California Code, Government Code - GOV § 53069.85

The legislative body of a city, county, or district may include or cause to be included in contracts for public projects a provision establishing the time within which the whole or any specified portion of the work contemplated shall be completed.  The legislative body may provide that for each day completion is delayed beyond the specified time, the contractor shall forfeit and pay to the agency involved a specified sum of money, which may be deducted from any payments due or to become due to the contractor.  The sum so specified is valid as liquidated damages unless manifestly unreasonable under the circumstances existing at the time the contract was made.  A contract for such a project may also provide for the payment of extra compensation to the contractor, as a bonus for completion prior to the specified time.  These provisions, if used, shall be included in the specifications upon which proposals or bids are received, which specifications shall clearly set forth the liquidated damages provisions.

For purposes of this section, “public project” shall include the erection, construction, alteration, repair, or improvement of any structure, building, road, railway, or other improvement, and the procurement of any other goods or services that are manufactured specifically, designed specifically, or produced specifically, pursuant to a contract with a public agency.