Sign In
  • Question

    On service contracts, performance cannot be performed after the period of performance ends. What about on construction contracts?


    Answer

    To answer your first question, “Do construction contract expire if work if the contract completion date passes and work is not complete?”

    Construction contracts do not expire automatically.  The contractor is in breach at this point and the government may terminate for default, but there is no expiration that prevents the contractor from continuing to work on the project.

    To answer your second question, “On service contracts, performance cannot be performed after the period of performance ends.  What about on construction contracts?” 

    Most construction contracts contain a liquidated damages clause.  FAR 36.206 says the following

    36.206 Liquidated damages.

    The contracting officer must evaluate the need for liquidated damages in a construction contract in accordance with 11.502 and agency regulations.

     

    Also see FAR 11.502, which illustrates the procedures:

    FAR 11.502

        (a) Include the applicable liquidated damages clause and liquidated damages rates in solicitations when the contract will contain liquidated damages provisions.

          (b) Construction contracts with liquidated damages provisions must describe the rate(s) of liquidated damages assessed per day of delay. The rate(s) should include the estimated daily cost of Government inspection and superintendence. The rate(s) should also include an amount for other expected expenses associated with delayed completion such as-

               (1) Renting substitute property; or

               (2) Paying additional allowance for living quarters.

    FAR 52.249-10 is the Default clause for construction.  The whole clause is worth a read but

    52.249-10(a) is enough to give you the flavor of the clause

    So what happens in most cases is work continues and liquidated damages are assessed. However default is also an option as you can see from the default clause language below:

     

                                                                                 Default (Fixed-Price Construction) (Apr 1984)

    1. If the Contractor refuses or fails to prosecute the work or any separable part, with the diligence that will insure its completion within the time specified in this contract including any extension, or fails to complete the work within this time, the Government may, by written notice to the Contractor, terminate the right to proceed with the work (or the separable part of the work) that has been delayed. In this event, the Government may take over the work and complete it by contract or otherwise, and may take possession of and use any materials, appliances, and plant on the work site necessary for completing the work. The Contractor and its sureties shall be liable for any damage to the Government resulting from the Contractor’s refusal or failure to complete the work within the specified time, whether or not the Contractor’s right to proceed with the work is terminated. This liability includes any increased costs incurred by the Government in completing the- work.

     

    So, in summary, the government “may” terminate when the contractor is in default on schedule, but is not obligated to do so.  Instead the contractor can keep working and the government will collect liquidated damages as consideration for late delivery.

    Open full Question Details
Chat with DAU Assistant
Bot Image