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Limitation of Liability in IM/IT Contracting
Background, Current Situation & Industry
Concerns
Presentation to SSC Procurement
Benchmarking Committee
Sharon Chamberlain
July 4, 2013
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Presentation Goal
T0 provide the background on the genesis of the
PWGSC Acquisitions Branch Framework for LOL
in IM/IT Contracting and Outline the Current
Situation
Key Areas
• Genesis of PWGSC Acquisitions Branch
Framework and the Core Elements
• Current Situation, SSC’s Approach & Industry
Concerns
• ITAC’s Request
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Genesis of PWGSC IM/IT Framework
Timeline
20002003
PWGSC Treatment of Liabilities #1
ITAC concern
PWGSC
IT Branch
Quest &
Due
Diligence
On ITAC
Concern
September 1, 2003
25 years prior
SSC RFP’s
2000-2012
Harmony
TBS Policy &
PWGSC Special
Authority =
Workable
Foundation for
PWGSC
Acquisitions
Branch
Framework, with
Refinements
2012-2013
Again #1
ITAC
Concern as
SSC
Undertakes
Enterprise
Procurement
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GoC Due Diligence for Solution
Development (2000 to 2003)
Contiguous work to develop the new overarching TBS Policy & a
Special Authority to allow an exception for am area of special,
indirect and consequential damages of third parties promulgated
concurrently to TB Minsters Outcome: Approved in 2003
•
Rigorous PWGSC Review
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Consultations with Industry – Small
Industry/PWGSC Working Group
Nature of IT
History of Occurrences
PWGSC funded Risk Study by Leading
Software Industry
PWGSC funded Study on Insurance Availability
In-depth Review of Options
PWGSC Business and Legal Review
PWGSC IT Acquisitions wrote TB submission
for exception
Developed risk models and accompanying
standard clause and process to be used with
clients
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Rigorous TBS Policy Work
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Joint PWGSC and TBS Work to find an
overarching policy approach
TBS funded a review by a professor emeritus on
risk and public policy
Close collaboration with TBS on PWGSC TB
submission for exception
TBS wrote Policy on Decision Making in
Limiting Contractor Liability in Crown
Procurement contracts
ITAC Communications at Political Levels on Criticality of
Addressing their #1 Issue for the past 25 years
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TBS Policy “Decision Making in Limiting Contractor
Liability in Crown Procurement Contracts”
• Key thrusts
• Protection of the Crown
• Contractor responsibility
• Exceptional transfer of risk (TB exception for IM/IT procurement)
• Risk based implementation (Four models see below)
• Four models for liability
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Model 1: Standard commercial or military products and services …
commonly available in the marketplace
Model 2: Complex developmental products, services and construction
contracts
Model 3: Contracts where there is limited scope for negotiating liability
provisions, … where no other viable alternative to serve a program
requirement exists
Model 4: Highly specialized services contracts in support of assuring the
health, safety and economic well being of Canadians
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PWGSC Developed Risk Assessments for
IM/IT Standard Groupings
• PWGSC IT Acquisitions Branch in concert with
clients developed standard model 1
commodity/service risk assessments
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Desktop products
Software
Telecom services
IT Professional services
Others
• Other Models – Used as Applicable, some
interpretation required
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Current Situation & ITAC Concerns
Environmental Changes
ITAC Concerns
• SSC enterprise procurement
approach for IT architecture
• SSC revisit of LOL on a file by file
basis
▫ Sometimes adopts former
PWGSC IT LOL framework
unchanged
▫ Other times SSC business and
SSC procurement perform new
risk assessment and set limits
and clauses for file
• ITAC understands the SSC
rationale is:
▫ SSC considers enterprise
approach as having unique
considerations
▫ SSC wants to ensure full
accountability of the successful
suppliers
• SSC positions on “Other times”
risk assessments causing major
concerns for ITAC members
• ITAC ‘s #1 problem as under
Corporate Governance rules,
officers cannot accept liability
requirements that:
 Create risks well beyond
commercial limits
 Cannot be demonstrated to be
a genuine pre-estimate of
actual damages
 Create liability for
events/requirements beyond
those they have agreed to
meet
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ITAC Request – Some Questions
Reevaluate PWGSC Acquisitions Branch IT LOL frameworks in
context of SSC procurement strategies & goals
• Considerations for SSC
• Still buying standard commercial products and services
• Software based solutions where bugs are inherent
• Best commercial pricing (even lower)
• Greater transparency when deviating from established
PWGSC IT contracting frameworks
• Is deviating required and warranted? Impacts?
• Are higher than normal “industry standard” commercial
LOL limits impacting competition, pricing? etc.
• Do higher than normal LOL limits afford SSC greater
accountability from suppliers? incent better behaviour?
• How does this lever fit within an overall contract
performance management framework?
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The ITAC ASK
ITAC requests that SSC:
• Set up a joint government
(SSC,TBS,PWGSC)/Industry Working
Group
• In the interim, continue with the PWGSC
SACC clause
• End goal
• to establish a regularized and
standardized LOL approach akin to
the current SACC Manual clause
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