Use late penalties to keep contractors on task?

[Ashan D]

From what I've read, it seems the #1 problem with contractors is not getting the work done when they said they would. Well what if penalties were built into the contract, so that for every day work is not completed past the deadline, a 3-5% reduction in pay will be enforced. Obviously this would only work with projects that can reasonably be estimated for time requirements (I think most would be)

Is this a ridiculous stipulation, or could it be worked into an agreement and provide better performance?