Liquidated Damage Cover – a protective shield for your balance sheet
Large projects, major risks
Anyone who works on large construction projects secures for himself and his company good chances of profit. Of course, you also take risks, because you commit yourself to deliver at a fixed time. Irrespective of how experienced and well prepared your company is, there are always factors beyond your control that make it impossible for you to meet your contractual obligations. Some of them might be excusable events. However, delays, failures or lack of performance can result in compensation payments like Liquidated Damage (LD) payments to the owner. The owner can use these LD payments as an alignment which reduces his risk while increasing yours.
As a contractor, shouldn’t you also minimize your risks? Because the payment of liquidated damages can quickly limit your ability to maneuver financially and put unwanted pressure on your balance sheet. Consider the LD payment itself as well as the additional resources required during the delay to complete the project. You may have already planned and invested in a new project and this risk can limit your available resources for further projects.
An insurance that covers your contractual risks
Your benefits at a glance:
Alternative applications for Developers and Principals
LD coverages can be adjusted to enable financing of projects for Developer and Principals.
This fills the gap of your financial obligations if LD payments from contractor/main supplier are too low.