1. Limitation of Liability in IM/IT Contracting Background, Current Situation & Industry Concerns
Presentation to SSC Procurement Benchmarking Committee
Sharon Chamberlain
July 4, 2013

2. 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

3. Genesis of PWGSC IM/IT Framework
September 1, 2003
Timeline
SSC RFP’s
25 years prior
PWGSC Treatment of Liabilities #1 ITAC concern
Harmony
TBS Policy & PWGSC Special Authority = Workable Foundation for PWGSC Acquisitions Branch Framework, with Refinements
Again #1 ITAC Concern as
SSC Undertakes
Enterprise Procurement
PWGSC IT Branch
Quest & Due Diligence
On ITAC Concern

4. 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
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
Rigorous TBS Policy Work
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

5. 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
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

6. 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
Desktop products
Software
Telecom services
IT Professional services
Others
Other Models – Used as Applicable, some interpretation required

7. 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

8. 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?

9. 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