Federal regulations require that DOTs must establish liquidated damages (LD) for construction projects and update when necessary and submit them to FHWA every two years for approval. According to FHWA, the method used to develop a standard LD schedule should use construction engineering costs associated with the type and size of work encountered. The FHWA method has four steps: 1) determination of requisite data, 2) collection and organization of data, 3) calculation of workday LD rates and 4) calculation of calendar-day LD rates. The objectives this research were to evaluate the Auburn University protocol used to determine LDs in Alabama and to modify it as necessary and apply it to a data base supplied by ODOT. This effort included the evaluation, screening and qualifying of the ODOT data for the development of liquidated damages. These data and the selected methodology were then applied to the ODOT’s data base to determine a statistically defensible daily rate for agency charges when projects are not completed within the original schedules. A robust statistically based procedure for use by ODOT or an outside vendor to determine LD rates for projects of varying sizes that should meet the requirements of FHWA was developed.