§ 1-1.315 Use of liquidated damages provisions in procurement contracts. § 1-1.315-1 General. This section 1-1.315 prescribes (a) policy which shall govern executive agencies in the use of liquidated damages provisions in contracts for supplies and services, including construction, entered into by formal advertising or by negotiation, and (b) a provision which shall be inserted in contracts for supplies and services, other than construction, when liquidated damages are stipulated. § 1-1.315-2 Policy. (a) Liquidated damages provisions may be used only where both: (1) the time of delivery or performance is such an important factor in the award of the contract that the Government may reasonably expect to suffer damage if the delivery or performance is delayed, and (2) the extent or amount of such damage would be difficult or impossible of ascertainment or proof. (b) In making decisions as to whether liquidated damages provisions are to be used, consideration should be given to their probable effect on such matters as pricing, competition, and the costs and difficulties of contract administration, as well as the availability of provision elsewhere in the contract for recovery of excess costs in termination cases. (c) The rate of liquidated damages stipulated must be reasonable in relation to anticipated damages, considered on a case-by-case basis, since liquidated damages fixed without any reasonable reference to probable damages may be held to be not compensation for anticipated damages caused by delay, but a penalty, and therefore unenforceable. (d) Where a licuidated damages provision is included in a contract and a basis for termination for default exists, appropriate action should be taken expeditiously by the Government to obtain performance by the contractor or to exercise its right to terminate as provided in the contract. If delivery or performance is desired after termination for default, efforts must be made to obtain either delivery or performance elsewhere within a reasonable time. Efficient administration of contracts containing liquidated damages provisions is imperative to prevent undue loss to defaulting contractors and to protect the interests of the Government. (e) Whenever any contract includes a provision for liquidated damages for delay, the Comptroller General, on the recommendation of the head of the agency concerned, is authorized and empowered, by law, to rerit the whole or any part of such damages as in his discretion may be just and equitable. (determined pursuant to section 1-1.3152) shall be stipulated: LIQUIDATED DAMAGES Article 11(f) of Standard Form 32, General Provisions (Supply Contract), is redesignated as Article 11(g) and the following is inserted as Article 11(f): (f) (1) In the event the Government exercises its right of termination as provided in paragraph (a) above, the Contractor shall be liable to the Government for excess costs as provided in paragraph (b) above and, in addition, for liquidated damages, in the amount set forth elsewhere in this contract, as fixed, agreed, and liquidated damages for each calendar day of delay, until such time as the Government may reasonably obtain delivery or performance of similar supplies or services. (ii) If the contract is not so terminated, notwithstanding delay as provided in paragraph (a) above, the Contractor shall continue performance and be liable to the Government for such liquidated damages for each calendar day of delay until the supplies are delivered or services performed. (iii) The Contractor shall not be liable for liquidated damages for delays due to causes which would relieve him from liability for excess costs as provided in paragraph (c) of this clause. (b) Construction contracts. Liquidated damages provisions for construction contracts are contained in the Termination for Default-Damages for Delay-Time Extensions clauses of both Standard Form 19, Invitation, Bid and Award (Construction, Alteration or Repair), and Standard Form 23A, General Provisions (Construction Contracts). § 1-1.316 Time of delivery or perform sidered (see section 1-1 316-3), and must be realistic. Schedules which are unreasonably tight or difficult of attainment tend to restrict competition, are inconsistent with small business policies, and may result in higher contract prices. Therefore, before issuing an invitation for bids or request for proposals, the contracting officer shall question any delivery or performance schedule which appears unrealistic and, if necessary, initiate action to make appropriate adjustments. (b) Where timely delivery or performance is unusually important to the Government, a liquidated damages provision may be used as provided for in section 1-1.315. (c) Invitations for bids and requests for proposals shall, when appropriate, inform bidders or offerors of the basis on which their bids or proposals will be evaluated with respect to time of delivery or performance. [25 F.R. 3713, Apr. 28, 1960] § 1-1.316-3 Factors to be considered. Factors to be considered in establishing delivery or performance schedules may include one or more of the following: (a) Urgency of need for the property or services. (b) Production time due to quantity, complexity of design, etc. (c) Market conditions. concerns. business (g) Time for obtaining and evaluating bids or offers, and for awarding contracts. (h) Time for contractors to comply with any conditions precedent to performance. (1) Time for the Government to perform its obligations under the contract (e.g., furnishing of Government property to the contractor, approval of preproduction samples, and inspection). [25 F.R. 3713, Apr. 28, 1960] § 1-1.316-4 Terms. (a) Delivery schedules may be expressed in terms of— (1) Specific calendar dates (e.g., on or before July 1, 1960); (2) Specified periods from date of contract (i.e., from date of award or ac ceptance by the Government, or from date shown on contract document as effective date of contract); or (3) Specified periods from date of receipt by contractor of notice of award or acceptance by the Government (including notice by receipt of contract document executed by the Government). The full period whicl. the Government holds out as being available for contract performance should not be curtailed to the prejudice of the contractor by delay in giving notice of award. Accordingly, one of the provisions in paragraph (b) or (c) of this section shall be used in advertised procurements and may be suitably modified and used as appropriate in negotiated procurements. (b) Where the delivery schedule is expressed in terms of specific calendar dates (see paragraph (a)(1) of this section), invitations for bids shall include one of the following provisions: (1) The foregoing delivery requirements are based on the assumption that the Government will make award by (procuring activity insert calendar date). Each delivery date in the delivery schedule set forth herein will be extended by the number of calendar days after the above date that the contract is in fact awarded. Attention is directed to paragraph 8(d) of the Terms and Conditions of the Invitation for Bids, which provides that a written award mailed or otherwise furnished to the successful bidder results in a binding contract. Therefore, in computing the available time for performance, the bidder should take into consideration the time required for notice of award to arrive through the ordinary mails. (2) The foregoing delivery requirements are based on the assumption that the successful bidder will receive the notice of award by (procuring activity insert calendar date). The Government will extend each delivery date in the delivery schedule set forth herein by the number of calendar days after the above date that the contractor receives notice of award, if the contractor promptly acknowledges such receipt. (c) Where the delivery schedule is based on the date of contract (see paragraph (a) (2) of this section), the invitations for bids shall include the following provision: Attention is directed to paragraph 8(d) of the Terms and Conditions of the Invitation for Bids, which provides that a written award mailed or otherwise furnished to the successful bidder results in a binding contract. Any award hereunder, or a preliminary notice thereof, will be mailed or otherwise furnished to the bidder the day the award is dated. Therefore, in computing the time available for performance, the bidder should take into consideration the time required for the notice of award to arrive through the ordinary mails. However, a bid offering delivery based on date of receipt by the contractor of the contract or notice of award (rather than contract date) will be evaluated by adding the maximum number of days normally required for delivery of the award through the ordinary mails. If, as so computed, the delivery date offered is later than the delivery date required in the invitation, the bid will be considered nonresponsive and rejected. (d) Where the delivery schedule is based on the date of the contract (see paragraphs (a) (2) and (c) of this section), the contract, notice of award, acceptance of proposal, or other contract document executed by the Government shall be mailed or otherwise furnished the contractor on the date shown thereon. (e) Where the delivery schedule is based on date of receipt by the contractor of notice of award (see paragraph (a)(3) of this section), or where it is expressed in terms of specific calendar dates on the assumption that notice of award will be received by a specified date (see paragraph (b) (2) of this section), the notice of award, acceptance of proposal, or other contract document executed by the Government shall be sent by certified mail, return receipt requested, or by any other appropriate method which will provide evidence of the date of receipt. (f) When the required delivery schedule in the invitation for bids is based on date of the contract (see paragraph (a) (2) of this section), a bid which offers delivery based on date of receipt by the contractor of the contract or notice of award (see paragraph (a)(3) of this section). (1) Shall be evaluated by adding the maximum number of days normally required for delivery of the notice of award through the ordinary mails; and (2) If the delivery date offered by the bid (computed in accordance with subparagraph (1) of this paragraph) is later than the delivery date required in the invitation for bids, the bid shall be considered nonresponsive and rejected; but (3) If award is made under subparagraph (1) of this paragraph, under the terms of the contract the delivery date will be computed on the basis of the number of days after actual receipt by the contractor of the notice of award as specified in the bid. [25 F.R. 3713, Apr. 28, 1960] § 1-1.316-5 Time of delivery clauses. (a) Examples of time of delivery clauses for invitations for bids are set forth below. They may be modified, or other clauses may be used, to state particular delivery requirements or any special procedures to be used in the evaluation, rejection, or award process as regards time of delivery. These clauses also may be suitably modified and used as appropriate in negotiated procurements. (b) The following clause may be used where delivery by a particular time is necessary to meet the Government's requirements: Bids offering delivery of each quantity within the applicable delivery period specified above will be evaluated equally as regards time of delivery. Bids offering delivery of a quantity under such terms or conditions that delivery will not clearly fall within the applicable delivery period specified above will be considered nonresponsive and will be rejected. Where a bidder offers an earlier delivery schedule than that called for above, the Government reserves the right to award either in accordance with the required schedule or in accordance with the schedule offered by the bidder. If the bidder offers no other delivery schedule, the delivery schedule stated above shall apply. Bidder's Proposed Delivery Schedule Item No. Time [* (To Be Completed by Bidder) Quantity Time [* 1 ------- *Contracting officer shall insert the appropriate one of the following phrases, in both of the indicated spaces: (1) "On (on or before) the date (s) specified below." (2) "Within the number of days stated below after date of contract." (3) "Within the number of days stated below after the date of receipt of a written notice of award." * Contracting officer shall insert the appropriate one of the following phrases, in each of the three indicated spaces: (1) "On (on or before) the date(s) specified below." (2) "Within the number of days stated below after date of contract." (3) "Within the number of days stated below after the date of receipt of a written notice of award." (4) "Within the periods specified below." (NOTE: When this phrase is inserted, the wording "during the month(s) of or "not sooner than and not later [25 F.R. 3713, Apr. 28, 1960] Subpart 1-1.4-[Reserved] Subpart 1-1.5-Contingent Fees § 1-1.500 Scope of subpart. This subpart prescribes the use by executive agencies of the "covenant against contingent fees" and sets forth the policies, forms, methods, procedure, principles, and standards related thereto. The requirements of this subpart have as their objective the prevention of improper influence in connection with the obtaining of Government contracts, the elimination of arrangements which encourage the payment of inequitable and exorbitant fees bearing no reasonable relationship to the services actually performed, and the prevention of unwarranted expenditure of public funds which inevitably results therefrom. The methods used to achieve these objectives are the requirement for disclosure of the details of arrangements under which agents represent concerns in obtaining Government contracts, and the prohibiting, by use of the covenant against contingent fees, of certain types of contractor-agent arrangements. General Provisions (Construction Contract)): Covenant against contingent fees. The Contractor warrants that no person or selling agency has been employed or retained to solicit or secure this contract upon an agreement or understanding for a commission, percentage, brokerage, or contingent fee, excepting bona fide employees or bona fide established commercial or selling agencies maintained by the Contractor for the purpose of securing business. For breach or violation of this warranty the Government shall have the right to annul this contract without liability or in its discretion to deduct from the contract price or consideration, or otherwise recover, the full amount of such commission, percentage brokerage, or contingent fee. [26 F.R. 1045, Feb. 3, 1961] § 1-1.504 General principles and standards applicable to the covenant. § 1-1.504-1 Use of principles and standards. The principles and standards set forth in this subpart are intended to be used as a guide in the negotiation, awarding, administration, and enforcement Government contracts. of § 1-1.504-2 Contingent character of the fee. Any fee whether called commission, percentage, brokerage, or contingent fee, or otherwise denominated, is within the purview of the covenant if, in fact, any portion thereof is dependent upon success in obtaining or securing the Government contract or contracts involved. The fact, however, that a fee of a contingent nature is involved does not preclude a relationship which qualifies under the exceptions to the prohibition of the covenant. § 1-1.504-3 Exceptions to the prohibition. There are excepted from the prohibition of the covenant "bona fide employees" and "bona fide established commercial or selling agencies maintained by the contractor for the purpose of securing business." § 1-1.504-4 Bona fide employee. (a) The term "bona fide employee," for the purpose of the exception to the prohibition of the covenant, means an individual (including a corporate officer) employed by a concern in good faith to devote his full time to such concern and |