Local suppliers have welcomed new guidelines for capping liability insurance across Federal Government contracts, claiming the decision will encourage more players to battle the big multinationals for tenders.
The newly released Guide to Limiting Supplier Liability Policy in ICT Contracts for Australian Government Agencies was developed to investigate ways in which the government could limit professional indemnity insurance for suppliers. It was first proposed by the Minister for Department of Communications, Information Technology and the Arts (DCITA), Senator Helen Coonan, during the coalition's pre-election campaign last year.
DCITA is inviting local supplier opinions on the draft guide, with submissions closing in February.
Industry bodies, including the Australian Computer Society, claim caps would level the playing field between local suppliers and multinationals. Currently, the Federal Government insists on unlimited supplier liability across all of its procurement contracts.
These cover issues such as loss and damage from breach of intellectual property, security and confidentiality, unlawful acts, damage to tangible property and personal injury.
According to the DCITA draft guide, open-ended liability was limiting market competition because many smaller suppliers were not able or prepared to meet such conditions.
Under the new arrangement, government agencies would be able to introduce a ceiling on a selection of these issues after undertaking a risk assessment. This would involve quantifying what damages were likely to occur, estimating overall risk and calculating an acceptable cap. Other considerations could include the value and complexity of the tender.
MCR national sales manager, Martyn Bartlett, welcomed the new policies.
He said liability caps would make it easier for the Sydney-based services integrator to work within the government framework. It would also encourage smaller integrators to consider public sector tenders.
"The changes will make companies like ours more open to looking at government business," Bartlett said. "Before, we not only had to compete with the big boys, but also had onerous liability conditions which were inconsistent with the size of our business. As positive as we are about our services, we're not going to bet our whole business on a liability clause. If they capped it, we would be more confident about bidding."
Data#3 managing director, John Grant, said the new approach was terrific for local suppliers because it provided clear and simple guidelines on which risks could be capped.
"There is no doubt that we have a government that is risk averse," he said. "The industry wants to encourage the government to be more adventurous without being risky.
"It requires a leap of faith, but this would be returned in spades."
Dimension Data ACT branch manager, Michael Gration, said the changes were a comforting shift in the government's outlook on liability.
"Rhe commercial position we work under with government is severely limited," he said. "There's a huge cost and legal burden in every instance. We have a strong financial position, so we are able to take high risk on high value projects, but we get involved in laborious talks over every single, simple acquisition."