For more than ten years of our practice we have been observing the growing importance of liquidated damages, in particular when it comes to contracts performed in the public procurement regime. This results, on one hand, from an ever-increasing catalogue of liquidated damages, including liquidated damages provided for directly by public procurement regulations, and the growing legal awareness of contracting authorities that have become more willing to charge contractors with liquidated damages, on the other hand.
The current practice of public contracting authorities of stipulating and imposing liquidated damages materially affects all contractors from the industrial projects, railway, road, power and gas sectors. In the recent years, entities performing construction contracts have been facing a lot of difficulties caused by i.a. defective tender documentations, dynamic changes in the economic environment or improper performance of contracts by contracting parties, which are often the grounds that contracting authorities use to charge liquidated damages.
Considering the above, we decided to prepare a report with the primary aim of identifying key problems relating to liquidated damages that contractors have been encountering. The report is based on data collected in a survey. Our intention was also to start a wider discussion on liquidated damages under public contracts and potential legislative changes if the report findings show there is such a need.
In this report, we comprehensively analyse practical issues regarding stipulating and enforcing liquidated damages by public contracting authorities. However, for comparative reasons, we also put some aspects into the context of contracts performed for private investors.
This report covers the railway, road, power and gas sectors and industrial projects, however the collected data have been presented globally. This is mainly because we did not identify any significant differences between the individual sectors as to how contracting authorities and contractors approach the issues addressed in the survey.
As the survey subject that we proposed has a practical impact on the entire environment of contractors, it enjoyed great interest of industry organisations, including Chambers of Commerce, that we had invited to collaborate with us. We complied the report in collaboration with:
- Polish Association of Construction Industry Employers,
- Polish Economic Road Association,
- Land Transport Chamber,
- Chamber of Natural Gas Industry,
- Chamber of Power Industry and Environment Protection,
whose representatives provided valuable comments that are included in the report.