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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: January 13, 2000

FROM: Barry McVay, CPCM

SUBJECT: Federal Acquisition Regulation (FAR); Liquidated Damages

SOURCE: Federal Register, January 13, 2000, Vol. 65, No. 9, page 2271

AGENCIES: Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA)

ACTION: Proposed Rule

SYNOPSIS: It is proposed that the FAR guidance on liquidated damages be rewritten in plain language. This proposed rule would revise FAR Subpart 11.5, Liquidated Damages, FAR 22.302, Liquidated Damages and Overtime Pay, FAR 22.406-8, Investigations, FAR 22.406-9, Withholding from or Suspension of Contract Payments, and the associate clauses in FAR Part 52.

DATES: Submit comments on or before March 13, 2000.

ADDRESS: Send comments to General Services Administration, FAR Secretariat (MVRS), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405, e-mail: farcase.1999-003@gsa.gov. Cite FAR case 1999-003 in all correspondence related to this proposed rule.

FOR FURTHER INFORMATION CONTACT: Ms. Victoria Moss, Procurement Analyst, 202-501-4764.

SUPPLEMENTAL INFORMATION: Many have found the FAR guidance on liquidated damages difficult to understand, particularly FAR 11.502, Policy. Using the guidelines in President Clinton's June 1, 1998, memorandum titled "Plain Language in Government Writing," this proposed rule would clarify and simplify the FAR guidance.

For example, the current FAR 11.502(b) states, "The rate of liquidated damages used must be reasonable and considered on a case-by-case basis since liquidated damages fixed without any reference to probable actual damages may be held to be a penalty, and therefore unenforceable." The corresponding sentences in proposed paragraph (b) of FAR 11.501, Policy, would state, "Liquidated damages are not punitive and are not negative performance incentives. Liquidated damages are used to compensate the Government for probable damages. Therefore, the liquidated damages rate must be a reasonable forecast of just compensation for the harm that is caused by late delivery or untimely performance of the particular contract."

Besides rewriting FAR Subpart 11.5 (FAR 11.500, Scope; FAR 11.501, Policy; FAR 11.502, Procedures; and FAR 11.503, Contract Clauses), this proposed rule would revise the following:

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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