Time is Money—Recent Decisions on Liquidated Damages (Part II)

The second significant recent ASBCA decision on liquidated damages is American International Contractors, Inc. (May 29, 2018). In that case, the contractor did not complete the original contract work on time and was assessed liquidated damages. After the contractor completed the base contract work and demobilized from the site, and following unsuccessful negotiation of a bilateral modification for extra work, the Government issued a unilateral modification requiring the contractor to perform extra work. The unilateral modification granted additional time to complete the extra work, which additional time started to run from the date the unilateral modification was issued and by its terms stated the period of performance only covered work under the modification only, not the overall contract. The contractor completed the extra work within the period of performance.

The contractor submitted a claim seeking return of the liquidated damages contending, among other things, that the Government could no longer assess liquidated damages based on a superseded completion date, as reflected by the unilateral modification. The parties filed cross-motions for summary judgment on this issue. The Board held that the Government could add work to the contract while retaining liquidated damages because FAR 52.211-13 allows the Contracting Officer to grant a time extension “only for those specific elements related to the changed work” and provides “that the remaining contract completion dates for all other portions of the work will not be altered.” The Board further held that FAR 11.503(c) did not limit application of FAR 52.211-13 to those circumstances where the liquidated damages clause has been revised to reflect different liquidated damages amounts for various stages of work.

The Board also held that the modification language clearly carved out a completion date for the new work while preserving the already assessed liquidated damages. The Board further noted that it was inconceivable that the Government would simply forgive liquidated damages, except perhaps as consideration for the new work.The Board noted there was no negotiating history that would suggest such forgiveness.

If you find yourself in the above situation where you are asked to perform extra work after base contract work has been completed after the contract completion date, we recommend that you negotiate as part of the consideration, the remission of existing liquidated damages, and closely scrutinize the modification language you are provided.

If you have any questions about the above cases, please don’t hesitate to contact us.