Type:
NSW Procurement Board Direction
Identifier:
PBD 2017-03
Status:
Active

PBD 2017-03 Civil Liability Act 2002 - proportionate liability

Description

NSW Government agencies should only contract out of Part 4 of the Civil Liability Act 2002 in a construction contract when an assessment clearly demonstrates that this action is justified. An agency that enters into a contract that excludes application of the Part 4 of the Civil Liability Act 2002 must submit a report to Public Works Advisory setting out the reasons for taking this action.  

Detailed Outline

Direction

The NSW Procurement Board has asked Public Works Advisory (PWA) to monitor the circumstances where NSW Government agencies exclude or modify the application of the Part 4 of the Civil Liability Act 2002 in construction contracts, and to provide advice on the use of this facility.

The Board directs all NSW Government agencies to report to PWA when they enter into a construction contract that excludes or modifies the application of the Part 4 of the Civil Liability Act 2002. Agencies must also provide PWA with information on the nature and value of the contract and the circumstances justifying the exclusion of proportionate liability provisions in the CL Act.

This direction applies to construction contracts entered into from 1 November 2017 until it is withdrawn. 

Background

Part 4 of the CL Act creates a proportionate liability regime for claims for economic loss or damage to property arising from a failure to take reasonable care. The provisions in Part 4 replace the common law rule of joint and several liability, under which a plaintiff can recover the whole of its loss from just one defendant, even though there were multiple parties who caused the loss. Part 4 creates a single claim where the liability for a loss is apportioned by the court between defendants according to their responsibility for the loss. 

The CL Act allows contracting parties to include provisions in a contract that exclude or modify the application of Part 4, and the proportionate liability regime that it creates. NSW Government agencies are entitled to make use of this facility to contract out of proportionate liability provisions when undertaking procurement. However, agencies need to be mindful of not exercising their rights in this regard in an inflexible manner, without proper assessment of whether the circumstances justify contracting out. 

Contracting out can pose potential disadvantages to both suppliers and government. For example, contracting out can expose suppliers to significant liability regardless of the size of their actual contribution to the loss. It potentially limits competition among suppliers because of increased insurance costs, thereby reducing the range of suppliers with whom the government may deal. Further, such costs may be passed on to government agencies through higher prices for services.

Without limiting agencies’ discretion in deciding whether to contract out of proportionate liability provisions, agencies: 

  • should consider various factors in determining whether contracting out of proportionate liability is warranted, including:
    • the size, cost, complexity and risk of the procurement
    • the extent to which the agency is able to manage risks associated with the procurement through means other than contracting out of proportionate liability, including assessing suppliers’ respective expertise, skills and financial resourcing
    • the extent to which contracting out of proportionate liability potentially reduces competition and value for money for a given procurement activity
    • the potential flow-on costs to the agency in contracting out
    • any other relevant circumstances.
  • should listen to any concerns raised by suppliers in relation to contracting out of proportionate liability, and consider them in any final determination on whether contracting out is warranted.

 

 

Act

Part 11, Public Works and Procurement Act 1912

Overview

Who needs to know and/or comply with this?

Departments
Executive agencies related to Departments
Advisory Entities (including Boards and Committees)
Separate agencies
Statutory Authorities/Bodies

Compliance

Mandatory

AR Details

Date Issued
Oct 6, 2017
Review Date
Apr 28, 2019
Replaces
Replaced By

Contacts

Contact
Phone
Publishing Entity
Department of Finance, Services and Innovation
Issuing Entity
New South Wales Procurement Board (DFSI)