NPM 005-2007

Requesting Entity: Department of Agriculture Regional Field Unit XI

Issues Concern: Computation of Liquidated Damages



Guidance on the Proper Computation of Liquidated Damages for Infrastructure Projects

The contractor incurred a 19-day delay in the construction of a farm-to-market road in Saranggani Province. Original contract period was set at 204 calendar days. The Office of the Provincial Engineer computed liquidated damages at P136,801.68, while the contractor computed it at P7,200.

A comparison of the two differing computations indicates that the values used by both parties in the application of the foregoing formula are the same. Thus, both parties derived the same figure (P7,200). However, the Office of the Provincial Engineer further multiplied this amount with the total number of days in delay (P7,200 x 19 days) resulting to a higher figure of P136,801.68.

However, an examination of the prescribed formula (IRR-A, Annex "E") reveals that the number of days in delay has already been factored in through the variable (ⁿ). Thus, further multiplying the resulting figure with the number of days the project is in delay becomes superfluous. More importantly, the intent of the formula is to compute the total liquidated damages, as can be seen in the meaning of TLD.

Consequently, we believe that the computation for liquidated damages submitted by the contractor is more in accord with the prescribed guidelines under the IRR-A of R.A. 9184.