Chapter 25 - IT Contract Formation

25.8.13 Liquidation costs and completion failure remedies in IT contracts

If the supplier's failure to deliver on time will adversely affect an agency's capacity to perform its business function, a liquidated damages clause should be included in the contract. This clause will establish the method for computing the reimbursement to an agency for costs incurred due to the failed delivery of the IT product or service. This may be linked to service level requirements or acceptance testing failure. Liquidated damages must be based on a realistic estimate of the expense incurred by the Commonwealth.