Penalty Clauses

Make sure you have a good lawyer write it up, don't just simply make a note of it in the bid material.

As mentioned, some major catastrophies cannot be predicted, and should be provided some leniency. Make sure this is spelled out in detail, or everything will become an emergency.

Be prepared for the bid to be higher than normal. If you want it faster, or guaranteed by a certain date, more man-hours may be needed to insure that.

Be prepared to pay penalties in time or dollars yourself if you make changes in the middle of the building of the panel.

I haven't used much of these in the automation world, except on very large projects.

During college I worked for a construction company owned by two lawyers. I once left an outrigger partially down on a crane as I crossed a set of railroad tracks and ripped them out. As it turned out, the approach to the railroad tracks was at a slightly steeper grade than specified in the bid documents, so the company I worked for not only got out of paying for the tracks, but was re-imbursed for the bent outrigger on the crane.

As they say, the devil is in the details.
 
Face it, we live in a global economy that is highly competitive.

If a project is late, the delay causes financial hardship on someone. For example, the field electricians may be getting paid to stand around waiting for the control panel to show up from the panel vendor (assuming they are not the same company). The owner is losing money.

If a project is "early", there is not generally a bonus to the contract administration company or general contractor. They are happy to stay on schedule and make their "planned" profit.

Therefore, I just don't see how you can give such a bonus for being early, since the money is not probably available. When did you last attend a budget meeting where rewards to early vendors were negotiated? Get real.

In conclusion, as my earlier post stated, a panel shop would be idiotic to enter a contract with no gain, but substantial loss, especially when there are too many factors beyond its control.

(I think Tom Jenkins' post stated it best so far.)
 
I have a question. How do you figure out what the "Penalty" rate should be? Do you take the amount per day the project savings should have been or do you just state a flat rate? The project savings amount could be so large that no one will agree to the penalty clause. Also, do you put daily rate capped to a maximum incurred number?

Thanks,

Todd.
 
Back
Top Bottom