contract closeout, sometimes sacrificing LD amounts due by contractors under contract. Few states have experienced legal challenges regarding their LDs provision.
Get full access to this article
View all available purchase options and get full access to this article.
Acknowledgments
This paper is based on a study sponsored by the Alabama Department of Transportation (ALDOT) located in Montgomery, Ala. The support provided is gratefully acknowledged.
References
Alabama Department of Transportation (ALDOT). (2002). Standard specifications for highway construction, 2002 Ed., Montgomery, Ala.
Allen, R. K. (Spring/Summer 1995 ). “The estimation of construction contract liquidated damages.” Civ. Eng. Pract., 10(1), 7–16.
FHWA. (2000). U.S. Code of Federal Regulations, Title 23, Vol. 1, 23 CFR635.127, ⟨http://www.access.gpo.gov/nara/cfr/waisidx_00/23cfr635_00.html⟩ (Jan. 22, 2006 ).
McCormick, C. R. (2003). “Make liquidated damages work.” AACE Int. Trans., ABI/INFORM Global, CDR.15.1–CDR.15.7.
Naoum, S. (1998). Dissertation research and writing for construction students. Elsevier, Burlington, Mass., 54–55, 70–71.
Information & Authors
Information
Published In
Copyright
© 2008 ASCE.
History
Received: May 16, 2007
Accepted: Jul 13, 2007
Published online: Oct 1, 2008
Published in print: Oct 2008
Authors
Metrics & Citations
Metrics
Citations
Download citation
If you have the appropriate software installed, you can download article citation data to the citation manager of your choice. Simply select your manager software from the list below and click Download.