14 October 2024
The OGP has published amended versions of Model Form 1.12- Collateral Warranty for Sub- Contractors (PW-CF1 to 5 inclusive), and Model Form 2.3- Collateral Warranty for Sub-Consultants. This follows the introduction of the Limitation of Liability into the Conditions of Contract for Main Consultants on 31 March 2023 and the Public Works Contract for Main Contractors on 17 July 2023.
The OGP has also made amendments to the general conditions in the Collateral Warranties to update them for industry best practices and modernisation of the terms.
The amended Collateral Warranties provisions better weigh the rights of the Contracting Authority and the Sub- Contractor or Sub- Consultant. The addition of a cap on liability forms part of the work on rebalancing risk in the Capital Works Management Framework.
Collateral Warranties
In summary:
MF 1.12: Specialist Sub- Contractors:
MF 1.12 caters for two distinct types of specialist and the liability cap differs depending on which type of specialist is providing the collateral warranty. There are works specialists (who are likely to be undertaking some element of design) and designers who may be engaged by a main contractor under a design and build contract or for temporary works design under an employer designed contract.
The liability cap options are directly linked to the selection of clause 1.2a or 1.2b. Clause 1.2a applies to a designer whereas clause 1.2b applies to a works specialist. If it is a works specialist liability of the sub-contractor to the Client is capped at the same amount as the Main Contractor to the Client, under the same conditions as in the Main Contract. In the case of a designer the liability cap is stated as an amount in Euro. Guidance on setting appropriate caps for designers may be found in guidance note GN 1.6.4.
The other key changes in the collateral warranty are as follows:
- The benefit of the Collateral Warranty can be assigned 3 times without the consent of the Specialist and thereafter by agreement. This is reduced from 6.
- The Step- In Clause is amended to state that no payments above the original Contract Sum are due and that there will be no “double payments” for work already completed, for monies which should have been paid to the Specialist by the Main Contractor.
- The Copyright Clause has been updated.
- The execution blocks are amended to allow for execution under hand or under seal.
MF 2.3: Sub- Consultants:
- Liability Cap of the sub-consultant to the Client has been introduced; the terms and exceptions are identical in their drafting as in the main contract.
- The Clause numbering convention has been amended.
- The Step- In Clause is amended to state that no payments above the original Contract Sum are due and that there will be no “double payments” for work already completed, for monies which should have been paid to the Sub-consultant by the Main Consultant. The Client has 28 days to exercise their Step-In rights.
- The Copyright Clause has been updated.
- The benefit of the Collateral Warranty can be assigned 3 times without the consent of the Specialist and thereafter by agreement. This is reduced from 6.
See the exact changes to Collateral Warranties (PDF)
Revised versions of Guidance Note 1.6.4 Liability Caps Application in the Standard Conditions of Engagement COE1 and COE2 and Guidance Note 2.3.5 Liability Caps Application in the Public Works Contract have been published, accounting for Sub-Liability Caps in the Collateral Warranties.
Arbitration Rules
Please note that the Rules for Arbitration (AR1) are also updated. The same rules apply for disputes under the Public Works Contract and the Standard Conditions of Engagement.
- Arbitration is now the default final dispute resolution methodology under both forms of Collateral Warranty, as laid out in those conditions.
- AR1 now has a Joinder and Consolidation sub- clause, which is intended to improve efficiency and timely outcomes to the dispute resolution process.
See the exact changes to Arbitration Rules (PDF)
What should Contracting Authorities do now?
Contracting Authorities should ensure that you issue and that Sub-Contractors or Sub-Consultants are responding to the most up to date versions of Collateral Warranties to avail of the benefits therein.
Contracting Authorities should also note that the Arbitration Rules which govern disputes in contract are those published on the CWMF website 10 days prior to [main] contract formation. Contracts with a Tender return deadline of on or after 25 October 2024, should be aware that the Arbitration Rules (v1.3) will govern any dispute procedure under the Public Works Contract or the Standard Conditions, where Arbitration has been commenced.
Contracting Authorities should ensure that they are issuing and seeking responses to the most up to date versions of the Collateral Warranties and all Capital Works Management Framework documents.
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