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					                          Insurance for Construction Work
                    This information has been issued by ACT Contracts and Purchasing to advise
                 ACT Government agencies of insurance arrangements for Territory construction work.

                                   Purchasing Circular 1999/5
                                                 The ACT Government Solicitor‟s Office has
INTRODUCTION
                                                 reviewed the policy. The Superannuation and
This Circular provides information on the        Insurance Provision Unit of the Department of
Territory‟s insurance arrangements for           Treasury & Infrastructure also supports the use
construction projects.                           of the policy.

The Circular has been prepared for ACT                      All stakeholders should be aware of the policy,
Government Agencies involved in construction                including the nominated exclusions and obtain
projects, and Agents including Project                      extra insurance cover if appropriate.
Directors, Superintendents, Design & Construct
Contractors, Project Managers, Consultants and              Agencies are not obliged to use the policy
Sub-consultants.                                            however it is highly recommended as a cost
                                                            effective risk management tool.
An implementation guideline for the insurance
arrangements is at Attachment B.                            The benefits of this form of insurance policy
                                                            are:
PRINCIPAL ARRANGED INSURANCE
                                                             Cover commences as soon as the letter of
POLICY                                                           acceptance is issued to the contractor;
An insurance policy for construction projects                the terms and conditions of insurances over
has been arranged with GIO Insurance. This is                    capital works are uniform throughout the
the third such policy and it is effective from                   Capital Works Program, eliminating the risk
30 April 1999. The Territory‟s insurance broker                  of exclusions in the case of individual
Marsh Pty Ltd (formerly Sedgwick Limited)                        projects; and
arranged the policy.                                         the continuity of insurance cover during the
                                                                 life of each construction project is assured.
The policy has specifically been established to
cover construction projects in the Territory‟s              ADMINISTRATIVE ARRANGEMENTS
Capital Works Program. The policy covers                    Marsh is notified of projects valued at over
building works, road works and other civil                  $50,000 by being sent a copy of the letter of
works for damage to the works and third party               acceptance and contractors subsequently
liability.                                                  receive an invoice from Marsh based on a
                                                            premium of 0.303% of the project value.
Other construction projects outside the Capital             Contractors deal directly with Marsh over
Works Program may also be included. For these               claims against the policy.
projects, insurance requirements should be
discussed with ACT Contracts and Purchasing                 To reduce administration costs, for projects
prior to tenders being called.                              valued at less than $50,000, a bulk premium is
                                                            paid by ACT Contracts and Purchasing. This
                                                            generally applies only to construction projects
                                                            in the Capital Works Program.

Authorised by Pat Hanrahan
ACT Contracts and Purchasing
November 1999
Principal Controlled Insurance for Construction Work



For projects spanning 1 July 2000, the premium
will be subject to adjustment when the Goods              USEFUL CONTACTS
and Services Tax is implemented.
                                                       Assistant Manager
An adjustment to the premium is required if the        ACT Contracts & Purchasing
final contract value exceeds the initial value by      Department of Urban Services
more than 15%. As the cost of insurance is a           Level 4, Macarthur House
legitimate cost to the project, ACT Contracts          LYNEHAM ACT 2601
and Purchasing may pass on the cost of any
extra premium to the client.                           Telephone: 02 6207 5550
                                                       Facsimile: 02 6207 5543
A copy of the policy is available from ACT
Contracts and Purchasing on telephone
(02) 6207 5542. A brief summary of the policy          Buyers & Sellers Information
cover is provided at Attachment A.                     Service
                                                       Telephone: 02 6207 7377
                                                       Facsimile: 02 6207 7366
Agencies must liaise with ACT Contracts
                                                       Web site:
and Purchasing about any projects to be
                                                       http://www.basis.act.gov.au
covered by the GIO policy.
AGENCIES NOT USING THIS POLICY
ACT Agencies that decide not to use this               Construction Industry Policy
                                                       Department of Urban Services
insurance policy for construction projects must
                                                       Level 2, Macarthur House
ensure that appropriate contract clauses and
                                                       LYNEHAM ACT 2601
contract management processes relating to
insurance are in place. Contract managers will
                                                       Telephone: 02 6207 5546
need to apply close scrutiny to the contractor‟s
                                                       Facsimile: 02 6207 6245
proposed insurance arrangements, and to
monitor the continuance of those arrangements
for the life of each project. It is appropriate for
a contract manager to seek expert advice about         Marsh Pty Ltd
                                                       Level 12
such policies. Advice is available from the
                                                       15 London Circuit
Superannuation and Insurance Provision Unit of
                                                       GPO Box 306
the Department of Treasury & Infrastructure.
                                                       CANBERRA ACT 2601
IMPLEMENTATION GUIDELINES
                                                       Telephone: 02 6249 1422
Guidelines on implementation of the Principal
                                                       Facsimile: 02 6249 1305
Controlled Insurance arrangements are provided
at Attachment B. Appropriate Tender and
Contract Clauses are provided at Attachment C.




ACT Contracts and Purchasing Policy
November 1999
Principal Controlled Insurance for Construction Work

                                                                                           ATTACHMENT A

                                   BRIEF SUMMARY OF POLICY COVER

Insurer                        GIO Insurance Ltd

Policy Number                  CI 0034730

Period of                      30 April 1999 to 30 June 2002 at 4.00pm Local Standard Time (both days
Insurance                      inclusive).

Cover                          Insurance of the Works and Third Party Liability.

Insured                        The Australian Capital Territory (as represented by ACT Contracts and
                               Purchasing) and its agencies, authorities and instrumentalities, Territory
                               Owned Corporations (including but not restricted to Totalcare Industries
                               Limited but excluding ACTEW Corporation Limited), Project Managers,
                               Project Directors, Works Managers, Contractors, Sub-Contractors, and their
                               respective Employees, Hirers and Suppliers of Construction Plant and, in
                               respect of Section C only, Consultants, all of their respective rights, interests
                               and liabilities.

Insured                        All contracts let in the Period of Insurance by, through or notified by:
Operations                      ACT Contracts and Purchasing;
                                Totalcare Industries Limited;
                                ACT Housing;
                                ACT agencies, authorities and instrumentalities; and
                                Territory Owned Corporations.

                               The insurance under this Policy also applies to losses occurring:
                                after the Policy expiry date for contracts let before, and not commenced
                                  or completed until after, the expiry date; and
                                during any testing/commissioning and/or maintenance/defects liability
                                  period.

Territorial Limits             Anywhere in Australia.




ACT Contracts and Purchasing
November 1999
Principal Controlled Insurance for Construction Work

                                                                                    ATTACHMENT A

                                  BRIEF SUMMARY OF POLICY COVER

Limit(s) of                 Material Damage and/or Loss
Liability/Sum(s)            For any one occurrence, any one project the following applies.
Insured
                            1. Insured Property - unless specifically agreed $15m, except:
                               ‘Road Works Contracts’ - $5m; or
                               ‘All other Civil Works Contracts’, including associated works to road
                               works - $2m.
                            2. All buildings used for construction purposes - $1m.
                            3. Existing Property - $1m.
                            4. Professional Fees - $2m.
                            5. Debris Removal - $3m.
                            6. Expediting Expenses - $500,000.
                            7. Shoring and Propping - $500,000.
                            8. Government Charges - $250,000.

                            Third Party Liability

                            $10m any one occurrence, any one project, unlimited in any one policy
                            period.

Deductible(s)               Material Damage and/or Loss, and Third Party Liability
(Excess)                    For each and every occurrence the following applies.

                            1. Road Work Contracts – where the Awarded Contract Value is in excess
                               of $2m - Policy Amount is $10,000.
                            2. All Other Contracts:
                               Awarded Contract Value               Policy Amount
                                Up to $50,000                      - $1,000
                                Above $50,000 and up to $500,000 - $2,000
                                Above $500,000 and up to $3m       - $3,000
                                Above $3m and up to $5m            - $5,000
                                Above $5m                          - $10,000




ACT Contracts and Purchasing Policy
November 1999
Principal Controlled Insurance for Construction Work

                                                                                  ATTACHMENT B

                   GUIDELINE FOR PRINCIPAL CONTROLLED INSURANCE
INTRODUCTION
The contract for the provision of insurance broker services was awarded to Marsh Pty Ltd (formerly
Sedgwick Ltd) in November 1998. GIO Insurance Limited - through Marsh provides a policy of
insurance for construction work in the Territory Capital Works Program including road works and
other civil works. The policy covers the works and third party liability. ACT Contracts and
Purchasing, Department of Urban Services administers this “principal controlled insurance”
arrangement.

ACT Government Agencies and Agents involved in construction projects should be aware of this
insurance policy, particularly its exemptions and special conditions.

The aim of this Guideline is to ensure that the Territory‟s insurance broker is notified of contracts as
they are let.


AGENCIES NOT USING THIS POLICY
ACT Agencies deciding not to use this insurance policy for Agency construction projects, must
scrutinise the contractor‟s proposed insurance policies, and closely monitor the continuity of
insurance arrangements for the life of each project.


SCOPE
The Policy covers insurance of the works in progress and public liability. It may also be used for
construction projects outside the Capital Works Program. The period of the insurance cover is from
30 April 1999 to 30 June 2002 at 4.00pm Local Standard Time (both days inclusive).

All contracts let in the period of insurance by, through or notified by:

   ACT Contracts and Purchasing;
   Totalcare Industries Limited, including Engineering Maintenance Division, when the Principal
    is the Territory;
   ACT Housing;
   ACT agencies, authorities and instrumentalities; and
   Territory Owned Corporations

are covered by the insurance policy. Projects containing a significant demolition component valued
at more than $100,000 require special notification to Marsh Pty Ltd (see also “Exemptions” below).

The insured parties include the Territory and:

   all subsidiary and related corporations of Totalcare Industries Ltd;
   all Joint Ventures on behalf of the Territory where the Territory accepts the responsibility for
    insurance;
   all Contractors and sub-contractors engaged on Territory projects;
   suppliers whilst on site; and

ACT Contracts and Purchasing
November 1999
Principal Controlled Insurance for Construction Work

    any other party or person where an obligation under contract or agreement exists for works
     associated with construction of the project.
EXEMPTIONS
The Policy is subject to certain exemptions, conditions and excesses. In particular the policy does
not provide cover for the Contractor‟s or the Contractors‟ employees‟ tools, machinery plant
equipment or mechanically propelled vehicles except as may be included in the Works.

The policy also excludes any contract:
 that includes asbestos removal;
 that involves demolition where blasting or explosives are used unless pre-advised and terms
   are agreed; and
 where the demolition component exceeds $100,000 unless pre-advised and terms are agreed.

     Note:
     Where the Contractor is responsible for arranging insurance for projects that are excluded
     from the Marsh arranged insurance policy, the tender and contract clause at Attachment C
     should not be included in the contract conditions for those projects. Agencies should seek
     advice from ACT Contracts and Purchasing or the ACT Government Solicitor on
     appropriate clauses.

     Also, the Principal should not give ‘possession of the site’ to the Contractor until proof is
     supplied of insurance cover for the excluded project or excluded project activities.
COPIES OF THE POLICY
Copies of the policy are held by ACT Contracts and Purchasing and are available for distribution to
Contractors, Consultants, Project Managers, Works Managers and Agencies.
INSURABLE CONTRACT WORK

Insurable contract work should be arranged in the following manner.

Contracts Valued Over $50,000

1.       Project Insurance Cover

Prior to the issue of a Request for Tender the client Agency or the client Agency‟s consultant or
project director, eg Totalcare, should confirm in writing to ACT Contracts and Purchasing that:
 all construction activities for the particular project are covered under the Principal Controlled
    Insurance Policy; and
 identify any activities excluded under the policy or that no excluded activities are proposed.

2.       Notification to Marsh Pty Ltd and other interested parties.

Following the evaluation of tenders (over $50,000 in value), copies of the Letter of Acceptance
(LOA) to the successful Tenderer (with notation „CC: Marsh Pty Ltd) should be sent by the
responsible Agency to:
 the Superintendent and/or the Agency officer responsible for supervising the construction work;
 Marsh Pty Ltd - the LOA should indicate the lump sum value of the contract, or for contracts
    with a Schedule of Rates, indicate the extended contract value; and

ACT Contracts and Purchasing Policy
November 1999
Principal Controlled Insurance for Construction Work

    when an Agency other than ACT Contracts and Purchasing raises the LOA, ACT Contracts and
     Purchasing. ACT Contracts and Purchasing is responsible for the administration of the insurance
     arrangement with Marsh.

Where a Project Manager is engaged to manage a project, copies of the Project Manager‟s letters of
engagement should be sent to Marsh and should include the following information:

    for projects under $3 million in value, the estimated total project value. The Project Manager
     receives the Marsh invoice and is responsible for payment of the insurance premium; and
    for projects $3 million and over, the estimated value of the Project Manager‟s reimbursable
     works. Contracts let for each trade package under this arrangement require individual
     notification to Marsh by sending a copy of the LOA for each trade package, as each trade
     contractor is responsible for payment of insurance premiums.

Copies of all LOAs sent to Marsh are also retained by ACT Contracts and Purchasing, including the
fax confirmation advice attached to the copy of the LOA.

It should be noted that difficulties in settling insurance claims might be experienced if any intended
project is not notified to Marsh.

3.       Insurance Premium

For contracts of value greater than $50,000, contractors are required to pay the insurance premium,
which is 0.303% of the contract sum, within 30 days of receipt of the Marsh invoice. Proof of
payment (provision of the cheque number and date will suffice) should be presented to the
Superintendent before the first or, allowing for the Marsh premium invoice payment period,
subsequent contract payment is made.

4.       Excluded Activities

On projects involving activities excluded from Policy cover, the Contractor will be required to take
out additional insurance cover for the excluded activities. The standard contract clauses should be
modified to reflect this and the Contractor must provide evidence of this additional insurance cover
prior to being given „possession of the site‟.

5.       Claims

In addition to Marsh being notified of any claims, the Project Director or client Agency should be
notified by the Contractor and/or Superintendent of any occurrence that may give rise to a claim
under the Policy. The Project Director or client Agency should then advise ACT Contracts and
Purchasing.

The Superannuation & Insurance Provision Unit, Department of Treasury and Infrastructure will be
notified by ACT Contracts and Purchasing of any claims exceeding $5m. The Unit will
subsequently make a disclosure to the insurers of the Treasury and Infrastructure fund.

6.       Review of Insurance Cover

Project Directors and client Agencies should continually review the level of insurance cover
required for each project, based on project size and nature, and advise ACT Contracts and
Purchasing.
ACT Contracts and Purchasing Policy
November 1999
Principal Controlled Insurance for Construction Work




7.       Missing Insurable Projects

Each quarter a list will be obtained from Marsh by ACT Contracts and Purchasing of all insured
projects for that quarter. The list is then sent to ACT Agencies (including Totalcare and
ACT Housing) with a request for a list of other non-listed projects to be returned to ACT Contracts
and Purchasing. A list of any missing projects is then sent to Marsh.


Contracts Valued Less Than $50,000

1.       Insurance Premium

For contracts valued at less than $50,000, Contractors are not invoiced for the cost of the insurance
premium as this is included in the bulk premium advance payment made by ACT Contracts and
Purchasing to Marsh.

The advanced payment is based on the total value of projects valued less than $50,000 in the
previous year (for 1999 the premium is based on $6 million) - note that very low value orders for
goods and services that may not be directly related to physical construction work can be included in
the policy arrangements.

2.       List of Agency Contracts and Purchase Orders

Once a quarter Agencies should provide a list (refer to Attachment D) of minor contracts and
purchase orders that are less than $50,000 to ACT Contracts and Purchasing. This list will be
forwarded to Marsh for inclusion in the bulk premium arrangement. Short form contracts estimated
to be under $50,000 but with an actual contract value at completion above $50,000 are still covered
by the bulk premium arrangement.

Adjustment to the Insurance Premium.

If the value of the Final Certificate varies from the original contract sum by more than plus or minus
15%, the insurance premium for the project will be adjusted by ACT Contracts and Purchasing in
consultation with Marsh Pty Ltd. It may be necessary for the client to fund any extra premium
amount.

OTHER TERRITORY ARRANGED ISURANCE
The third party liability level has been established at $10 million as the Territory has excess liability, or
“catastrophe”, insurance cover, arranged by the Department of Treasury and Infrastructure, that
protects the Territory for claims in excess of this amount. Contractors are not covered by the
Territory‟s excess liability insurance policy.




ACT Contracts and Purchasing Policy
November 1999
Principal Controlled Insurance for Construction Work



INSURANCE BROKER REPORTS
Quarterly reports are provided to ACT Contracts and Purchasing by Marsh Pty Ltd that include the
following information for the quarter:

   listed insurable projects over $50,000;
   claims registered;
   claims settled; and
   the status of claims outstanding.




ACT Contracts and Purchasing Policy
November 1999
Principal Controlled Insurance for Construction Work

                                                                                                   ATTACHMENT C

                                   TENDER AND CONTRACT CLAUSES

INSURANCE OF THE WORKS AND PUBLIC LIABILITY INSURANCE
A Policy has been arranged for Insurance of the Works and Public Liability Insurance through Marsh Pty Ltd (formerly
Sedgwick Limited). The Policy Number is CI0034730 and the insurer is GIO Insurance Limited. The Contractor shall
use this Policy of insurance, and pay all premiums required. For work completed before 1 July 2000 the premium for
construction projects without a significant demolition component is 0.303% of the contract lump sum. The insurance
cover premium for work performed after 1 July 2000 will need GST adjustment. See Section xx.

Together with the first claim for payment the Contractor must provide evidence which is acceptable to the
Superintendent of payment of the insurance of the works and public liability policy premium. The value of the premium
may be included in the first claim for payment.

The Principal shall not be liable to pay the amount of the first progress certificate unless and until the Contractor has
provided proof of payment of the premium.

The Policy is in the names of the Principal, all Contractors, Sub-Contractors, Construction Managers, Project Managers,
etc.

A copy of the Policy may be obtained from ACT Contracts and Purchasing at:

         Level 4, Macarthur House
         12 Wattle Street
         LYNEHAM ACT 2602.

The Policy is subject to certain exemptions, conditions and excesses. In particular the policy does not provide cover for
the Contractor‟s or the Contractors employees‟ tools, machinery plant equipment or mechanically propelled vehicles
except as may be included in the Works.

The existence of the Policy shall not limit the liability of the Contractor to deliver up the Works completed in all
respects in accordance with the Contract, the Liability of the Contractor to third parties nor in any way prevent the
Contractor from effecting any additional insurances if so desired at the Contractor's cost.

Notice of Potential Claims

The Contractor shall, as soon as practicable, inform Marsh Pty Ltd in writing at either address given below of any
occurrence that may give rise to a claim under the Policy:
       Level 12, 15 London Circuit
       CANBERRA ACT 2601

       GPO Box 306
       CANBERRA ACT 2601

       Telephone:      (02) 6249 1422
       Facsimile:      (02) 6249 1305

The Contractor shall ensure that Sub-Contractors in respect of their operations similarly inform Marsh Pty Ltd.

Please note the excesses as detailed in the Policy are to the Contractor's account.




ACT Contracts and Purchasing
November 1999
Principal Controlled Insurance for Construction Work

                                                                           ATTACHMENT D

         AGENCY REPORT OF INSURABLE CONSTRUCTION WORK/SERVICES


Contractor’s Address           Order No.     Tender    Project   Project     Start   Expected
Name                                         No.       Details   Value       Date    Finish




ACT Contracts and Purchasing
November 1999
Principal Controlled Insurance for Construction Work



                             CHECKLIST FOR PRINCIPAL CONTROLLED INSURANCE
                                     AT CONTRACT COMMENCEMENT


                            CONTRACTS VALUED AT OVER $50,000                    COMMENTS

               The level of insurance cover reviewed at commencement.

               Confirmed that construction activities are covered.

               Excluded activities identified.

               Copy of LOA sent to Marsh Pty Ltd & Superintendent. or

                Copy of Project Manager‟s Letter of Engagement sent to
                Marsh for projects valued at under $3m. or

                For Project Management contracts valued at over $3m copy
                of LOA for each trade package sent to Marsh.

               Copies of all LOAs forward to ACT Contracts & Purchasing.

               Proof received of Contractor‟s payment of insurance
                premium for activities covered under the Policy.

               Proof received of Contractor‟s payment of insurance
                premium for activities identified as excluded under the Policy

               Missing insurable projects identified and notified to Marsh
                quarterly.


                       CONTRACTS VALUED AT LESS THAN $50,000                    COMMENTS

               List of minor contracts/purchase orders sent to Marsh
                quarterly by ACT Contracts and Purchasing.


                                     CHECKLIST DURING CONSTRUCTION


                                         GENERAL                                COMMENTS

               Insurance incidents notified to Marsh.

               The Superannuation & Insurance Provision Unit of the
                Department of Treasury and Infrastructure advised of any
                claims in excess of $5m.

               The Final Certificate value checked against the original
                amount notified to Marsh. Insurance premium adjusted if
                value changes by more than 15%.

ACT Contracts and Purchasing
November 1999

				
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