# How do delay penalties work in oxygen plant contracts?

**How are delay penalties (liquidated damages) set and capped in oxygen plant supply contracts?**

In World Bank-financed procurement, the standard goods conditions (August 2020) set delay damages as a weekly percentage of the late goods' price, up to a maximum set in the special conditions, after which the buyer may terminate; a 2022 CHAI PSA plant tender set 1% of the contract per day, for up to 30 days.

## World Bank standard documents

The World Bank's Standard Procurement Document for goods (Request for Proposals, two-envelope process, August 2020), prepared for contracts financed by IBRD and IDA, deals with delays in its General Conditions of Contract (GCC):

- Rate and cap (GCC 27.1): if the supplier fails to deliver the goods or perform the related services on time, the purchaser may, without prejudice to its other remedies, deduct a percentage of the delivered price of the delayed goods or unperformed services for each week or part of a week of delay, up to a maximum deduction. Both percentages are left blank in the Special Conditions of Contract (SCC) for the purchaser to fill in.
- Termination: once the maximum is reached, the purchaser may terminate the contract.
- Force majeure (GCC 32): the supplier is not liable for liquidated damages to the extent the delay results from an event beyond its control that is not foreseeable, is unavoidable and is not due to its negligence.
- Extensions of time (GCC 34): the supplier must promptly notify the purchaser in writing of a delay, its likely duration and cause; the purchaser may extend the time by amendment, and otherwise, except for force majeure, the delay makes the supplier liable to liquidated damages.
- Liability (GCC 30): the exclusion of indirect and consequential losses does not apply to liquidated damages, and the supplier's aggregate liability is limited to the total contract price, with stated exceptions.

The same document offers a sample SCC provision for performance or consumption guarantees: if they are not met for reasons attributable to the supplier, it either modifies the goods at its own cost and repeats the performance tests, or pays liquidated damages at a rate the purchaser sets, which the document says should be higher than the adjustment rate used in the evaluation of proposals.

## An example from an oxygen plant tender

In a request for proposals posted on 9 May 2022 for a containerised PSA oxygen plant with a cylinder filling station, the Clinton Health Access Initiative (CHAI) set liquidated damages of 1% of the total contract amount for each day of delay, for a maximum of 30 days, after which the contract would be terminated, and made failure to meet the delivery date a basis for cancellation. Release of payment was conditional on passing inspection of the supplies and on written acceptance by the end user.

## Delay is a contract matter, not a delivery term

The US International Trade Administration notes that Incoterms do not address liability for delayed delivery, so the delivery rule named in a tender, such as CPT or DAP, does not set delay damages. See [which Incoterms are used when buying an oxygen plant](https://library.ultracontrolo.com/answers/which-incoterms-are-used-when-buying-an-oxygen-plant/) and [what is included in a turnkey PSA contract](https://library.ultracontrolo.com/answers/what-is-included-in-a-turnkey-psa-contract/).

### Are delay damages charged on the whole contract or on the late items?

It depends on the contract. The World Bank standard conditions (2020) apply the percentage to the delivered price of the delayed goods or unperformed services, while a 2022 CHAI PSA plant tender applied 1% per day to the total contract amount.

### Does a supplier pay delay damages for force majeure?

Not under the World Bank standard conditions (2020): the supplier is not liable for liquidated damages to the extent the delay results from force majeure.

## Sources

- [World Bank, Standard Procurement Document: Request for Proposals, Goods (Two-Envelope Process), August 2020, GCC 27, 30, 32 and 34 and SCC](https://thedocs.worldbank.org/en/doc/413051600110937774-0290022020/render/SPDRequestforProposalsGOODSAugust20202envelope.pdf)
- [Clinton Health Access Initiative, RFP/CHAI/OSC/0122, containerised PSA oxygen plant with cylinder filling station (posted 9 May 2022)](https://www.clintonhealthaccess.org/wp-content/uploads/2022/05/RFP-for-PSA-oxygen-plant-in-DRC.pdf)
- [US International Trade Administration, Know your Incoterms (web page, read 23 October 2026)](https://www.trade.gov/know-your-incoterms)

Reviewed: 2026-10-23. Ultra Controlo engineering. https://library.ultracontrolo.com/answers/how-do-delay-penalties-work-in-oxygen-plant-contracts/