2018-01-30

NPM No. 001-2018

Requesting Entity: Ms. Kathy Barbosa

Issues Concern: Liquidated Damages

 

Details

1.    Can liquidated damages be deducted from progress billings?


Under the General Conditions of the Contract (GCC) Clause 9 of the 5th Edition of the Philippine Bidding Documents for the Procurement of Infrastructure Projects, Liquidated Damages shall be paid by the Contractor in the following manner:


9.1   The Contractor shall pay liquidated damages to the Procuring Entity for each day that the Completion Date is later than the Intended Completion Date. The applicable liquidated damages is at least one-tenth (1/10) of a percent of the cost of unperformed portion for every day of delay. The total amount of liquidated damages shall not exceed ten percent (10%) of the amount of the contract. The Procuring Entity may deduct liquidated damages from payments due to the Contractor. . . . (Emphasis ours)


 .  .  .


As can be gleaned from the foregoing, liquidated damages can be deducted from payments due to the Contractor, which include progress payments and final payment, for each day that the Completion Date is later than the Intended Completion date.


2.    Can liquidated damages be imposed after the expiry/completion date but before the termination of the contract or only after the target completion date?


 .  .  .  GCC Clause 46.1 provides that:


If the Contract is terminated because of a fundamental breach of Contract by the Contractor, the Procuring Entity`s Representative shall issue a certificate for the value of the work done and Materials ordered less advance payments received up to the date of the issue of the certificate and less the percentage to apply to the value of the work not completed, as indicated in the Special Conditions of the Contract (SCC). Additional Liquidated Damages shall not apply. If the total amount due to the Procuring Entity exceeds any payment due to the Contractor, the difference shall be payable to the Procuring Entity. (Emphasis ours.)


 .  .  .


All told, liquidated damages can still be imposed after the expiry/completion date or after the target completion date so long as there contractor refuses or fails to satisfactorily complete the work within the specified contract time, plus any time extension duly granted, of at least one-tenth (1/10) of a percent of the cost of unperformed portion for every day of delay or each day that the Completion Date is later than the Intended Completion date. As already explained, it may be deducted from payments due to the Contractor.


The provision that “additional liquidated damages shall not apply” shall be applicable only when the Procuring Entity has already terminated the contract because of fundamental breach of Contract by the Contractor.