Liquidated Damages

Liquidated damages clauses are common in public works contracts and large private infrastructure projects. They specify a fixed dollar amount per calendar day or working day that will be deducted from the contractor's payment for late completion. Typical liquidated damages amounts range from a few hundred dollars per day on small projects to tens of thousands of dollars per day on major infrastructure projects.

For hydrovac subcontractors, liquidated damages exposure typically flows down from the prime contract through the subcontractor agreement. If the hydrovac contractor's work is on the critical path and a delay in potholing or excavation causes the overall project to miss its deadline, the general contractor may back-charge the liquidated damages to the hydrovac subcontractor. This can represent a significant financial risk that should be carefully evaluated during bid review.

To manage liquidated damages risk, hydrovac contractors should understand the project schedule and their role in it, ensure the contract clearly defines what constitutes an excusable delay, document any delays caused by other parties, maintain sufficient equipment and crew to meet schedule requirements, and communicate proactively when potential schedule impacts are identified. Force majeure events, owner-caused delays, and changes in scope typically qualify as excusable delays that suspend the accrual of liquidated damages.