Fines/Liquidated And Ascertained Damages (LAD)


1. What is meant by a Liquidated and Ascertained Damages (LAD) and in what ways can a company be imposed with a LAD?
  LAD means a fine/compensation imposed to a contractor/supplier who fails to fulfill a contractual obligation as stipulated in the contract.
Among the failures to meet contractual obligations that can be subjected to LAD are as follows:
  (a) Delay in completing a project that is not in accordance with the schedule specified in the contract; and
  (b) Delay to supply / failure to supply or quality of goods supplied not according to the specifications in the contract.
2. How are the fines claimed from the contractor?
  Agencies only need to write a letter with details of fines calculated and requesting the contractor payment within the period specified in the contract clauses. If the contractor fails to pay, the fines shall then be recovered from the progress payment or any balance from the amount which the contractor is entitled to receive .If this could not be done, the claim shall then be made from the performance bond.

The clause on penalties and how the government can collect it must be included in the contract documents.
3. What action can be taken if after a fine is imposed, the contractor fails to pay the fine, the performance bond was seized, but still more debt is to be collected from the contractor?
  Civil claims should be taken if all other actions are to no avail.
4. Can an agency impose a fine or only the Ministry of Finance has the right?
  All agencies are responsible for administering / managing their contracts and imposing a fine on the contract it manages. However, Government agencies shall notify the Treasury / Contractor Service Centre (PKK) of any fine / LAD claimed and received from suppliers / contractors
5. What actions can be taken if the supplier that won the contract to supply is late in sending the ordered supplies?
  Refer to the clause in the contract. Typically, the supplier can be fined for late delivery
6. What action can be taken if the supplies sent by a supplier did not meet the specifications set?
  Refer to the clause in the contract. An Agency may reject shipments. Suppliers can also be requested to replace the supply. If the supplier fails to replace the rejected supplies, deduction can be made. If the agency had to buy from external sources, the price difference shall be recovered from the supplier. In cases where the supply has been used and cannot be returned, payment should be reduced based on the assessment.