I have reviewed many construction contracts over the years.
Most of them focus on dates and delay.
Very few speak to the risks that cause the greatest harm to owners.

Problem and Context

A recent Lexology article on data center construction risk offers a strong introduction to liquidated damages, force majeure, and indemnity. It is a useful starting point for any owner drafting a construction contract.
Source: https://www.lexology.com/library/detail.aspx?g=62f0b249-faed-4c50-a416-63312459bfe3

Data center delivery is an extreme environment. The daily cost of delay can reach tens of thousands of dollars. The stakes are high and the pressures are real. But the article reflects a larger pattern I see in many contracts. The conversation centers on schedule. Other risks, which are often larger, receive little attention.

Many of the most serious losses do not come from missing a completion date. They come from safety failures, quality defects, and cost drift. These risks must be addressed with the same rigor that owners apply to schedule-based liquidated damages.

Insight and Lesson

1. Liquidated Damages Should Cover More Than Time

Most owners limit LDs to schedule. This is too narrow. The Construction Industry Institute states, “Rework may cost between 2 percent and 20 percent of total project cost. It is one of the largest contributors to cost growth.”
Source: https://www.construction-institute.org/resources/knowledgebase/knowledge-areas/quality-management/topics/rt-252

FMI Corporation reports similar results. In its research, FMI notes that “the total cost of rework can represent up to 20 percent of a project’s contract value” when field corrections, supervision time, and lost productivity are included.
Source: https://www.fminet.com/insights/cost-of-rework/

These findings deserve more weight in contracting. Owners seldom quantify quality risk in their LD structures. Yet rework often exceeds schedule-related exposure by a wide margin.

Safety is another major gap. According to OSHA, “Construction fatalities account for more than one in five worker deaths in the United States.”
Source: https://www.osha.gov/data/commonstats

OSHA also notes that owners can be held liable when they exercise control over site conditions or fail to correct known hazards.
Source: https://www.osha.gov/laws-regs/standardinterpretations

If LDs are meant to address foreseeable harm, then safety failures belong in the LD framework. They carry measurable cost and legal exposure.

Owners should therefore expand LDs to cover four areas.
Time.
Safety.
Quality.
Cost control.

This creates a structure that reflects the real risk profile of the project.

2. If You Penalize Poor Performance, Reward Strong Performance

Balanced incentives matter. When LDs exist without bonuses, teams focus on avoiding loss rather than achieving excellence. The Construction Industry Institute has shown that incentive alignment can improve project outcomes on safety, quality, and cost. In one study, CII found that “projects with formal incentive structures achieved significantly better performance in cost, schedule, and safety than those without them.”
Source: https://www.construction-institute.org/resources/knowledgebase/best-practices/project-control

I see this in practice. When teams understand that strong safety, quality, and cost performance can produce a financial gain, their behavior changes. Meetings become more transparent. Problems are raised earlier. Collaboration improves.

Bonuses should mirror LDs.
Safety metrics.
Quality metrics.
Cost discipline.
Schedule milestones.

This creates a structure that rewards the outcomes that matter most to owners.

3. Force Majeure and Supply Chain Disruption

The Lexology article notes that supply chain disruption is now commonly listed as a force majeure event. This aligns with commentary from Construction Dive, which reported that supply chain conditions after COVID forced contractors to renegotiate force majeure language across markets.
Source: https://www.constructiondive.com/news/supply-chain-covid-force-majeure/609390/

ENR also reported that global disruptions, including semiconductor shortages and port congestion, materially impacted delivery of critical electrical and mechanical components.
Source: https://www.enr.com/articles/51461-supply-chain-chaos

Including supply chain disruption in force majeure is therefore reasonable. But owners must remain disciplined. Early procurement, long lead tracking, and transparent communication remain essential. Force majeure relief protects against what is uncontrollable, not what is unplanned.

4. Indemnity Caps Should Reflect Real Owner Exposure

The Lexology article correctly states that indemnity obligations are commonly capped and that many states regulate indemnity when it attempts to shift liability for a party’s own negligence.
Source: https://www.lexology.com/library/detail.aspx?g=62f0b249-faed-4c50-a416-63312459bfe3

AIA and ACEC commentary notes that caps are often set as a percentage of the contract value or tied to available insurance.
Source: https://www.aiacontracts.org/articles/62841-limitations-of-liability

However, in my experience, a percentage cap is often too low for mission-critical facilities. Operational losses, regulatory penalties, reputational harm, and service interruption can exceed the construction cost. For this reason, I recommend setting caps as a multiple of the contract value, or as a multiple of the general contractor’s fee. This creates proportional accountability without creating an unreasonable burden.

5. LD Calculation Methodology

Lexology reinforces a long-standing legal principle. LDs are enforceable when they reflect a reasonable estimate of likely harm.
Source: https://www.lexology.com/library/detail.aspx?g=62f0b249-faed-4c50-a416-63312459bfe3

Construction law guidance from various legal firms points to the same requirement. A reasonable LD number is calculated from extended general conditions, consultant costs, and any measurable lost revenue. Owners should document their calculation and retain supporting evidence.

This same logic applies when expanding LDs to safety, quality, and cost. Only include LDs where harm can be reasonably estimated and supported.

GOA Perspective

At GOA, we treat contracting as strategy. Not paperwork. We look at a client’s true exposure. Then we build incentives around the outcomes that protect that exposure.

Expanding LDs beyond schedule creates a meaningful shift in project behavior. Balancing LDs with bonuses improves transparency and collaboration. Updating force majeure for modern supply chain realities keeps both parties aligned. Setting indemnity caps as multiples, not percentages, reflects real owner risk.

We have seen owners gain ten to fifteen percent in effective value by standardizing contract frameworks and tying incentives to the outcomes that matter most.

Close and Engagement

How are you structuring LDs today.
Do your contracts reward the results that matter most to your program.
Where have you seen liability caps or force majeure language help, or hurt, your position.