The Minister for Public Expenditure, NDP Delivery and Reform, Paschal Donohoe, has today (21st March 2023) announced the introduction of a cap on liability (also referred to as a ‘liability cap’) in public works contracts and the standard conditions of engagement for consultants. The introduction of liability caps will support the delivery of vital projects under the National Development Plan (NDP).
Over the lifetime of the NDP, €165 billion will be invested in new and upgraded infrastructure that will meet the needs of our growing population. In the current climate of uncertainty facing the construction industry, the introduction of liability caps brings greater certainty to the businesses that the State engages to deliver essential public buildings and infrastructure.
Welcoming the introduction of liability caps, Minister Donohoe said:
“I’m pleased to announce the introduction of caps on liability in public works contracts and the standard conditions of engagement for consultants, following consultation with a range of stakeholders. This follows on from a series of measures introduced by my department over the last 18 months to address the challenges that the construction industry has faced over the last two years in terms of material price inflation, supply chain disruption and the reduced availability of professional indemnity insurance.”
A cap on liability will limit the liability of a contractor or consultant engaged under a contract to a monetary amount, which will be determined by the Contracting Authority and stated in the tender documents.
There will be some exclusions for caps on liability – for instance, if the liability has arisen as a result of gross negligence, fraud, or fraudulent misrepresentation. The Office of Government Procurement (OGP) will prepare guidance to help Contracting Authorities to decide on the appropriate amount for a liability cap.
The Minister added:
“My department has been exploring key policy levers and support structures to support the faster delivery of vital NDP projects, as well as removing any potential barriers that are impacting on delivery.
Improving the risk/reward balance of public works contracts through the introduction of caps on liability will encourage a greater level of competition for public works tenders from both domestic and overseas businesses. This will lead an improved quality of bids received and maximise value-for-money, key priorities for my department in delivering the NDP.”
The OGP will publish the amended forms of contract and associated schedules, beginning with the standard conditions of engagement for consultants by the end of March. The suite of public works contracts will follow early in Q2 of 2023.
Notes for Editors:
The current review of the Capital Works Management Framework is considering a wide range of matters that impact on the procurement of the entities engaged to deliver public works projects. The examination of liability, indemnity and insurance was identified as a work stream under the review.
The Office of Government Procurement (OGP) undertook a series of engagements with industry stakeholders and insurers active in the Professional Indemnity Insurance (PII) market and, with the support of the State Claims Agency, it developed a series of recommendations to ensure that the tightening of the international market for PII did not result in otherwise capable businesses being excluded from public contract opportunities. The majority of the recommendations were actioned by February 2022 with the issue of Circular 05/2022 and associated guidance. Section 4 of the circular committed to the introduction of liability caps.