Liquidated Damages
Beyond penalties and percentages, Liquidated Damages tell the real story of how risk, trust, and performance intertwine in our water projects.
In my work overseeing water projects, I find myself constantly focused on the nuances of contract management, for instance in the use of Liquidated Damages (LDs).
Welcome to another Tuesday’s edition — exclusive to those who choose to engage more deeply with us through our paid membership.
To put it simply, LDs are the amounts you have to pay if you fail to meet the committed schedule (delay) or the guaranteed performance targets, such as energy consumption, chemical usage, or water quality.
In other words, if you understand them well, you understand your risk — and that helps you manage your opportunities more effectively.
I view LDs as one of the critical links we employ to keep the commitments among all parties under tight control (otherwise you can imagine...).
Analysing this typical clause in our Contracts is essential for anyone involved in a water project to fully grasp the definitions and inherent risks.
