Requesting Entity: Iloilo Science and technology University (ISTU)

Issues Concern: Computation of Liquidated Damages (LD)

Details

Request for opinion on the correctness and validity of ISTU’s computation as regards the LD it imposed to the contractor of its project

[T]he determination of the correctness and validity of the computation, relative to the penalty of liquidated damages, rest with the procuring entity using the available data from the procurement project, and applying the formula provided for under Section 68 of the IRR of RA 9184. Consequently, based on the correctness and reliability of the data and information available and known to the procuring entity as regards the number of days the contractor has been in default or delay; the actual amount for everyday of delay, which must be computed accurately; and the computation provided under the rules, i.e., one-tenth of one percent (0.1%) of the cost of the unperformed portion for every day of delay, the procuring entity may arrive at the appropriate LD imposition.

[U]nder Section 8.5 of the Contract Implementation Guidelines for the Procurement of Infrastructure Projects, the totality of the LD should not exceed the actual contract cost for the project, otherwise the contract shall be subject to “rescission” , thus: “In no case however, shall the total sum of liquidated damages exceed ten percent (10%) of the total contract price, in which event the contract shall automatically be taken over by the procuring entity concerned or award the same to a qualified contractor through negotiation and the erring contractor’s performance security shall be forfeited. xxx .”