Section 4 - Liquidated Damages and Contract Termination

7.18. Beneficial Occupancy. The Government has the right to occupy a building prior to final acceptance. It requires the Contracting Officer to notify the contractor, in writing when that occupancy occurs. The Government assumes all risk when occupying the premises early with the exception of latent defects or fraud. If alterations, repairs or changes to the facility or equipment occur prior final acceptance, both parties' rights under the contract clauses for warranty and inspection may be altered.

7.19. Termination.

7.19.1. Termination for Default. The Show Cause/Cure Notice requirements of FAR 49.402-3 will be utilized prior to a contracting officer terminating a construction contractor for default. FAR 49.504 provides that the Air Force may take over the work and complete the project, by contract or otherwise. The contractor is liable for any additional cost incurred in completing the project, to include the loss incurred for delayed completion of the work. The Contracting Officer must consider the following factors in determining whether to terminate a contract for default:

7.19.1.1. The provisions of the contract and applicable laws and regulations.

7.19.1.2. The specific failure of the contractor, and the reasons, if any, made by the contractor for such failure.

7.19.1.3. The possibility of excusable delays.

7.19.1.4. The availability of construction services from other sources.

7.19.1.5. The urgency of the need and the period of time which would be required to work by other sources as compared with the time in which completion could be obtained from the delinquent contractor.

7.19.1.6. The availability of funds to finance repurchases costs which may prove to be uncollectible from the defaulted contractor, and the availability of funds to finance termination costs if the default is determined to be excusable.

7.19.1.7. Any other pertinent facts and circumstances.

7.19.2. Actions in Lieu of Termination for Default. When in the best interest of the Government, the Contracting Officer may take the following actions:

7.19.2.1. Permit the contractor, or its surety to continue performance of the contract under a revised schedule.

7.19.2.2. Permit the contractor to continue performance of the contract by means of a subcontract with an acceptable third party, provided the rights of the Government are adequately preserved.

17.20. Liquidated Damages. Liquidated damages are to be assessed against the contractor for each day of unexcused delay. If the clause FAR 52.211-10 is used with its alternate specifying phased construction, liquidated damages should be assessed for each day of delay associated with the particular phase. It is recommended that legal assistance be sought prior to the assessment of liquidated damages.

7.20.1.Default Clause. Liquidated damage remedies are in addition to other remedies provided by the default clause. This means that the Contracting Officer can exercise the government's right to recover liquidated damages for unexcusable delays, as well as exercise its right of termination, and cause transfer of title to work in place and engage in reprocurement actions charging excess costs to the defaulted contractor.

7.20.2. Surety Takeover. The Contracting Officer may enter into a written agreement with the surety. Consideration should be given to having the agreement include both the surety and the defaulting contractor in order to eliminate any disagreement as to the contractor's residual rights, such as claims to unpaid prior earnings. The agreement must provide that the surety will undertake the work required by the contract in accordance with all the terms and conditions of the contract. It must also provide that the Government will pay the surety in the manner provided by the contract, but not in excess of the surety's costs and expenses, the balance of the contract price unpaid at the time of the default, subject to those issues at FAR 49.404(e).

7.20.2.1. Completion by Another Contractor. If the surety does not arrange for completion of the contract, the Contracting Officer normally will arrange for completion of the work by awarding a new contract based on the same plans and specifications.

7.20.2.2. Air Force Completion of the Work. In-house employees can be used to complete the project. Excess costs can generally be recoverable when an urgent need can be demonstrated and there is no reasonable alternative under the circumstances. The same standards of reasonableness and similarity would be applied where the work is completed in-house. Where a surety is involved, the acquiescence or specific approval of the surety should be obtained.

7.20.2.3. If the requirement for the completion of the work specified in the contract no longer exists and the contractor is not liable for damages, execute a no-cost termination settlement agreement