CONTEXT Note to drafters: This section should set out a description of the procurement to which the LRA relates, including the procurement objectives and the procurement environment. For further guidance on establishing the context, refer to Annex A and Chapter 3.3 of the. […INSERT DETAILS AS REQUIRED…] Table 1 – Contract Liability Risk Log Note to drafters: The Contract Liability Risk Log at Table 1 should address at least the nine standard liability risks outlined below. Additional project specific liability risks can be included should they not fall within the standard liability risks and specific contractual drafting should be included in the contract if necessary to address them. The worked examples provided below are provided as examples only. Drafters should refer to Annex A for guidance on Risk Categories and the Likelihood and Consequence ratings, and Residual Risk Level evaluations in accordance with the Standard Risk Matrix. Risk Source Category Impact Controls and/or Treatment Likelihood Consequence Residual Risk Level The contractor fails to complete the contract (e.g. the contractor goes into liquidation) Note to drafters: Related liability cap – losses suffered by the Commonwealth other than those referred to in the other liability caps Lack of expertise in the company Unproven solution Financial viability of the company Schedule Cost Performance Re-tendering costs of finding alternative supplier to complete estimated at $6m (inc project office costs). Costs of keeping existing equipment operating for longer estimated at $24m for 2 years. Tender allows for evaluation of experience and capacity of key personnel. Tender allows for assessment of maturity of the tendered solution. Tender allows for evaluation of financial viability and projected viability if contract is awarded. Payment schedule is designed to reflect the value delivered to the Commonwealth (i.e. it is not Bank guarantee will be obtained to secure contract performance and any mobilisation payment paid. Rare Moderate Low
Deed of guarantee and indemnity requires parent to ensure performance of contractor. The contractor completes the contract but the supplies provided are not fit for purpose, are defective or do not provide the capability contracted for Note to drafters: Related liability cap – loss of use of supplies Lack of expertise in the company Unproven solution Performance Cost Costs for loss of use of supplies include: wasted crewing costs estimated at $20k a day for 365 days ($7.3m) providing alternate capability or extending existing capability until the supplies are rectified estimated at $1m a month for 12 months ($12m) The project considers that issues with the supplies would be resolved within 12 months or the contract would otherwise be terminated. Tender allows for evaluation of experience and capacity of key personnel. Tender allows for assessment of maturity of the tendered solution. Contract provides for design reviews, acceptance testing and defect rectification period to address defects. Contract includes requirement to obtain third party warranties for Commonwealth benefit. Contract contains a clear description of purpose of supplies, with objective specifications to be met. Possible Moderate Medium The contractor completes the contract but not on time or one or Capacity issues given competing projects Schedule Cost Liquidated damages for delay have been assessed as: cost of standing up a project office estimated Tender allows for assessment of proposed management plans and skills, and proposed resourcing. Tender allows for assessment of maturity of the tendered solution. Possible Moderate Medium
more milestone dates are not met Note to drafters: Related liability cap – liquidated damages Poor management skills Unproven solution Contractor damages supplies before they are accepted at $50k a week for 26 weeks ($1.3m) cost of keeping existing equipment in operation estimated at $6m for 26 weeks The maximum delay that the project will accept is 26 weeks. Contract could be terminated if the liability cap is reached or under clause 13.3. Contract allows for liquidated damages. Contract allows for termination for default if delay reaches liquidated damages cap. Bank guarantee will be obtained to secure contract performance. Deed of guarantee and indemnity requires parent to ensure performance by contractor. The contractor injures or kills people in the course of performing the contract or as a result of defects in supplies after acceptance Note to drafters: Related liability cap – none as third party claims for death, personal injury, disease or Unsafe work practices Unsafe contractor premises Lack of technical expertise in performing the work, leading to defects in supplies Cost Potential claims against the Commonwealth by contractor employees, Commonwealth employees or third parties. Estimated Maximum Probable Loss scenario is 10 people are killed as a result of an accident, estimated claims cost of $45m ($4.5m per person). Legal fees and other Commonwealth management overheads, estimated cost of $3m. Contract contains indemnities from the contractor in respect of Commonwealth and contractor employees and third party death or personal injury. Liability is uncapped. Contract requires contractor to have insurance. Contractor required to be appropriately licensed and comply with WHS requirements. Contract includes obligations to comply with safety procedures while on Commonwealth property. Rare Moderate Low
illness cannot be capped Tender allows evaluation of proposed system safety plan. The contractor loses or damages supplies owned by the Commonwealth in the course of performing the contract Notes to drafters: Related liability cap – loss of or damage to supplies. Loss of use of supplies is not to be captured here as that risk is captured above under Risk 2. Unsafe work practices Inadequate or unsafe contractor storage facilities Inadequate or unsafe contractor transport practices Lack of technical expertise in performing the work Accidents etc. and natural disasters Cost Cost for loss of or damage to supplies owned by the Commonwealth (other than loss of use of the supplies) estimated at Maximum Probable Loss of half the total number of supplies ($50m). Tender allows for evaluation of skills and experience of the key personnel. Contract requires contractor to have insurance. Contractor has appropriate systems to minimise accidental loss and damage, theft, fire etc. Contractor has risk of supplies prior to delivery and after delivery if contractor retakes possession. Contractor liable for loss or damage caused by defects during defect rectification period or caused by contractor default after defect rectification period. Unlikely Major Medium The contractor loses or damages Defence property Unsafe work practices Cost Cost for loss of or damage to Defence property (other than supplies) estimated at Tender allows for evaluation of skills and experience of the key personnel. Unlikely Major Medium
(other than supplies) in the course of performing the contract Note to drafters: Related liability cap – loss of or damage to Defence property (other than supplies) Lack of technical expertise in performing the work Inadequate or unsafe contractor storage facilities Inadequate or unsafe contractor transport practices Accidents etc. and natural disasters Maximum Probable Loss of $75m. Contract requires contractor to have insurance. Contractor has appropriate systems to minimise accidental loss and damage, theft, fire etc. Contractor has risk of Defence property while in its possession and an obligation to take reasonable care of Defence property otherwise. Contractor liable for loss or damage to Defence property caused by defective supplies during defect rectification period or by contractor default after defect rectification period. Contractor has obligations to keep GFF in good repair. The contractor damages the property of a third party or Commonwealth property (other than Defence property) in the Unsafe work practices Lack of technical expertise in performing the work Cost Cost for loss of or damage to third party or Commonwealth property (other than Defence property) estimated at Maximum Probable Loss of $25m. Tender allows for evaluation of skills and experience of the key personnel. Contract contains an indemnity from the contractor in respect of third party property damage. Rare Moderate Low
course of performing the contract Note to drafters: Related liability cap – none as third party property claims and the loss of or damage to non-Defence Commonwealth Property cannot be capped Inadequate or unsafe contractor storage facilities Inadequate or unsafe contractor transport practices Accidents etc. and natural disasters Contractor liable for damage to Commonwealth property caused by defective supplies during defect rectification period or by contractor default after defect rectification period. Contract requires contractor to have insurance. Liability is uncapped. The contractor causes a third party to suffer pure economic loss in the course of performing the contract Note to drafters: Related liability cap – losses suffered by the Commonwealth other than those referred to in the Unsafe work practices Lack of technical expertise in performing the work Cost The Commonwealth may be liable to pay the third party for pure economic loss the third party suffers. Cost for pure economic loss to third party estimated at Maximum Probable Loss of $30m (as a result of severing an underground power cable to an industrial area). Tender allows for evaluation of skills and experience of the key personnel. Contract contains an indemnity in respect of third party claims. Losses referred to in the indemnity includes economic loss, however, pure economic loss is not excluded from the liability caps and therefore can be capped. Contract requires contractor to have insurance. Unlikely Moderate Medium
other liability caps The contractor fails to comply with intellectual property rights, confidentiality, Defence security or privacy obligations under the contract resulting in damage to the Commonwealth or a third party Note to drafters: Related liability cap – none as IP, confidentiality, Defence security and privacy cannot be capped Failure to secure IP rights Failure to secure confidential information Failure to protect personal information Failure to meet security obligations Cost IP Commonwealth loss as a result of a third party claim. Estimated loss $10m including damages, cost of defending claim and securing alternate IP rights. Confidentiality Commonwealth loss as a result of a third party claim. Given nature of likely confidential information, estimated loss $5m. Defence security Commonwealth expends amounts to investigate and address loss of classified information at a cost of $35,000. Privacy Tender evaluation will consider source of IP rights. Contract contains an indemnity in respect of third party claims for IP infringement and breach of confidence. Contract contains an indemnity for third party claims which includes breach of privacy. Contract contains obligations to comply with privacy law and Commonwealth security requirements. Liability is uncapped. Unlikely Minor Low