The Office of Government Procurement (OGP) has today published Circular 05/2022: Construction Procurement Reform – Revised Guidelines for Professional Indemnity Insurance Levels in Public Works Projects and amendments to the Capital Works Management Framework (CWMF) to address risks caused to the procurement and delivery of capital works projects by on-going capacity constraints in the professional insurance indemnity (PII) market. This first tranche of amendments relates primarily to the procurement of Consultants.

The amendments, summarised below, also incorporate substantial changes to the suitability assessment questionnaires for consultants (QC1 & QC2) and a range of associated documents.  These changes are aimed at reducing the extent of documentation to be provided by applicants in a procurement process, to better facilitate digital submission and to clarify the process for applicants who are reliant on the capacity of others to meet pre-qualification criteria.

Revised PII Requirements

– In Pillar 4 (Guidance Notes), a new Guidance Note GN 1.1.2 has been published that summarises the challenges presented by the current constraints in the PII market. It addresses the impact that the manner in which consultants and contractors are engaged can have on liability, summarises the options available to a contracting authority with respect to insuring design risk and provides guidance on the measures that can be taken where PII can no longer be obtained to meet contractual requirements.  Revised guidelines for contracting authorities to select the appropriate levels of PII to apply in competitions for consultants and contractors are also provided.

– In Pillar 2 (Conditions of Engagement), the requirements for the provision of PII on an “each and every claim” only basis for Consultants have been amended. If, because of the current market conditions, applicants in a competition are unable to provide PII on an “each and every claim” basis, cover on an “annual aggregate” basis will now be acceptable. This is on condition that the applicant undertakes a review of the availability of PII on an “each and every” basis with the Client upon the annual renewal of its policy. Where such a review concludes that PII is available on an “each and every” basis within the terms set out in the Form of Tender, the Consultant will be required to provide the PII on an “each and every” basis.

Amendments have been made to the forms of Tender and Schedule (FTS-9 and FTS-10), Model Forms 2.1 (PII Certificate) and 2.3 (Collateral Warranty) to implement this provision.

– In Pillar 3, the minimum standards for the PII criterion in the Suitability Assessment Questionnaires for Service Providers (i.e. QC1 & QC2) relating to the terms, including the level of excess of the required insurance policy have been amended. New requirements are introduced in relation to the entity providing insurances and the form of evidence required to demonstrate an Applicant either does or can meet the requirements for PII, Public Indemnity and Employers Liability Insurances.

– In addition, where, as a result of the current insurance market conditions, during the term of a contract or a collateral warranty, a Consultant cannot provide professional indemnity insurance on an each and every claim basis at the level stated in the contract/collateral warranty, a new model form letter has been introduced. The letter sets out the conditions that the Consultant must meet that will permit the Client to accept temporary alternative insurance arrangements, which are subject to review on an annual basis. MF 2.11 Letter re Temporary PII Arrangements (in Pillar 2, Conditions of Engagement) is provided for Consultants.

General Revisions

In Pillar 2, (Conditions of Engagement) and Pillar 3 (Suitability Assessment), general updating of the Instructions to Tenderer (“ITT”) documents, Model Forms and SAQ documents for Consultants including but limited to:

– In order to reduce the extent of documents that make up the pre-qualification submissions under both an open or restricted procedure the layout of QC1 and QC2 has been re-configured such that they now comprises two parts, which are now to be completed separately by the Contracting Authority and Applicants. Part 2, which forms the basis of an applicant’s response has been standardised to respond to either QC1 or QC2. Evidence, if required to be submitted by the Contracting Authority, must still accompany Part 2 if the submission is to be valid.

– The introduction, in Pillar 2, of new model forms of contractual commitments for entities relied upon for the purpose of pre-qualification. Where, in order to meet the requirements of a qualification criterion in the SAQ, a successful Tenderer relies upon the resources of another entity (including the provider of a specialist skill who is not the Tenderer itself), the entity relied upon is required to enter into a contractual commitment to make the resources available.

Where an entity has been relied upon for financial and economic criteria, the entity is required to provide a guarantee in the form of MF 2.9 Reliance Guarantee, and where an entity has been relied upon for any of the technical competency criteria, the entity will be required to provide a warranty in the form of either MF 2.10 Reliance Warranty or a Collateral Warranty in the form of MF 2.3 (having regard to the resources relied upon) for the benefit of the Client.  (Specialist Skill Providers are still required to provide a Collateral Warranty, where it is required in the Particulars.)

At SAQ stage, entities relied upon by an Applicant, are required to provide confirmation that they will provide the appropriate contractual commitment either by completing an eESPD (where an eEPSD is required in the competition); or providing an undertaking in the form of a new letter provided as Appendix D in Pillar 3.

– General updating of the documents where appropriate including strengthening of the provisions in the documents, including electronic submission and use of an eESPD to provide a self-declaration in relation to Regulation 57 Exclusion Grounds of SI 284/2016 for above-threshold competitions. Where a competition is sub-threshold, and a Contracting Authority elects to apply the requirements of Regulation 57 (Exclusion Grounds), they may either specify that Applicants must complete a new Appendix A (Applicant’s Self-Declaration in relation to Article 57), or an eESPD, to provide a self-declaration. Contracting Authorities are encouraged to use electronic submission (and an eESPD, where appropriate) for sub-threshold competitions.

– In Pillar 3, former Appendices A (Declaration Under Oath re Article 57) and A1 (Confirmation that the Oath is still valid) are updated for the requirements of Regulation 57 of SI 284/2016 and are now contained in Pillar 2 as Model Forms MF 2.7 and MF 2.8 respectively.

– The ITT’s no longer require that the Tender must be executed in the same way as the contract.

The Office of Government Procurement has today published a suite of interim amendments to the Capital Works Management Framework (CWMF) to address the risk of price inflation to construction materials in public works contracts.  The amendments, which are summarised below, are those interim amendments (‘the amendments’) that are described in Section 3 of the Guidance on public works tenders with respect to construction material price inflation (“the Guidance”), as published by the Office of Government Procurement on 24 November 2021 and should be read in conjunction with the Guidance.

The amendments comprise the introduction of the following measures:

a) Limited indexation to apply to the successful Tenderer’s tender (applies to PW-CF1 to PW-CF6 inclusive):
New measures are introduced to mitigate the risk of construction material inflation that occurs within a specified period prior to the award of the standard forms of public works contracts PW-CF1 to PW-CF6 (inclusive).  Formulae have been introduced to the Instructions to Tenderers for these contracts to determine the extent of an increase (if any) that will apply where the price of construction materials, as measured by relative movements in a specified index (See Note 1), has increased above a specified threshold.

There are two distinct approaches where the formulae determine the adjustment:

– In the case of PW-CF1 to PW-CF5 (inclusive), the formula determines an ‘Applicable Factor (Contractor)’ that will adjust each interim payment to the main contractor, and where there are named Specialists (Novated or Reserved) in the contract, a separate ‘Applicable Factor (Specialist)’ will apply to their payments.

– Where PW-CF6 is concerned, the formula determines the adjustment to apply to the successful Tenderer’s tendered price to arrive at the final tendered price for the contract.

In both approaches described above, an adjustment will not result in a reduction in the successful Tenderer’s tender.

In the first instance, the Applicable Factor or the adjustment to the tendered Price (as appropriate), will be notified by the contracting authority in the Letter to the Successful Tenderer. Where the specified index is up-dated within the period prior to the issue of the Letter of Acceptance or Tender Accepted (as appropriate), the relevant formula in the Instructions will be re-applied, and a new notification issued to the successful Tenderer of the revised figures to apply for the contract.

The relevant Tender and Schedules for these public works contracts have been amended to allow for the inclusion of the values for the Applicable Factor (PW-CF1 to PW-CF5), and the final tendered Price (PW-CF6) in the relevant contract.

b) Amendment to PV1 and PV2 (applies to PW-CF1 to PW-CF5 inclusive only)
In PW-CF1 to PW-CF5, the price variation clauses PV1 and PV2 (“PV1 and PV2”), have been amended with respect to the fixed price period as follows:

 i. Reduction in the duration of the fixed price period

The duration of the fixed price period for both PV1 and PV2 is reduced to 24 months, which now commences on the Tender Inflation Indexation Date (See Note 2).

ii. Adjustment to the Contract Sum for materials price inflation or deflation during the fixed price period

Under amendments introduced to both PV1 and PV2, within the amended fixed price period of 24 months, and subject to meeting the particular requirements of PV1 and PV2 (as applicable), as summarised below, the contract sum shall be

-increased where the price of a material has increased by more than 15% of the price of the material on the Tender Inflation Indexation Date; and

-decreased where the price of a material has decreased by more than 15% of the price of the material on the Tender Inflation Indexation Date.

Guidance
With respect to those measures outlined in a) above, worked examples on the application of the formulae have been provided in a new appendix to the relevant Instructions to Tenderers and guidance on how to access the specified index has been published here.

With respect to those measures outlined in b) above, Guidance Note 1.5.2 Price Variation is currently being updated to assist contracting authorities in implementing those new measures.

Implementation
A summary of the amendments made to documents published under the Capital Works Management Framework may be found here.

The amended documents take effect from the date of publication and contracting authorities should therefore make appropriate arrangements that the amended documents are used.

Subject always to the particular circumstances of a tender competition, contracting authorities currently conducting a live tender process should note that:

-where the standard form of Instructions to Tenderers for PW-CF 1 to PW-CF 5 are in use, that the amended forms of contracts will apply to those tenders that are due to be received from the 18^th January 2022 onwards (See Note 3). Therefore, it is recommended that contracting authorities make appropriate arrangements to provide the relevant amended documents for such competitions.

-where the competition is for PW-CF6, that while the standard form of contract for PW-CF6 is not affected by the amendments, the Instructions to Tenderer and the Tender and Schedule are amended. Therefore it is recommended that those contracting authorities electing to include the amendments relevant to PW-CF6, make appropriate arrangements to provide the relevant amended documents for such competitions.

Contracting Authorities are advised to consider the potential impact that the amendments may have on the particular circumstances of a project and seek expert advice if necessary.

Notes:

1. The specified index is the index for the “All Materials” category in Table 3 ‘Detailed Wholesale Price Indices (ex VAT) for Building and Construction Materials’ in the Statistical Release for the Wholesale Price Index published monthly by the Central Statistics Office.
2. The Tender Inflation Indexation Date is the last day of the month in which the latest available index is published at the Contract Date.
3. Being 10 days after the publication of the amended form of contracts on 7^th January 2022 and disregarding the day of publication.