Successful Tender

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Question- Can a successful tenderer for a publicly procured project negotiate the terms of the contract post acceptance, but prior to contract award, in order to amend an obligation to indemnify the public body against all losses due to any breach of the appointment or failure to fulfil the obligations due under it, to an obligation to indemnify to the extent of any monies recoverable under the consultant’s Professional Indemnity (PI) insurance.

The public authority is arguing that (a) this would potentially be unfair to other tenderers and/or third parties and (b) such a limitation would be contrary to public policy in a public works consultancy agreement.  The consultant believed that by providing evidence of their insurance at tender stage, that was sufficient to limit their liability to the amount of the level of insurance (LOI).

Answer-

  1. A public procurement body may fall foul of the public procurement regulatory regime if the contract which is ultimately awarded does not accord with the particulars of the contract which was described in the contract notice published in OJEU. Not every change will be significant. The test which is usually applied is whether the proposed changes are so significant that the altered contract, if re-advertised, would attract responses from tenderers other than those initially admitted or would have allowed for the acceptance of a tender other than the one initially accepted. This may be the case where one or more important features of the contract have been changed (e.g. as to value, scope, timing or financing arrangements).  I had not seen the contract notice, so I was unable to advise definitively but I provided some initial views on this particular case.
  2. A public procurement body may fall foul of the public procurement regulatory regime if the public procurement authority awarded the contract on award criteria which are different from those which it has stated will apply to tenders.  I discussed that in the context of this case.
  3. The public body was correct in stating that the consultant’s confirmation of the level of its insurance cover (and in particular the limit of indemnity on its PI cover) does not amount to offering to provide the services subject to the consultant’s liability being limited to the amount of its PI cover. The tender criteria sought details of the PI insurance in respect of the criteria relating to the commercial viability/strengths of the interested tenderers.  Unless a consultant expressly states that its tender is subject to the insurance recoverable being the limit of any liability which the consultant may have for breach of the contract , then the mere provision of the insurance details in the tender is unlikely to have that effect.
  4. The proposed limitation of liability provisions are not contrary to public policy.  It is well established that parties are permitted to agree to limit their liability.  For example, clause 82.1 of the NEC3 Professional Services Contract provides for a cap on the consultant’s liability. The consultant’s total liability to the employer for all matters arising under or in connection with the contract, other than excluded matters, is limited to the amount stated in the Contract Data & applies in contract, tort or delict and otherwise to the extent allowed under the law of contract.  This contract is part of the NEC3 suite of contracts which have received OGC approval and which are approved as satisfying the “Achieving Excellence in Construction” principles.