State-of-the-Practice for Liquidated Damages, Incentive/Disincentive, and Road User Cost Provisions on High-Value Transportation Projects

Abstract

Construction, rehabilitation, and maintenance of roads, highways, and bridges are necessary activities for social and economic growth in the United States. Highway construction often requires disruption of traffic due to lane closures and detours impacting the motoring public. Contractual provisions [i.e., liquidated damages (LDs), incentive/disincentives (I/Ds), and road user costs (RUCs)] are essential in construction contracts to ensure timely completion and minimal disruption to road users. A survey was administered to establish a state-of-the-practice regarding the application, development, project staffing requirements, audit and review, and enforceability of LDs, I/Ds, and RUCs. The survey response rate was 88% (45 out of 51). Construction and Engineering Design were identified as the departments most often charged with developing LD, I/D, and RUC rates. Every responding agency has a similar definition and common requirements to achieve substantial completion. Most agencies do not conduct cost-analysis audits and reviews on projects to compare LD rates with actual costs, which could lead to possibly not recovering all damages. Most respondents stated their LD, I/D, and RUC provisions have never been challenged in court.