Liability risk assessment for a major IT services contract

Broadleaf recently completed a contract liability risk assessment for a major IT service delivery for a Commonwealth agency. The purpose of the risk assessment was to help the procurement team to arrive at an appropriate limit or cap on commercial liabilities to be included in the contract. In this context, an ‘appropriate limit’ is one that will provide adequate protection for the Commonwealth against foreseeable risks through the life of the contract. Setting an appropriate limit avoids the imposition of an unreasonably large cap (or even unlimited liability) on the supplier, an approach that leads to unnecessary increases in the contract price.

The process was based on a quantitative assessment of plausible scenarios that might lead to a loss for the Commonwealth, facilitated and analysed by Broadleaf. It drew on the procurement team’s knowledge of both the service requirement to be delivered under the contract and the capabilities and intended approach of the preferred supplier.

As well as delivering quantitative information to guide the procurement team’s negotiations, the analysis report also demonstrated that the team’s conclusions were soundly based. This gave confidence to everyone in the team that their negotiating position was realistic and defensible.