What Are Liquidated Damages in Construction?

By Wyatt Cooper · Published October 22, 2026 · 3 min read

Key takeaways

Liquidated damages (LDs) replace proving the owner's actual delay losses with a daily rate agreed up front.
The rate must be a reasonable forecast of the owner's harm; a rate set to punish is a penalty and may not be enforced.
LDs run from the contract completion date, adjusted for approved time extensions, to the day the work is completed or accepted.

Liquidated damages (LDs) are usually a fixed amount per calendar day, agreed in the contract, that the contractor pays the owner for each day the work finishes late. The rate is a reasonable forecast, made in advance, of the owner's real losses, such as lost rent, which would be hard to prove later. LDs compensate; they are not a penalty.

When liquidated damages fit

Federal policy allows them only when timely performance is "so important that the Government may reasonably expect to suffer damage if the delivery or performance is delinquent" and the damage "would be difficult or impossible to estimate accurately or prove," and the rate "must be a reasonable forecast of just compensation for the harm that is caused by late delivery or untimely performance" (FAR 11.501). The construction clause charges a stated amount "for each calendar day of delay until the work is completed or accepted" (FAR 52.211-12).

LDs at $1,500 per calendar day

Contract completion date: June 30
Approved time extension: 6 days, to July 6
Work completed and accepted: July 20
Days late: July 6 to July 20 = 14 days
Liquidated damages: 14 × $1,500 = $21,000

Liquidated damages on a late finish (fictional figures)

LDs, actual damages and penalties

With LDs, the owner collects the agreed rate without proving its losses, and usually can't collect more for the same delay. Without an LD clause, the owner must prove actual damages. A rate far above any likely loss reads as a penalty, which courts generally won't enforce. Many contracts also stop LDs at substantial completion rather than final completion, so how that date is set matters: see how to determine substantial completion.

The clock starts with the notice to proceed. Subcontracts often pass LDs down to the trade that caused the delay, so a schedule that shows float and the critical path is the best evidence of who did.

The bottom line

Liquidated damages are a daily price for finishing late, agreed before the job so nobody has to prove the loss after it.

Owners: set the rate from your real costs of delay and write the calculation down. Book a demo to see Conflo.

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Sources

FAR 11.501, Policy (liquidated damages) — Acquisition.gov, U.S. General Services Administration. Read October 22, 2026.
FAR 52.211-12, Liquidated Damages—Construction — Acquisition.gov, U.S. General Services Administration. Read October 22, 2026.

Questions

Do liquidated damages apply if the owner caused the delay?

Generally not for days the owner caused. The contractor should request a time extension in writing, as the contract requires, so the completion date moves before LDs are counted.

Can a GC pass liquidated damages to a subcontractor?

If the subcontract says so, usually for delay the sub caused, often capped at what the owner assesses. Read the subcontract's delay clause before signing.