Government Contracting Database
Liquidated damages may not be assessed under construction contracts after the date the work is substantially completed. See Appeals of Tromel Constr. Corp., PSBCA No. 6303, 13 BCA ¶ 35346 (citing Dillon Construction Co., ENG BCA No. PCC-36, 81-2 BCA ¶ 15,416). This rule is applied on construction contracts where a high percentage of the work is complete and the project is available for its intended use. Appeals of Tromel Constr. Corp., PSBCA No. 6303, 13 BCA ¶ 35346; Lindwall Construction Co., ASBCA 23148, 79-1 BCA ¶ 13,822.
The terms “substantial completion” and “beneficial occupancy” are often used interchangeably to denote the cutoff date for assessing liquidated damages. The Boards of Contract Appeals consider the determination of when a facility is ready for beneficial occupancy or is substantially completed, to be a question of fact. Appeal of Strand Hunt Constr., Inc., ASBCA No. 55905, 13 BCA ¶ 35287 (citing ASS Lindwall Construction Co., ASBCA No. 23148, 79-1 BCA ¶ 13,822).
However, substantial completion of a project cannot take place in a vacuum. The concept of “substantial completion” has been equated with “read[iness] for beneficial occupancy” in the sense that the facilities are ready to be “occupied or used by the Government for the purpose for which intended.” Amec Constr. Mgmt., Inc., Appellant, GSBCA No. 16233, 06-2 BCA ¶ 33410 (citing ASS Lindwall Construction Co., ASBCA No. 23148, 79-1 BCA ¶ 13,822). In addition, in order for the government to be ready to take beneficial occupancy of a facility, it must have some notice that the work has been substantially completed. See In Re Kinetic Builders, Inc., ASBCA No. 51012, 99-2 BCA ¶ 30450 (citing Seaboard Surety Company, ASBCA No. 43281, 93-1 BCA ¶ 25510).
While the contractor must show that performance is near completion, there is no set percentage which establishes substantial completion. The Boards are usually more concerned about the availability of the work for its intended purpose, rather than the application of any “rule of thumb” based on the percentage of contract work complete. If the project cannot be used as intended, liquidated damages are generally assessed. In Electronic & Missile Facilities, Inc., ASBCA 10077, 66-1 BCA ¶ 5493, the board found that where a project was 97% complete, but the remaining 3% was for air conditioning, the work was not substantially complete because without cooling the installation was not usable for its intended purpose of housing equipment sensitive to atmospheric conditions. The Boards have also refused to consider a project substantially complete where the remaining work would interfere with the preparation of food in a mess hall. Pathman Construction Co., ASBCA 16781, 74-2 BCA ¶ 10,785. Also, even though the government may be able to derive some benefit from the uncompleted project, if a significant percentage of the work remains unperformed, the project will not be considered substantially complete. Sun Construction Corp., IBCA 208, 61-1 BCA ¶ 2926.
In determining the percentage of completion, the Boards will rely on the contractor’s progress reports unless evidence exists that they overstate the actual percentage of completion of the project.
Updated: July 6, 2018