Sign In
  • Question

    Are CERP contracts potentially susceptible to a liquidated damages clause, to collect money from a local Afghani contractor if he misses his performance period deadlines?


    Answer

    The issue you raise is an interesting one. You are correct that Commanders' Emergency Response Program (CERP) contracts are not governed by the FAR; DoD Financial Management Regulation (FMR) Volume 12, Chapter 27 governs it. However, your assertion that "...(liquidated) damages are supposed to be used when the time of delivery or timely performance is so important that the Government may reasonably expect to suffer damage if the delivery or performance is delinquent" comes out of FAR Subpart 11.5 (Liquidated Damages). Strictly speaking, it's not appropriate to use a definition from the FAR when evaluating the use of liquidated damages for a CERP contract, which is not subject to the FAR. If you decide to make that leap and apply the FAR restriction on the use of liquidated damages to a CERP contract, even then I'm not sure the restriction in FAR Subpart 11.5 necessarily applies. DoD Financial Management Regulation Volume 12, Chapter 27 states (at least for Iraq) "...all projects over $750,000 require either an explanation of the cost-share arrangement with the GoI or a justification that the project directly benefits U.S. security objectives (my italics) in Iraq..." This calls into question the statement that CERP cannot include anything that benefits the U.S. Government.

    I found no mention of liquidated damages in DoD Financial Management Regulation Volume 12, Chapter 27. Also, the FAR states that if a strategy, practice, policy or procedure is not specifically prohibited and it makes good business sense to use it, then contracting officers are authorized to use it. I found no such guidance in DoD FMR Volume 12, Chapter 27, so that provides no additional insight. 

    In light of the considerations above, a case could be made to use liquidated damages in a CERP, but it's not definitive. I highly recommend you contact your organization's legal counsel, or email the U.S. Army Judge Advocate General's Reach Back Legal Support at USALSAKFLDRBGSUPPORT@conus.army.mil for a more definitive opinion.

    Open full Question Details