FUNCTIONAL POLICY MANDATORY PROCUREMENT POLICY REQUIREMENTS FOR THE APPROVED CONTRACTOR INSURANCE PROGRAM INITIATIVE. Contracting Policy and Practice

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1 FUNCTIONAL POLICY MANDATORY PROCUREMENT POLICY REQUIREMENTS FOR THE APPROVED CONTRACTOR INSURANCE PROGRAM INITIATIVE Business Process Owner: Business Process Authority: Ms Liesl O Meara, FAS Commercial CASG Ms Jane Wood, Executive Director Procurement & Contracting Policy and Practice Approval Date: 18 March 2016 Functional Policy is issued under the Capability Acquisition and Sustainment Group - Functional Manual (ADMIN) - Quality Management System Manual [Interim] Revised Document: This Functional Policy supersedes Defence Materiel Instruction - DMI (PROC) V1.0 Mandatory Procurement Policy Requirements for the Approved Contractor Insurance Program Initiative Objective Id AB Version: 2.0 Page 1 of 16

2 UPDATES Part Amended Amendment Reason Authorisation Reference Objective Id Entire document Updated to reflect streamlined ACIP protocols achieved since inception of the program. Objective Id AB Version: 2.0 Page 2 of 16

3 MANDATORY PROCUREMENT POLICY REQUIREMENTS FOR THE APPROVED CONTRACTOR INSURANCE PROGRAM INITIATIVE References: A. Approved Contractor Insurance Program Initiative B. Commonwealth Procurement Rules (CPRs) C. ASDEFCON Insurance Handbook and Case Studies D. Contract Risk Training Module 1 E. Defence Procurement Policy Manual (DPPM) F. Functional Policy (Procurement) (Formerly the DMI(PROC)s) G. Accountable Authority Instructions (AAIs) H. Legal Practice Guide No. 3 I. Liability Risk Management Process (LRMP) INTRODUCTION 1. The Approved Contractor Insurance Program (ACIP) is a procurement reform initiative that involves a periodic centralised review by the ACIP Management Team of participating Defence companies global / group and local insurance programs. The purpose of the review is to pre-qualify a participating company s insurance program (ie grant ACIP status), provided the ACIP Management Team is satisfied with the insurances maintained by the company. 2. The ACIP initiative is managed within the Commercial Division CASG by the ACIP Management Team, which is led by Director ASDEFCON and Contracting Initiatives (DACI). Requests for assistance and advice in relation to the ACIP initiative are to be forwarded to: ACIP.ManagementTeam@defence.gov.au. 3. The key objectives of the ACIP initiative are to: BACKGROUND - OVERVIEW OF THE ACIP INITIATIVE a. improve the competencies and understanding among CASG procurement staff of contract insurance related-issues; and b. reduce inefficiencies, duplication and costs for both Defence and industry associated with evaluating, negotiating and monitoring ongoing compliance with contract insurance requirements for Complex Procurements. 4. In brief, the ACIP initiative operates in the following main ways: a. the ACIP Management Team undertakes a high level periodic review and prequalification of the global / group and local insurance program of participating Defence companies. Following this review, the ACIP Management Team will grant a participating company ACIP status (subject to conditions agreed with the company) if satisfied with the company s insurance program. These conditions will include providing the ACIP Management Team with timely notice of material adverse changes to the company s ACIP; and b. in the context of a specific procurement, the ACIP Management Team advises on compliance issues relevant to insurance requirements specified in a contract where those requirements relate to policies that fall within a tenderer s / contractor s ACIP. In this way, the ACIP initiative alleviates personnel involved in the procurement from responsibility for compliance checking contract insurance requirements for the purposes of tender evaluation, contract negotiation and ongoing contract management. 5. A contractor whose insurance program has been granted ACIP status is deemed compliant with, and is relieved of certain of its obligations under, the contract s insurance provisions, to the extent those requirements are covered by the contractor s ACIP. However, this deemed compliance and relief from certain insurance obligations only applies to the extent and for such a time as the Objective Id AB Version: 2.0 Page 3 of 16

4 contractor holds the ACIP status. For further information refer below and to the ASDEFCON Insurance Handbook. 6. The primary envisaged benefits of the ACIP initiative include: a. streamlining and reducing the administrative burden and costs associated with compliance checking and management of certain contract insurance issues, specifically by: (i) (ii) reducing tender data and contract data deliverable requirements; and reducing tender evaluation, contract negotiation and contract management effort; b. improving risk management within CASG, particularly in respect of insurable risks that arise in connection with the performance of Defence contracts; c. subject to stringent confidentiality safeguards, improving transparency and understanding of participating Defence companies global / group and local insurance policies; and d. developing a corporate level relationship between the ACIP Management Team and participating Defence companies global risk and insurance managers. 7. The ACIP is currently open to the top six to seven major Defence companies. Participation by companies in the program is entirely voluntary. On application, companies will have their global / group and local insurance policies reviewed and approved (subject to conditions) by the ACIP Management Team. A register of companies with ACIP status (and therefore eligible to participate in the ACIP initiative) is located at r. 8. The conditions that attach to a company s ACIP status include the requirement to provide the ACIP Management Team: a. with written details of any material adverse change to its ACIP; and b. within 30 days of renewing any policy relevant to its ACIP, with a certificate of currency evidencing the relevant insurances have been renewed and written confirmation that the cover under the renewed policies has not materially adversely changed from the cover determined available as at the date of the company s last ACIP review. 9. Importantly, the ACIP Initiative does not: a. alter responsibility for undertaking a Liability Risk Assessment (LRA) in order to identify and assess contract specific risks and determine appropriate contract insurance coverage and associated requirements (including by identifying relevant types of policies, appropriate limits of indemnity and other specific coverage requirements, eg appropriate geographical and / or jurisdictional limits). The assessment of these risks must be wholly uninfluenced by the details of any ACIP. In other words, the ACIP initiative does not in any way alter the fundamental premise that it is the LRA that drives and informs the development of appropriate contract insurance requirements (subject to the overall value for money test); b. change or eliminate the need to properly manage risks, including by developing appropriate risk management or mitigation strategies (eg appropriate contract insurance requirements for insurable risks); c. remove the need to specify insurance requirements in the draft contract included in any request documentation; Objective Id AB Version: 2.0 Page 4 of 16

5 d. alter responsibility for evaluating, negotiating and ensuring tenderer compliance with contract insurance requirements not covered by a tenderer s ACIP; e. alter a company s responsibility to properly manage risks and its insurance program, and to discuss appropriate contractual insurance requirements; f. seek to inform or advise companies about their insurance requirements or programs; g. benchmark (or compare) an individual company s insurance program against the insurance program maintained by any other company; or h. concern Defence insurable risks which are managed by the Defence Insurance Office through Comcover or Comcare and not impacted in any way by the ACIP initiative. 10. As mentioned in clause 9.a, conducting a LRA remains in all cases a key step in the procurement process for determining insurance requirements for contracts. CASG Personnel are directed to the CPRs (paragraphs 8.1 to 8.3), Defence AAIs (Chapter 1), DPPM (Chapters 3.2 and 3.15), Functional Policy (Procurement) Procurement Policy And Process Requirements From Planning To Contract Signature For Complex Procurements Involving Materiel Acquisition And / Or Support Requirements (paragraph 65), Liability Risk Management Process (LRMP), DMM (PROJ) Project Risk Management Manual (PRMM), DMM (LOG) Risk Management in Sustainment and Contract Risk Module 1 (Limitation of Liability, Indemnities, Warranties and Insurance) for policy and guidance on risk management and the LRA. Where a limitation of contractor liability is not being considered, a LRA focused on insurable risks is still required in order to determine appropriate contract insurance requirements. ACIP INITIATIVE AND THE PROCUREMENT LIFECYCLE 11. To further assist CASG Personnel understand the ACIP initiative, this section contains a brief overview of the operation of the initiative and its impact on roles and responsibilities at the various key points during the procurement lifecycle: a. Request Documentation - develop request documentation (including draft contract insurance requirements) in the usual way noting, however, the relevant ASDEFCON templates are structured to adjust the manner in which tenderers respond to the draft contract insurance requirements depending on whether a tenderer has ACIP status (refer, for example, ASDEFCON (Strategic Materiel) TDR C-3). As further explained below in paragraph 23, appropriate ASDEFCON template insurance provisions (without any material changes) must be included in the draft contract, except where approval is obtained from the ACIP Management Team not to include, or to amend, these provisions. For further information on the ASDEFCON insurance clause, refer to the ASDEFCON Insurance Handbook and Case Studies. b. Tender Evaluation: Tender Data Requirement (TDR) Standalone insurance section (i) Tenderer with ACIP status is not required to provide the information requested in the insurance TDR (other than cost), to the extent that the insurance policies the tenderer intends to rely upon in respect of the draft contract are within the scope of the tenderer's ACIP status. However, prior to contract negotiations if selected as a preferred tenderer, the tenderer is to provide the information requested in the insurance TDR in respect of any insurance policy which falls outside the scope of its ACIP status. Tenderers with ACIP status are to indicate in their Statement of Non-Compliance against the insurance TDR that they have ACIP status and they are to identify Objective Id AB Version: 2.0 Page 5 of 16

6 any insurance policy which falls outside the scope of their ACIP status that they intend to rely upon in respect of the draft contract. Insurance is not "within" a tenderer's ACIP status if it was not reviewed by the ACIP Management Team as part of the ACIP pre-qualification review process or if it is specifically carved out of the tenderer's ACIP approval in the ACIP review report. A common example is where a tenderer within the ACIP relies upon a project specific insurance policy. Such a policy would not ordinarily form part of the tenderer's ACIP status. Another example would be where a contract requires a type of insurance cover (say, marine liability) and the ACIP review report does not cover such insurance. CASG considers workers compensation insurance and compulsory third party insurances as required by law to be within a contractor's ACIP status (even if those policies were not reviewed as part of the ACIP pre-qualification review). This position does not apply if there is evidence to suggest that the ACIP contractor is in breach of the law and has failed to maintain such insurance. As further explained below in paragraph 28, for the purposes of tender evaluation, it must be assumed a tenderer is compliant with any draft contract insurance that the tenderer identifies as coming within its ACIP (subject to any contrary statements in the tenderer s Statement of Non-Compliance). At this stage in the procurement process, there is no requirement to seek supporting documentation or evidence verifying the tenderer s compliance with the draft contract insurance requirements. (ii) Tenderer who does not have ACIP status is required to provide details of all costs associated with the insurance policies covered in the tenderer s insurance response and, prior to contract negotiations if selected as a preferred tenderer, is to provide the information requested in the insurance TDR for the current or proposed insurance policies that they intend to rely upon in respect of the draft contract. Tender Data Requirement (TDR) Statement of Non-Compliance (iii) Tenderer with ACIP status is required to indicate in its Statement of Non- Compliance against the insurance TDR that it has ACIP status and to identify only those insurances (if any) that it intends to rely upon in satisfaction of the insurance obligations in the draft contract that fall outside the scope of its ACIP status. A tenderer with ACIP status will be deemed compliant with, and is relieved of certain of its obligations under, the insurance provisions of a contract to the extent the insurances required by the contract fall within the tenderer s ACIP status. This is intended to eliminate the need for tenderers with ACIP status to tender non-compliances and negotiate the insurance clause to the maximum extent possible. Accordingly, a tenderer with ACIP status is only required to indicate the following non-compliances as regards to the insurance obligations in the draft contract (for those insurances which fall within its ACIP status): o non-compliances with the limits of indemnity of the insurance policies selected (including the business interruption and advanced consequential loss limits); o non-compliances with the clauses for which the contract does not deem compliance or relieve the contractor from its obligations while it maintains ACIP status; and o any other non-compliances that it intends to raise in contract negotiations. Objective Id AB Version: 2.0 Page 6 of 16

7 For those insurances (if any) which do not fall within its ACIP status, a tenderer is required to indicate in its Statement of Non-Compliance against the draft contract insurance requirements any non-compliances. (iv) Tenderer who does not have ACIP status is required to indicate in its Statement of Non-Compliance against the insurance TDR and the draft contract insurance requirements any non-compliances. c. Contract Negotiations: (i) Tenderer with ACIP status an ACIP Assurance Report must be requested from the ACIP Management Team if the draft contract specifies any of the following insurance requirements and the tenderer has identified any of the following types of policies as coming within the scope of its ACIP: (1) any liability insurance policy for which the limit of indemnity specified in the draft contract exceeds the nominated monetary threshold (ie $25m refer paragraph 30 below); (2) any property policy which insures Commonwealth property, or transit or contract works policy, with a value which exceeds the nominated monetary threshold (ie $25m refer paragraph 30 below); or (3) any type of aviation or marine insurance policy. This ACIP Assurance Report will summarise the tenderer's known compliance (or otherwise) with the draft contract insurance requirements that the tenderer identifies as coming within its ACIP and is to be used to identify insurance related issues requiring resolution during contract negotiations. For any draft contract insurances that are not covered by the tenderer s ACIP, these insurances are evaluated in the usual way to determine whether the tenderer complies with those requirements. If paragraphs (1) (2) or (3) above are not met (ie there are no aviation or marine policies, and no liability, transit or contract works policy, or property policy which insures Commonwealth property, with a specified limit of indemnity greater than $25 million in the draft contract), an ACIP Assurance Report is not required and the tenderer s ACIP status must be relied on to deem the tenderer compliant with the draft contract insurance requirement(s) that the tenderer identifies as coming within its ACIP (subject to any contrary statements in the tenderer s Statement of Non-Compliance). In some instances, the ACIP Management Team will identify issues which require further information from the tenderer. The ACIP Management Team may choose to investigate those issues through the ACIP process. The purpose of this approach is to centralise the collection of the information from ACIP contractors. The ACIP Management Team will identify any insurance issues which the personnel involved in the procurement remain responsible for resolving. (ii) Tenderer who does not have ACIP status the personnel involved in the procurement are responsible for assuring in the usual way that the tenderer complies with the draft contract insurance requirements and for identifying any insurance related issues for resolution during contract negotiations. d. Contract Management post contract signature: (i) Contractor with ACIP status the ACIP Assurance Report (and any follow-on advice received from the ACIP Management Team from time to time) is to be Objective Id AB Version: 2.0 Page 7 of 16

8 relied on, and / or the contractor s continuing ACIP status if an ACIP Assurance Report is not required (refer paragraph 11(c)(i) above), for assurance of ongoing contractor compliance with the contract insurance requirements covered by the contractor s ACIP other than matters for which the report identifies as requiring personnel involved in the procurement to monitor. The ACIP Management Team will monitor the contractor s ACIP and advise of any issues or concerns that arise from time to time and what steps should be taken in response to those matters. For any contract insurances that are not covered by a contractor s ACIP, the personnel involved in the procurement are responsible for monitoring and validating contractor compliance with those requirements in the usual way. (ii) Contractors who do not have ACIP status monitoring and validating contractor compliance with contract insurance requirements is done in the usual way. 12. An important issue that tenderers / contractors and personnel involved in the procurement need to consider in procurements with insurance requirements that include both ACIP and non-acip insurances is seamlessness and completeness of coverage for all insurable risks arising from performance of the contract. Drawing on the LRA and other information provided, the ACIP Assurance Report will include details of any identified potential material gaps in the overall contract insurance coverage. ACIP MANAGEMENT TEAM COMMUNICATION PROTOCOLS 13. In order to respect the confidentiality and sensitivity of companies ACIPs (and to reinforce the ongoing importance of the LRA in determining contract insurance requirements), the ACIP Management Team will apply the following communication protocols: a. the ACIP Management Team will only provide information on a company s ACIP in the form of an ACIP Assurance Report and through follow up correspondence in respect of same; b. ACIP Assurance Reports will only assess a company s compliance against the insurance cover and limits tendered by the company in response to the request documentation, or as otherwise agreed with the company during contract negotiations; c. ACIP Assurance Reports will not contain details of a company s ACIP beyond what is necessary to provide assurance that the company complies with the relevant contract insurance requirements; d. the ACIP Management Team can provide information outside of the ACIP Assurance Report that is general in nature and which does not contain details of a company s ACIP or specific details of a company's insurances beyond what is necessary to provide assurance that the company complies with the relevant contract insurance requirements; and e. in any circumstance with consent from the ACIP contractor. 14. The ACIP Management Team will endeavour to assist with insurance issues relevant to any ACIP based on its understanding of general insurance practice and, where appropriate, calling on the expertise and knowledge of the ACIP Management Team s retained specialist legal service provider. The ACIP Management Team utilises the services of an external legal services provider to assist with the preparation of ACIP Assurance Reports and respond to related ad hoc queries. Funding for any external legal services provider used by the ACIP Management Team to assist with preparation of an ACIP Assurance Report is the responsibility of the business unit involved in the procurement. 15. From time to time, the ACIP Management Team may recommend consultation with other experts and advisers who may be better placed to assist with specific insurance issues. It is the responsibility of the business unit to separately arrange and fund the services provided by any such Objective Id AB Version: 2.0 Page 8 of 16

9 recommended specialist provider. SCOPE 16. Subject to paragraphs 17 to 19, this functional policy applies to all Personnel in the CASG who are involved in Complex Procurements on and from 3 September 2012 (Date of Effect). Application to existing request documentation 17. This functional policy does not apply to any request documentation released before the Date of Effect. Application to existing contracts 18. This functional policy does not apply to contracts in place before, or which are formed following the release of request documentation before, the Date of Effect ( Existing Contracts ), except where the contract is with a contractor that has ACIP status. 19. For Existing Contracts between the Commonwealth and a contractor with ACIP status, this functional policy applies in the following way: a. if the contract does not contain: (i) a liability insurance policy that exceeds the relevant monetary threshold (ie $25m refer paragraph 30 below); (ii) (iii) any property policy which insures Commonwealth property, or transit or contract works policy, with a value which exceeds the nominated monetary threshold (ie $25m refer paragraph 30 below); or any type of aviation or marine insurance policy, then the contractor's ACIP status is to be relied on for assurance of the contractor's compliance with the contract's insurance requirements and personnel involved in the procurement are relieved from the standard contract management activities as regards confirming the contractor s compliance with these requirements (eg seeking certificates of currency), unless otherwise notified by the ACIP Management Team; or b. if the contract contains an insurance policy of a type specified in paragraph 19.a and an ACIP Assurance Report has been provided for that contract, then this functional policy (ie Policy Directive 4) applies to the contract. To facilitate a smooth transition and ramp-up of the ACIP initiative, the ACIP Management Team will provide an ACIP Assurance Report for Existing Contracts determined to most likely benefit from the ACIP initiative. These contracts are anticipated to include long term contracts (eg longer than 5 years) that have recently commenced operation or contracts that are the subject of a major contract amendment that materially impacts on the scope and / or duration of the contract). If an ACIP Assurance Report has not been provided for such a contract, then the insurance requirements of the contract are to be managed in the usual way. If there is an Existing Contract that would benefit from the ACIP initiative, advice may be sought from the ACIP Management Team. 20. See Annex A for a list of Definitions. DEFINITIONS Objective Id AB Version: 2.0 Page 9 of 16

10 Key Terms 21. The words must, should and may are important words used throughout this functional policy to identify whether the requirements are mandatory or better practice guidance. a. must / must not - means that the requirement is mandatory with no exceptions. b. should / should not - means that the requirement must be complied with except for where there are valid reasons not to do so. For any Complex Procurement where a should requirement is not met, this decision should be recorded in (or be capable of clear explanation by reference to) the procurement record. c. may - means that the requirement is optional but is generally considered better practice and should be considered in each case. 22. Other key capitalised terms used throughout this functional policy have the meanings described in Annex A. Other terms have their ordinary dictionary meaning. Annex A also contains a table of acronyms used throughout this functional policy. Policy Directive 1 Request Documentation The appropriate ASDEFCON template insurance provisions (without any material change) must be included in contracts for all CASG Complex Procurements, except where approval not to use (or to materially amend the provisions) is obtained from the ACIP Management Team. 23. In order to improve the quality of CASG contract insurance requirements, achieve the objectives of the ACIP initiative and enhance the level of standardisation in the use of ASDEFCON template insurance provisions within CASG, the ASDEFCON insurance provisions must be used for all CASG Complex Procurements without making any material changes to the template provisions. If alternative insurance provisions, or material changes are proposed to the appropriate ASDEFCON template provisions, approval must be obtained from the ACIP Management Team. This requirement applies whether or not the procurement (as a whole) uses a contract based on an ASDEFCON template and whether or not the change is recommended by an external or internal legal services provider or other specialist adviser. 24. When using the ASDEFCON insurance clause, select and include any optional clauses that are considered appropriate for the circumstances of the procurement. For further information and assistance in selecting the appropriate optional clauses, please refer to the ASDEFCON Insurance Handbook and Case Studies. 25. For the purposes of this functional policy, the selection of appropriate optional clauses, the specification of appropriate limits of indemnity for the relevant policies, and any other tailoring as directed by the clauses or which are necessary to embed the ASDEFCON clauses into the draft contract (particularly where the draft contract is not based on an ADEFCON template) are not considered to be material changes and do not require approval from the ACIP Management Team. 26. Any requests for approval are to be directed to the ACIP.ManagementTeam@defence.gov.au. Objective Id AB Version: 2.0 Page 10 of 16

11 Policy Directive 2 Tender Evaluation When a tenderer responds to request documentation by indicating it has ACIP status, the tender evaluation personnel must confirm the tenderer s status and, if confirmed, evaluate the tenderer s compliance with the draft contract insurance requirements on the basis of the tenderer s Statement of Non-Compliance. For any of the tenderer s insurances that are covered by a tenderer s ACIP status, no insurance TDR response (other than cost) is required to demonstrate or verify compliance with the draft contract insurance requirements. For any of the tenderer s insurances that are not covered by a tenderer s ACIP status (which will be indicated in the Statement of Non-Compliance), at the tender evaluation stage no insurance TDR response (other than cost) is required to demonstrate or verify compliance with the draft contract insurance requirements. For any tenderer without ACIP status, the tender evaluation personnel must evaluate the tenderer s compliance with the draft contract insurance requirements on the basis of the tenderer s Statement of Non-Compliance. At the tender evaluation stage no insurance TDR response (other than cost) is required to demonstrate or verify compliance of the tenderer s insurances with the draft contract insurance requirements. 27. If a tenderer indicates it has ACIP status, the tenderer s status must be confirmed by consulting the ACIP register available at r. 28. If a tenderer is confirmed as having ACIP status, the tenderer s compliance with any draft contract insurance requirements must be evaluated on the basis of the tenderer s Statement of Non- Compliance. For any of the tenderer s insurances that are covered by a tenderer s ACIP status, no insurance TDR response (other than cost) is required to demonstrate or verify compliance with the draft contract insurance requirements. For any of the tenderer s insurances that are not covered by a tenderer s ACIP status (which will be indicated in the Statement of Non-Compliance), at the tender evaluation stage (subject to any statement to the contrary in the request documentation), 1 no insurance TDR response (other than cost) is required to demonstrate or verify compliance. Moving the demonstration or verification of compliance with the draft contract insurance requirements to the Offer Definition and Improvement Activities (ODIA) or contract negotiation stage is considered appropriate in order to reduce the cost of tendering for both Defence and industry. 29. If a tenderer does not have ACIP status, the tenderer s compliance with the draft contract insurance requirements must be evaluated on the basis of the tenderer s Statement of Non- Compliance. At the tender evaluation stage (subject to any statement to the contrary in the request documentation), no insurance TDR response (other than cost) is required to demonstrate or verify compliance of the tenderer s insurances with the draft contract insurance requirements. Moving the demonstration or verification of compliance with the draft contract insurance requirements to the ODIA or contract negotiation stage is considered appropriate in order to reduce the cost of tendering for both Defence and industry. 1 CASG personnel are advised that the insurance TDR requirements in request documentation based on older versions of ASDEFCON may not have been updated to reflect this aspect of Functional Policy. Objective Id AB Version: 2.0 Page 11 of 16

12 Policy Directive 3 Contract Negotiation For contract negotiations that involve a tenderer with ACIP status, an ACIP Assurance Report must be requested from the ACIP Management Team if the draft contract specifies any of the following insurance requirements and the tenderer has identified any of these policies as coming within the scope of its ACIP: a. any liability insurance policy for which the limit of indemnity specified in the draft contract exceeds the monetary threshold of $25 million; b. any property policy which insures Commonwealth property, or transit or contract works policy, with a value which exceeds the nominated monetary threshold (ie $25m refer paragraph 30 below); or c. any type of aviation or marine insurance policy. An ACIP Assurance Report will summarise the tenderer's known compliance (or otherwise) with the draft contract insurance requirements and is to be used to identify insurance related issues requiring resolution during contract negotiations. If paragraphs (a), (b) and (c) above are not met, an ACIP Assurance Report is not required and the tenderer s ACIP status must relied on to deem the tenderer compliant with the draft contract insurance requirement(s) that the tenderer identifies as coming within its ACIP (subject to any contrary statements in the tenderer s Statement of Non-Compliance) In some instances, the ACIP Management Team will identify issues which require further information from the tenderer. The ACIP Management Team may choose to investigate those issues through the ACIP process. The purpose of this approach is to centralise the information collected by ACIP contractors. The ACIP Management Team will identify any insurance issues which the personnel involved in the procurement remain responsible for resolving. For any draft contract insurance requirements that fall outside the tenderer s ACIP or for any tenderer without ACIP status, the personnel involved in the procurement remain responsible for ensuring compliance with draft contract insurance requirements, including by identifying any insurance-related issues for resolution during contract negotiations. 30. The nominated $25 million threshold for when an ACIP Assurance Report must be requested from the ACIP Management Team reflects a risk management decision on the part of the CASG Executive that at or below the $25 million threshold the insurable risks of a specific procurement (as assessed by the personnel involved in the procurement) do not justify the administrative effort and costs associated with confirming details of the tenderer s ACIP with the ACIP Management Team. 31. Where an ACIP Assurance Report is requested from the ACIP Management Team, this request should be accompanied by: a. a copy of the procurement s LRA that was used to determine the draft contract insurance requirements; b. a copy of the complete draft conditions of contract (and relevant attachments such as the Glossary), including the draft clauses (and any annexes) addressing insurance, indemnities and limitation of liability; c. a detailed description of the nature of the procurement, including the types of supplies and / or services being procured by Defence; d. the proposed (maximum) duration of the draft contract; e. relevant extracts from the tender dealing with insurance and liability issues; f. complete copy of any related relevant draft contracts or agreements (eg GFF licences); Objective Id AB Version: 2.0 Page 12 of 16

13 and g. the insurance TDR response and Statement of Non-Compliance. 32. The ACIP Management Team may request further information relevant to the procurement to assist with preparation of the ACIP Assurance Report. The responsiveness to requests for additional information will impact on the ACIP Management Team s ability to provide a timely and comprehensive ACIP Assurance Report. 33. Depending upon the complexity of the draft contract insurance requirements, the ACIP Management Team will generally require a minimum of two weeks (commencing from the date on which the ACIP Management Team has been provided with all relevant information) to prepare an ACIP Assurance Report. For procurements with more complex risk / insurance requirements, it is recommended that at least three weeks be allowed for the preparation of this Report. 34. The ACIP Management Team may advise of the need to engage the assistance of a specialist external legal service provider to assist with the preparation / review of an ACIP Assurance Report. As the ACIP Management Team is not centrally funded to cover the costs of any such engagement, these costs will need to be funded by the business unit. Where the ACIP Management Team proposes to procure the assistance of an external legal service provider, advance notice will be provided together with an estimate of the costs of the engagement. 35. For policies identified in a tenderer s tender as coming within its ACIP, the ACIP Assurance Report will indicate the extent to which the tenderer is compliant with the relevant insurance requirements specified in the draft contract. Notwithstanding these comments, the tenderer is deemed compliant with the identified insurance obligations of the draft contract. 36. The ACIP Assurance Reports are intended to be simple and comprehensive. On this basis, they do not identify absolutely all non-compliances. The ACIP Assurance Report is not a guarantee that an insurance policy will respond to a particular incident. The ACIP Assurance Report only deals with compliance with the insurance obligations in the draft contract. The ACIP Assurance Report may also identify related insurance issues requiring resolution during contract negotiations. If, during contract negotiations, the tenderer materially amends its tendered offer in relation to relevant insurance requirements, an updated ACIP Assurance Report should be requested from the ACIP Management Team. As stated in paragraph 13, the ACIP Assurance Report will only provide comment against the insurance cover and limits tendered by the company against the draft contract requirements or otherwise agreed with the company during contract negotiations. Except as otherwise indicated in the Report, no further compliance-checking of contract insurance requirements confirmed in the Report as satisfied by the tenderer s ACIP is required. 37. If there are no aviation or marine policies, and no liability, transit or contract works policy, or property policy which insures Commonwealth property, with a specified limit of indemnity greater than $25 million specified in the draft contract, an ACIP Assurance Report is not required and the tenderer s ACIP status is to be relied upon to deem the tenderer compliant with the draft contract insurance requirement(s) that the tenderer identifies as coming within its ACIP (subject to any contrary statements in the tenderer s Statement of Non-Compliance). 38. For any remaining draft contract insurance requirements that fall outside the tenderer s ACIP, the personnel involved in the procurement remain responsible for ensuring tenderer compliance with those requirements and for identifying any issues for resolution during contract negotiations. 39. In any situation where a draft contract specifies insurances that fall within and also outside the tenderer s ACIP, it is important to confirm there are no gaps in the draft contract s total insurance coverage. The ACIP Assurance Report will assist achieve this outcome. 40. For any tenderer without ACIP status, the personnel involved in the procurement are solely responsible for ensuring compliance with draft contract insurance requirements, including by identifying any insurance-related issues for resolution during contract negotiations. Objective Id AB Version: 2.0 Page 13 of 16

14 Policy Directive 4 Contract Management Once a contract is signed, the personnel involved in the procurement are alleviated from primary responsibility for ongoing monitoring and assuring compliance with contract insurance requirements to the extent these requirements are covered by the contractor s ACIP. If however the personnel involved in the procurement become aware of any information that may reasonably cause them to suspect non-compliance with any ACIP covered contract insurance requirement, this information must be promptly provided to the ACIP Management Team. If, during the term of the contract, there is a proposal to amend the contract to materially broaden or increase the contract s insurance requirements relevant to the contractor s ACIP (ie by introducing or changing any marine or aviation insurance or by increasing the limit of indemnity for a liability, transit, contract works policy, or property policy which insures Commonwealth property, so that it exceeds the nominated $25m threshold), details of the proposed change must be provided to the ACIP Management Team. At the discretion of the ACIP Management Team, a new or updated Assurance Report may be prepared to assess the impact of this change. If determined appropriate by the ACIP Management Team, the relevant contract amendment must not be finalised or approved without first receiving and considering the new or updated ACIP Assurance Report. 41. The ACIP Management Team has responsibility for monitoring the ACIPs of all contractors participating in the ACIP initiative. In keeping with this responsibility, the ACIP Management Team will advise personnel involved in procurements for which it has provided an ACIP Assurance Report, of any issues that may arise from time to time with a contractor s ACIP and what steps should be taken in response to those issues. 42. For any contract for which an ACIP Assurance Report was not required, the ACIP Management Team will provide a general advisory service that involves timely notice of any issues that may arise from time to time with a contractor s ACIP and what steps should be taken in response to those issues. 43. Consequently, the personnel involved in the procurement are relieved from primary responsibility for monitoring and assuring the contractor s compliance with contract insurance requirements covered by the contractor s ACIP. However, if at any time there is reasonable suspicion of any compliance issue, the ACIP Management Team must be promptly notified of any concerns. The ACIP Management Team will assist in determining an appropriate response to those issues / concerns. 44. If, during the term of the contract, there is a proposal to amend the contract to materially broaden or increase the contract s insurance requirements relevant to the contractor s ACIP (ie by introducing or changing any marine or aviation insurance or by increasing the limit of indemnity for a liability, transit, contract works policy, or property policy which insures Commonwealth property, so that it exceeds the nominated $25m threshold), details of the proposed change must be provided to the ACIP Management Team. At the discretion of the ACIP Management Team, a new or updated ACIP Assurance Report may be prepared to assess the impact of this change. If determined appropriate by the ACIP Management Team, the relevant contract amendment must not be finalised or approved without first receiving and considering this new or updated Report. The ACIP Management Team should be provided with any information reasonably requested for the purpose of determining if an updated Report is required and / or to assist with the preparation of this report. 45. Business units are responsible for funding the costs of any external legal service provider engaged by the ACIP Management Team to prepare an updated ACIP Assurance Report. 46. Personnel involved in the procurement are solely responsible for monitoring and ensuring ongoing contractor compliance in the usual way with any contract insurance requirements outside the contractor s ACIP or for any contractor without ACIP status. Objective Id AB Version: 2.0 Page 14 of 16

15 47. The ACIP Management Team will: RESPONSIBILITIES a. acknowledge all requests for an ACIP Assurance Report (and other ad hoc assistance) within 3 business days of receiving a request; b. provide a copy of the ACIP Assurance Report (including any updated Report) within the timeframes agreed (noting at least two weeks will generally be required for a standard Report and up to three weeks for procurements with more complex insurance requirements); and c. keep a record of contracts for which an ACIP Assurance Report has been provided and provide timely notice of any material changes to a relevant company s ACIP. 48. All CASG Personnel who are involved in procurement activities within the scope of this Functional Policy must comply with the mandatory requirements set out in this instruction. 49. FAS Commercial CASG, is the Business Process Owner (BPO) for Procurement and Contracting in CASG and the Procurement Instructions Directorate is responsible for maintaining and updating this instruction. 50. The Defence Insurance Office is responsible for managing Defence s own insurance policy arrangements and claims with Comcover and does not provide advice on contract insurance requirements or this instruction. MONITOR AND REVIEW 51. The content of this functional policy will be reviewed whenever any of the identified References are updated or amended, and no less than every two years. WORKPLACE HEALTH & SAFETY/ENVIRONMENTAL ISSUES 52. There are no WHS and Environmental issues that are pertinent or relevant to this functional policy. TRAINING AND COMPETENCIES 53. Training and competencies are not required for this functional policy, POINT OF CONTACT 54. The point of contact for this functional policy (and others in the series) is Director Procurement Instructions. ANNEXES A. Definitions ATTACHMENTS 1. Nil Objective Id AB Version: 2.0 Page 15 of 16

16 ANNEX A - DEFINITIONS Term Definition Approved Contractor Insurance Program or ACIP ACIP Management Team Complex Procurement Personnel means a company s global / group and local insurance program that has been reviewed and pre-qualified by the ACIP Management Team. Following this review, the ACIP Management Team will determine if a company is eligible for ACIP status. Where granted, ACIP status is given subject to certain conditions agreed with the company. A register of companies with ACIP status is located at: P%20Register. means the team with responsibility for managing the ACIP initiative. The team leader of the ACIP Management Team is Director ASDEFCON and Contracting Initiatives. means a procurement categorised as complex in accordance with chapter 1.3 of the DPPM. means all CASG staff involved in the procurement, including Commonwealth Officers (Australian Public Servants and Australian Defence Force personnel from Army, Navy and Airforce) as well as External Service Providers encompassing consultants, contractors, Professional Service Providers and Legal Service Providers. Objective Id AB Version: 2.0 Page 16 of 16