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Liquidated Damages. Denna Lambert Contract Specialist Institutional Procurement – Code 210.I Greenbelt, MD. What is the #1 Responsibility of the Government?. “The whole duty of government is to prevent crime and to preserve contracts.” -- Lord Melbourne (1779 – 1849).
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Sold Damages Denna Lambert Contract Specialist Institutional Procurement – Code 210.I Greenbelt, MD

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What is the #1 Responsibility of the Government? "The entire obligation of government is to avert wrongdoing and to safeguard contracts." - Lord Melbourne (1779 – 1849)

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Liquidated Damages Definition of Liquidated Damages (LDs) Administration of LDs Examples of fruitful and unsuccessful utilization of LDs Specific application to NASA and GSFC Questions and Comments

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What are Liquidated Damages? By and large, LDs are an endless supply of cash to which the administration will be entitled in the occasion the contractual worker neglects to execute as coordinated in the agreement. See FAR 11.5 Liquidated Damages connected with financial projects: FAR 19.705-7 – The Small Business Subcontracting Program: Liquidated Damages FAR 22.302 – Contract Work Hours and Safety Standards Act: Liquidated Damages and Overtime Pay

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When would they be able to be utilized? In supply, administration, innovative work, and development gets: The season of conveyance or execution is such an essential calculate the honor of the agreement that the Government may sensibly hope to endure harm if the conveyance or execution is reprobate. FAR 11.501(a)(1) The degree or measure of such harm would be troublesome or difficult to find out or demonstrate. FAR 11.501(a)(2)

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When would they be able to be utilized? (Cont\'d) The sold harms rate must be a sensible conjecture of only pay for the damage that is created by late conveyance or inopportune execution. FAR 11.501(b) Applicable LDs condition and rates ought to be recognized in the sales. Rates ought to incorporate a sum for other expected costs connected with deferred fulfillment. After honor, LDs can be consolidated into the agreement as a supplemental assention, however it is hard to have a temporary worker to concur without complaint. FAR 11.502

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When are LD\'s not utilized? LDs are for the most part utilized as a part of settled value contracts. However, LDs can be utilized as a part of cost repayment subcontracting plans. FAR 19.705-7 Reasoning: LDs depend on cost acquired by the administration as the aftereffect of reprobate conveyance or execution by the contractual worker. LDs are not in light of cost brought about by the contractual worker. FAR 11.503(a) and (b) The FAR is quiet on the utilization of LDs in Architecture and Engineering contracts.

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Determining How Much? The rate of exchanged harms utilized must be: Reasonable Considered on a case by case premise Reasoning: Damages that are settled with no reference to genuine likely harm might be held to be a punishment and esteemed to be unenforceable. FAR 11.501(b)

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Enforceability of Liquidated Damages Clauses There is a two section test that has been followed in the greater part of the administration contract cases. Sensibility of Forecast Time of the Forecast Accuracy of Measurement Difficulty of precise estimation

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Reasonableness of the Forecast Time of the conjecture Government contract decide is that the sensibility of the figure of LDs is assessed by taking a gander at the circumstance AT THE TIME the agreement is set aside a few minutes of break. Subsequently, the measure of misfortune brought about by the administration is unimportant.

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Reasonableness of the Forecast Time of the Forecast (cont\'d) Review loads up/courts have declined to implement LDs when the legislature ought not have foreseen bringing about any genuine harms AND when the administration did not bring about any harm or misfortune.

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Reasonableness of Forecast Accuracy of Measurement In Construction contracts most LDs evaluated at a settled rate of dollars per date-book day have been thought to be sensible. In different contracts, LDs will be held to be a sensible figure if the sum evaluated fluctuates in extent to the expected mischief to the Government at the season of agreement honor.

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Reasonableness of Forecast Accuracy of Measurement LDs have been maintained on the premise that they are to cover the managerial costs the administration will acquire if a postponement happens. Ex. Review, superintendence, building, contract organization, as well as lawful costs Remember harms must be resolved on a CASE BY CASE BASIS.

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Reasonableness of the Forecast Accuracy of Measurement Assessment of LDs at a for every unit for each day rate is for the most part maintained. In spite of the fact that stipends ought to be made for incompletely submitted units on the off chance that they have some useable esteem. Thinking: LDs depend on figuring interruption, loss of benefit, and esteem. LDs not containing a period farthest point or most extreme measure of LDs does not make it irrational and a punishment. In spite of the fact that it is prescribed by the FAR to build up a greatest esteem for LDs.

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Difficulty of Accurate Estimation Interestingly, this necessity is seldom thoroughly tried in an official courtroom. Declaration by a Government observer to the trouble of precisely evaluating the measure of harms because of the deferral is normally sufficient evidence of trouble.

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Substantial Completion LDs won\'t be surveyed after the date on which the work is "generously finished." Applies to development contracts where a high rate of the work is finished and the venture is accessible for its planned utilize.

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Excusable Delays FAR 52.249-14 (1) demonstrations of God or of the general population adversary, (2) demonstrations of the legislature in either its sovereign or legally binding limit, (Ex. Inconvenient reactions to contractual worker\'s solicitations, dishonorable reviews) (3) fires, (4) surges, (5) scourges, (6) isolate limitations, (7) strikes, (temporary worker must show it acted sensibly) (8) cargo embargoes, and (9) strangely extreme climate.

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Excusable Delays A temporary worker should likewise show that: the occasion was past the contractual worker\'s control (counting that it was not predictable at the season of agreement marking); the temporary worker couldn\'t have kept the occasion; the contractual worker couldn\'t conquer the impacts of the occasion; no temporary worker blame or carelessness added to the occasion; and the occasion brought on a postponement to the general fulfillment of the agreement.

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Example GSFC Cases TDRS-I Launch Delay This FFP contract consolidated Clause F.6 "Exchanged Damages… " with thought to the agreement\'s effect to the legislature if a deferral happened. This statement took into account a thirty day combined beauty period distinguished in Clause H.6 "Dispatch Delays." The LDs proviso recognized a $50,000 every day evaluation not to surpass $9,000,000.

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Example GSFC Case The agreement set up a dispatch date toward the end of October. Because of various deferrals exclusively brought about by the temporary worker and reported by the CO, the satellite did not dispatch until early March, five months after starting dispatch date. Without challenge, the contractual worker paid NASA $5.3 million for evaluated LDs, costs brought about by a deferred dispatch contract, and expenses connected with postponed organize bolster endeavors.

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Code 210.1 Contracts The TDRS-I LDs case is the main get that authorized the condition in the previous five years. Inside Code 210.1, there are no less than three gets that have a LDs statement in the agreement.

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The Challenge

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The Challenge Legal repercussion: Burden of confirmation and avocation is put upon the legislature. Implementing LDs, i n an agreement with an independent venture, could deliver restriction from SBA, Ombuds, Congressional Representative, and so on. Contract Administration: Increased weight and criticalness in the level and careful quality of documentation in regards to correspondence with inside and outer elements.

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The Challenge Communication: CO ought to find a way to alleviate LD\'s. On the off chance that a LD and Termination for Default condition exists, CO ought to attempt to get execution by the contractual worker or to end the agreement. See FAR 11.501(c)

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In Conclusion Government Customers Contractors

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