A standard clause used in many U.S. federal construction contracts has a blank for a dollar amount. If the contractor “fails to complete the work within the time specified in the contract,” it pays that amount “for each calendar day of delay until the work is completed or accepted.” The price of each late day is set before the work begins.
The Federal Acquisition Regulation says to use such liquidated damages when “the time of delivery or timely performance is so important” that the government can expect harm from a delay. The daily rate should include what it costs the government to keep inspecting and supervising the site.
The rule says these damages “are not punitive.” The rate must be “a reasonable forecast of just compensation for the harm that is caused by late delivery.”