SPECIAL CONDITIONS OF EMPLOYMENT/CONTRACT AND NOTE TO TENDERERS/CONSULTANTS
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5 Revised SCE( ) at App E to TCW 9/2007, page 1 of 3 SPECIAL CONDITIONS OF EMPLOYMENT/CONTRACT AND NOTE TO TENDERERS/CONSULTANTS SCE ( ) Professional Indemnity Insurance General Conditions of Employment Clause 47 is deleted and replaced by the following: (1) Without limiting their obligations and responsibilities nor their liability to indemnify the Employer under Clause 22, the Consultants shall effect and maintain with well established insurers of repute, professional indemnity insurance for a minimum amount [ ] in respect of their obligations in relation to the Services or any part thereof, for any one occurrence or series of occurrences arising out of any one event, or each and every claim, from the date of commencement of this Agreement until [ ] years from the date of notification of completion in writing issued by the Director s Representative (hereinafter referred to in this Clause as the requisite period ). The professional indemnity insurance shall be effected with an insurer or insurers acceptable to the Employer. The Consultants shall immediately inform the Employer in writing if such insurance ceases to be available at reasonable commercial rates or otherwise is not maintained in accordance with this Clause or for any reason becomes void or unenforceable. (2) If the insurance policy is project specific, the maximum deductible/excess allowed under the policy shall not exceed 20% of the minimum amount required under sub-clause (1) of this Clause. (3) (a) If (i) the insurance policy contains a limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy, and (ii) the period of insurance under the insurance policy is twelve months or less, then either: (A) (B) (C) the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall be reinstated in full upon exhaustion of the limit of indemnity by reason of indemnity payments made on account of any claim, loss, damage, liability, cost or expense paid or payable under the insurance policy until the total amount of indemnity payable by the insurer under the insurance policy reaches 2 times the minimum amount required under sub-clause (1) of this Clause; or the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall not be less than 2 times the minimum amount required under sub-clause (1) of this Clause; or the limit of indemnity for any one occurrence or series of occurrences arising out of any one event, or each and every claim under the insurance policy shall not be less than 2 times the minimum amount required under sub-clause (1) of this Clause. DEVB TC(W) No. 9/2007 Appendix E
6 Revised SCE( ) at App E to TCW 9/2007, page 2 of 3 (b) If (i) the insurance policy contains a limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy, and (ii) the period of insurance under the insurance policy exceeds twelve months, then either: (A) (B) (C) the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall be reinstated in full upon exhaustion of the limit of indemnity by reason of indemnity payments made on account of any claim, loss, damage, liability, cost or expense paid or payable under the insurance policy until the total amount of indemnity payable by the insurer under the insurance policy reaches 3 times the minimum amount required under sub-clause (1) this Clause; or the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall not be less than 3 times the minimum amount required under sub-clause (1) of this Clause; or the limit of indemnity for any one occurrence or series of occurrences arising out of any one event, or each and every claim under the insurance policy shall not be less than 3 times the minimum amount required under sub-clause (1) of this Clause. (4) The Consultants shall provide to the Employer within 60 days from the date of commencement of this Agreement and thereafter, in the case where the insurance policy does not cover the entire requisite period, within 7 days of professional indemnity insurance being effected upon the expiry of the earlier insurance policy: (i) (ii) an undertaking that the current insurance policy complies with the terms in this Clause in Form [ ] in Appendix [ ] to these General Conditions of Employment; and a certified copy of the full insurance policy for the approval of the Employer unless the Consultants can demonstrate to the satisfaction of the Employer that it is not reasonably practicable to provide a certified copy of the full insurance policy in which event the Consultants shall provide a certificate in Form [ ] in Appendix [ ] to these General Conditions of Employment issued by the insurer or insurance broker of the insurance policy and any information relating to the insurance policy that the Employer may reasonably require. (5) If the Consultants shall fail upon request to produce to the Employer satisfactory evidence that there is in force professional indemnity insurance required under this Clause, the Employer may effect and keep in force any such insurance and pay such premium as may be necessary for that purpose. The Employer shall be entitled to deduct such premium, together with expenses incurred, in accordance DEVB TC(W) No. 9/2007 Appendix E
7 Revised SCE( ) at App E to TCW 9/2007, page 3 of 3 with the provisions of Special Conditions of Employment Clause [ ] 1 recover such amount as a debt due from the Consultants. and/or to (6) In determining the period of insurance under an insurance policy for the purpose of this Clause, any extension or renewal of the insurance policy shall be treated as a separate insurance policy and shall not have the effect of extending the period of insurance. 1 Insert the number of the following Special Condition of Employment relating to setting off money due to the Government from defaulting Consultants promulgated in SETW s memo of 2 June 2003, ref. (59) in ETWB(PS) 106/11 Pt 19: SCE [ ] (1) All damages, losses, costs, expenses, debts or sums for which the Consultants are liable to the Employer under any provision of this Agreement may be deducted by the Employer from monies due to the Consultants under this Agreement and the Employer shall have the power to recover any balance not so deducted from monies due to the Consultants under any other Government consultancy agreement between the Employer and the Consultants. (2) All damages, losses, costs, expenses, debts or sums for which the Consultants are liable to the Employer under any provision of any other Government consultancy agreement between the Consultants and the Employer may be deducted by the Employer from monies due to the Consultants under this Agreement. DEVB TC(W) No. 9/2007 Appendix E
8 SCC (A) Professional Indemnity Insurance (1) Without limiting his obligations under the Contract, the Contractor shall effect and maintain, with well established insurers of repute, professional indemnity insurance for a minimum amount of [state amount] in respect of his obligations in relation to the design of any part or all of the Works carried out by or on behalf of the Contractor pursuant to the Contract for any one occurrence or series of occurrences arising out of any one event, or each and every claim, for a period from the date of notification of acceptance of Tender until [ ] years after the date of the certificate of completion. (2) The Contractor shall procure that each of the Designer/designer [see Note 4] and Independent Checking Engineer/Design Checker/independent checking engineer [see Note 5] appointed or engaged by the Contractor in connection with the design or checking of the design of any part or all of the Works, shall effect and maintain, with well established insurers of repute, professional indemnity insurance for a minimum amount of [state the amount] in respect of his obligations in relation to the design or, as the case may be, checking of the design of any part or all of the Works, for any one occurrence or series of occurrences arising out of any one event, or each and every claim for a period from the respective dates of commencement of appointment or engagement of the Designer/designer [see Note 4] and Independent Checking Engineer/Design Checker/independent checking engineer [see Note 5] until [ ] years after the date of the certificate of completion. (3) The professional indemnity insurance referred to in sub-clause (1) or (2) of this Clause shall respectively be effected with an insurer or insurers acceptable to the Employer. The Contractor shall immediately inform the Employer in writing if such insurance ceases to be available or otherwise is not maintained in accordance with this Clause or for any reason becomes void or unenforceable. (4) If the insurance policy effected pursuant to sub-clause (1) or (2) of this Clause is project specific, the maximum deductible/excess allowed under the insurance policy shall be limited to a maximum of 20% of the minimum amount required under sub-clause (1) or (2) of this Clause, as the case may be. (5) (a) If (i) the insurance policy effected pursuant to sub-clause (1) or (2) of this Clause contains a limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy, and (ii) the period of insurance under the insurance policy is twelve months or less, then either: (A) the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall be reinstated in full upon exhaustion of the limit of indemnity by reason of indemnity payments made on account of any claim, loss, damage, liability, cost or expense paid or payable under the insurance policy until the total amount of indemnity payable by the insurer under the insurance policy reaches 2 times the minimum amount required under sub-clause (1) or (2) of this Clause, as the case may be; or
9 (B) (C) the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall not be less than 2 times the minimum amount required under sub-clause (1) or (2) of this Clause, as the case may be; or the limit of indemnity for any one occurrence or series of occurrences arising out of any one event, or each and every claim under the insurance policy shall not be less than 2 times the minimum amount required under sub-clause (1) or (2) of this Clause, as the case may be. (b) If (i) the insurance policy effected pursuant to sub-clause (1) or (2) of this Clause contains a limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy, and (ii) the period of insurance under the insurance policy exceeds twelve months, then either: (A) (B) (C) the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall be reinstated in full upon exhaustion of the limit of indemnity by reason of indemnity payments made on account of any claim, loss, damage, liability, cost or expense paid or payable under the insurance policy until the total amount of indemnity payable by the insurer under the insurance policy reaches 3 times the minimum amount required under sub-clause (1) or (2) of this Clause, as the case may be; or the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall not be less than 3 times the minimum amount required under sub-clause (1) or (2) of this Clause, as the case may be; or the limit of indemnity for any one occurrence or series of occurrences arising out of any one event, or each and every claim under the insurance policy shall not be less than 3 times the minimum amount required under sub-clause (1) or (2) of this Clause, as the case may be. (6) (a) The Contractor shall provide to the Employer within 60 days from the date of notification of acceptance of Tender and thereafter, in the case where the insurance policy effected pursuant to sub-clause (1) of this Clause does not cover the entire period of insurance required under that sub-clause, within 7 days of professional indemnity insurance being effected upon the expiry of the earlier insurance policy: (i) (ii) an undertaking that the current insurance policy effected pursuant to sub-clause (1) of this Clause complies with the terms in this Clause in Form [ ] in Appendix [ ] to these Special Conditions of Contract; and a certified copy of the full insurance policy effected pursuant to sub-clause (1) of this Clause for the approval of the Employer unless the Contractor can demonstrate to the satisfaction of the Employer that it is not reasonably practicable to provide a certified
10 copy of the full insurance policy in which event the Contractor shall provide a certificate in Form [ ] in Appendix [ ] to these Special Conditions of Contract issued by the insurer or insurance broker of the insurance policy and any information relating to the insurance policy that the Employer may reasonably require. (b) The Contractor shall provide to the Employer, within [ ] days from the respective dates of appointment or engagement of his Designer/designer [see Note 4] and Independent Checking Engineer/Design Checker/independent checking engineer [see Note 5], and thereafter, in the case where the insurance policy effected pursuant to sub-clause (2) of this Clause does not cover the entire period of insurance required under that sub-clause, within 7 days of professional indemnity insurance being effected upon the expiry of the earlier insurance policy: (i) (ii) an undertaking that the current insurance policy effected pursuant to sub-clause (2) of this Clause complies with the terms of this Clause in Form [ ] in Appendix [ ] to these Special Conditions of Contract; a certified copy of the full insurance policy effected pursuant to sub-clause (2) of this Clause for the approval of the Employer unless the Contractor can demonstrate to the satisfaction of the Employer that it is not reasonably practicable to provide a certified copy of the full insurance policy in which event the Contractor shall provide a certificate in Form [ ] in Appendix [ ] to these Special Conditions of Contract issued by the insurer or insurance broker of the insurance policy and any information relating to the insurance policy that the Employer may reasonably require. (7) If the Contractor shall fail upon request to produce to the Employer satisfactory evidence that there is in force professional indemnity insurance required under this Clause, the Employer may effect and keep in force any such insurance and pay such premium as may be necessary for that purpose. The Employer shall be entitled to deduct such premium, together with expenses incurred, in accordance with the provisions of General Conditions of Contract Clause [83] # and/or to recover such amount as a debt from the Contractor. (8) In the event of different certificates of completion having been issued for [different Sections or parts of the Works] [see Note 7] pursuant to General Conditions of Contract Clause [53] #, the expression certificate of completion shall, for the purpose of this Clause, mean the last of such certificates [see Note 6]. (9) In determining the period of insurance under an insurance policy for the purpose of this Clause, any extension or renewal of the insurance policy shall be treated as a separate insurance policy and shall not have the effect of extending the period of insurance.
11 Legend # Amend as appropriate depending on the particular type of GCC to be used. Notes: 4. Use designer for D&B contracts. For other works contracts, use Designer in respect of Contractor s Design and designer in respect of Temporary Works. 5. Use Design Checker for D&B contracts. For Contractor's Design in other works contracts, use Independent Checking Engineer. For Temporary Works in other works contracts, use independent checking engineer. [Guidance Note: For Contractor s Design in a building contract not being a D&B contract, substitute Independent Checking Engineer with Independent Design Checker.] 6. a) For a works contract with a separate Section comprising only the Establishment Works, add at the end of sub-clause (8) excluding the certificate of completion for the Establishment Works. b) For a works contract with a separate Section comprising only the Landscape Softworks and Establishment Works, add at the end of sub-clause (8) excluding the certificate of completion for the Landscape Softworks and Establishment Works. c) For term contracts with separate Works Orders for Landscape Softworks and/or Establishment Works, add at the end of sub-clause (8) excluding the certificates of completion for Works Orders solely for Landscape Softworks and/or Establishment Works. This note 6(c) does not apply to term contracts which deal with Landscape Softworks and/or Establishment Works only. 7. For term contracts, the words different Sections or parts of the Works should be deleted and replaced by the Works under different Works Orders.
12 香 港 特 別 行 政 區 政 府 The Government of the Hong Kong Special Administrative Region 政 府 總 部 發 展 局 工 務 科 香 港 花 園 道 美 利 大 廈 Works Branch Development Bureau Government Secretariat Murray Building, Garden Road, Hong Kong Ref. : DEVB (PS)106/15/4 Group : 6 25 October 2007 Development Bureau Technical Circular (Works) No. 9/2007 Professional Indemnity Insurance for Consultancy Services, Works Contracts Involving Contractor s Design or Independent Checking Engineer s Services Scope This Circular announces a revision of the requirements for Professional Indemnity Insurance (PII) to be taken out where appropriate by consultants for providing consultancy services and by contractors for executing works contracts which involve contractors' designs or independent checking of contractors' designs, including Design and Build (D&B) contracts. Effective date 2. This Circular shall take effect on all public works consultancy agreements and works contracts with date of invitation to tender issued on or after 15 December Effects on Existing Circulars 3. This Circular supersedes Environment, Transport and Works Bureau Technical Circular (Works) (ETWB TC(W)) No. 6/2003 and 7/2005A, which DEVB TC(W) No. 9/2007 Page 1/8
13 are hereby cancelled. 4. This Circular should be read in conjunction with ETWB TC(W) No. 3/1997, ETWB TC(W) No. 25/2004, ETWB TC(W) No. 6/2005 and ETWB TC(W) No. 7/2005. Background 5. For all public works consultancy agreements and contracts involving contractors design or independent checking of the contractors design, relevant parties including consultants, contractors, their designers and independent checking engineers are required under relevant provisions in the respective agreements and contracts to procure PII. 6. Because of the nature of maintenance term contracts, PII requirements do not normally apply. However, if the project officer considers that it is necessary to procure PII for a maintenance term contract, he shall obtain prior approval of an officer of D2 rank or above and assess the requirements in accordance with this TC(W). 7. Notwithstanding the requirements for procurement of the PII, the consultants' and contractors liability shall not be limited. The consultants and contractors shall be required to indemnify the Employer against all damages, losses or expenses arising out of or resulting from any of their negligence in or about the conduct of and performance by the consultants and contractors. In case of a valid claim attributed to the consultants /contractors negligence, the consultants/contractors themselves will have to bear any liability over and above what they can recover from the PII. 8. Following the issue of ETWB TC(W) No. 6/2003, concerns have been raised by consultants and contractors regarding the difficulties encountered in procuring PII to meet the requirements as stipulated in the TC(W). In this regard, a consultant was commissioned by the then ETWB in 2006 to carry out a review on the existing PII requirements, taking into account the prevailing construction and insurance market conditions. 9. Based on the consultant s recommendations, the following major changes in PII procurement requirements are introduced under this TC(W): (a) A risk management approach is adopted in assessing whether PII is required to be procured and, if required, the amount of cover required DEVB TC(W) No. 9/2007 Page 2/8
14 (b) (c) (d) so as to associate the PII requirements with the anticipated risk exposure; PII requirements for contractor s design of temporary works are assessed separately to reflect the different nature and risk exposure of the design of permanent and temporary works; Project specific policy, group/company annual policy and policies with or without aggregated indemnity limit are accepted in order to provide flexibilities for consultants/contractors to comply with the PII requirements; and Requirements for submission of evidence of PII are standardised to assist project officers to check whether the PII procured by consultants/contractors has fulfilled the requirements under the contract. Procedures for Implementing the Requirements on PII 10. The procedures for PII procurement at different stages of project development from pre-tender stage to completion of a consultancy agreement/ expiry of the maintenance period of a works contract are detailed in the following sections and summarized in a flow chart at Appendix A. The key stages are as follows: (a) (b) (c) (d) Pre-tender stage Consultancy/works contract award stage From commencement to 6 years after completion of a consultancy agreement/works contract Upon expiry of the Maintenance Period of a works contract Details of the different stages are elaborated below: (a) Pre-tender Stage At the pre-tender stage of a consultancy agreement or works contract, the project officer shall carry out a risk assessment in accordance with the following procedures for determining whether PII is required to be procured and, if required, the requirements to be incorporated into the relevant tender documents. DEVB TC(W) No. 9/2007 Page 3/8
15 (i) Conduct risk assessment The project officer shall use the proforma at Appendix B1 to assess the risk exposure of the project associated with PII. The result of the assessment is expressed as the risk exposure score. The items to be included for risk assessment may vary according to the scale and complexity of the project and other relevant factors. In determining the probability and consequence of individual risk items, the project officer shall use the risk analysis matrix at Appendix B2. With the derived risk exposure score, the project officer shall then work out the risk level of the project using the conversion table at Appendix B3. (ii) Determine whether PII is required to be procured Based on the estimated consultancy fee or design fee (for works contracts) and the risk level established, the project officer will be able to determine whether PII is required to be procured for the project using the table at Appendix C. (iii) Determine the PII Cover To determine the minimum amount of PII cover required to be procured for the consultancy agreement/works contract, the project officer shall refer to Tables 1 to 3 at Appendix C. For works contract involving temporary works (designed by the contractor or his designer), the project officer shall carry out a separate risk management exercise to determine the PII cover requirements. The higher of the two PII cover requirements (i.e. for temporary works and permanent works, if any) shall be specified in the contract. The project officer shall maintain proper records of the risk assessment processes. (iv) Specify PII Requirements in Tender Documents Apart from stating the PII cover, the project officer shall ensure the following requirements, in particular, the maximum deductible/excess level allowed under the project specific insurance policy and the reinstatement requirements for policy with aggregated indemnity limit are incorporated. DEVB TC(W) No. 9/2007 Page 4/8
16 Period of Insurance PII is a claim-made basis insurance policy. This means that the current liability insurer is only responsible for claims made during the policy period. It is therefore important to enforce the obligations of maintaining PII coverage (for both temporary works and permanent works) for the period from commencement of consultancy agreement or work contracts to 6 years following the date of notification of completion of the consultancy services or the date of the certification of completion of the contract works. In the event of different certificates of completion having been issued for different sections or parts of the contract works, certificate of completion shall mean the last of such certificates (excluding the certificate of completion for the establishment works or the certificate of completion for landscape softworks and establishment works, as the case may be, for works contracts with such provisions). Deductible/Excess Level If a project specific policy is procured, the maximum deductible/excess level allowed under the insurance shall be 20% of the minimum amount of insurance cover. Item in Bills of Quantities For works contracts with PII requirements, the project officer shall include an item, under the Preliminaries section, in the Bills of Quantities in line with the sample given in Appendix D or in accordance with the Handbook for Preparing Bills of Quantities for Civil Engineering Works (i.e. under SECTION 1, PART III, the Subheading SURETIES, SECURITY AND INSURANCES ). Limit of indemnity If the PII policy contains a limit of indemnity, the limit of indemnity shall be consistent with the requirement specified in the Special Conditions of DEVB TC(W) No. 9/2007 Page 5/8
17 Employment/Contract (SCEs/SCCs). The PII policy shall provide cover for any one occurrence or series of occurrences arising out of any one event or each and every claim. The policy limit of indemnity/liability may be aggregated for the period of insurance under the insurance policy. If the insurance policy contains a limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy, and the period of insurance under the insurance policy is twelve months or less, then either: the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall be reinstated in full upon exhaustion of the limit of indemnity by reason of indemnity payments made on account of any claim under the insurance policy until the total amount of indemnity payable by the insurer under the insurance policy reaches 2 times the minimum amount of insurance cover; or the limit of indemnity for any one occurrence or series of occurrences arising out of any one event, or each and every claim or the aggregated limit of indemnity for all claims for the period of insurance under the insurance policy shall not be less than 2 times the minimum amount of insurance cover. If the insurance policy contains a limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy, and the period of insurance under the insurance policy exceeds twelve months, then either: the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall be reinstated in full upon exhaustion of the limit of indemnity by reason of indemnity payments made on account of any claim under the insurance policy until the total amount of indemnity payable by the insurer under the insurance policy reaches 3 times the minimum amount of insurance cover; or the limit of indemnity for any one occurrence or series DEVB TC(W) No. 9/2007 Page 6/8
18 of occurrences arising out of any one event, or each and every claim or the aggregated limit of indemnity for all claims for the period of insurance under the insurance policy shall be not less than 3 times the minimum amount of insurance cover. (v) Special Conditions of Employment/Contract and Notes to Tenderers/ Consultants For all consultancy agreements and works contracts, the SCEs/SCCs as shown in Appendix E shall be included in the consultancy/tender documents as the case may be. A "Note to Tenderers/Consultants" as shown in the same appendix shall also be included to draw tenderers' attention to the requirements of PII under the relevant SCEs/SCCs. (b) Consultancy/Works Contract Award Stage (i) (ii) (iii) After award of the consultancy agreement/works contract, the consultant/ contractor must provide to the Employer within 60 days from the date of commencement of the agreement/notification of acceptance of tender, a Letter of Undertaking in the form stipulated in Appendix F confirming that the PII policy covers the professional activities and duties undertaken for the particular contract/agreement. The consultant/contractor must also provide a certified copy of the full policy of insurance to the Employer unless it can be demonstrated to the satisfaction of the Employer that it is not reasonably practicable to provide the certified copy in which event the consultant/contractor shall provide evidence of insurance in the form of a certificate as stipulated in Appendix G and any information relating to the policy that the Employer may reasonably require. Appendix H contains a checklist to assist the project officer in determining whether the provided policy of insurance and/or certificate of insurance fulfills the requirements under the contract. If a policy that does not cover the requisite period is provided, the consultant/contractor must provide those documents as stipulated above as evidence of insurance within seven (7) days of the insurance having been effected or renewed. DEVB TC(W) No. 9/2007 Page 7/8
19 (iv) Under exceptional circumstances when the required insurance can no longer be procured at reasonable commercial rates, the Employer (an officer of D2 rank or above) may agree to reduce the requirement to that which is available at reasonable commercial rates. In such case, a supplementary agreement is required. Any increased or additional premium required by insurers by reason of the contractor s/consultant s own claim records or other acts, omissions, matters or things particular to the contractor/consultant shall be ignored in determining reasonable commercial rates. (c) From Commencement to 6 years after Completion of Consultancy Agreement/Works Contract From commencement of the consultancy agreement/works contract to 6 years after notified/certified completion of the services/works, the project officer shall use the checklist at Appendix H to check the PII procured and, where appropriate, its proper renewal or extension to determine whether the provided policy of insurance and/or certificate of insurance fulfill the requirements under the contract. (d) Upon Expiry of the Maintenance Period of Works Contract Upon expiry of the Maintenance Period of a works contract, the project officer shall check whether the PII policy period covers the requisite 6-year period after certified contract completion before issuance of the Maintenance Certificate. If the PII policy does not cover the requisite 6-year period, a Maintenance Certificate in the form as included in Appendix I should be used. (MAK Chai-kwong) Permanent Secretary for Development (Works) DEVB TC(W) No. 9/2007 Page 8/8
20 Appendix A DEVB TC(W) No. 9/ Appendix A Page A 1/1
21 Appendix B1 Assessment of Risk Exposure associated with PII RISK EXPOSURE ITEMS PROBABILITY* CONSEQUENCE* SCORE* Design programme / timing flawed Design omissions Use of unreliable site investigation data Design errors Quantities under / over-estimated Limited experience of designer with materials Use of unproven proprietary materials Use of unestablished design/technical principles Failures in Quality Control (e.g., Design review procedures inadequate) Fail to identify the sensitivity to trade / licensing agreement Contractor s alternative proposals accepted without due consideration Failure in resolving interfacing / integrating problem between design disciplines Management systems poorly implemented or inadequate (e.g. Use of superseded documents) Re-design and / or rework arising from design errors or omissions Re-design and / or rework arising from breach of statutory obligations, consents, agreements etc. TOTAL SCORE = RISK EXPOSURE SCORE = (TOTAL SCORE divided by No. of Risk Items) *Refer to Appendix B2 - Risk Analysis for details. (NOTE: a) The above list is by no means exhaustive and the project officer shall also identify and include in the list any other suitable risk items. (Reference can be made to the Risk Management User Manual, Risk Management for Public Works, ETWB, HKSAR, published in June 2005 for more appropriate items) b) For individual risk items with score equal to or higher than 20, the project officer shall draw the attention of senior management and to consider the possibility of adopting other more appropriate measures to mitigate such very high/extreme risk items. ) DEVB TC(W) No. 9/ Appendix B1 Page B1-1/1
22 Appendix B2 Risk Analysis Matrix Probability Consequence Insignificant (1) Minor (2) Moderate (3) Major (4) Catastrophic (5) Rare (1) 1 x 1 = Unlikely (2) Possible (3) Likely (4) Frequent (5) Descriptors Consequence: Insignificant: Negligible financial/safety/environmental consequence Minor: Minor financial/safety/environmental consequence Moderate: Moderate financial/safety/environmental consequence Major: Major financial/safety/environmental consequence Catastrophic: Huge financial/safety/environmental consequence Probability: Rare: May occur only in exceptional circumstances can be assumed not to occur during period of the project Unlikely: Event is unlikely to occur, but it is possible during period of the project Possible: Event could occur during period of the project Likely: Event likely to occur once or more during period of the project Frequent: Event occurs many times during period of the project DEVB TC(W) No. 9/ Appendix B2 Page B2-1/1
23 Appendix B3 Score/Level of Risk Conversion Table Risk Exposure Score Risk Level 1 to 3 Low Risk 4 to 9 Medium Risk 10 to 19 High Risk 20 to 24 Very High Risk 25 Extreme Risk DEVB TC(W) No. 9/2007 Appendix B3 Page B3-1/1
24 Appendix C Estimated Consultancy Fee (Design fee in connection with Works Contracts) Methodology to Determine the PII Cover Level of Risk (Average Score from risk analysis) Low risk Medium Risk High risk Very High Risk Extreme Risk < 1.3M No PII No PII Table 1 Table 1 Table 3 > 1.3M No PII Table 1 Table 2 Table 3 To be specified by DR (See Note 3) (Not less than the Minimum Cover as indicated in Table 3) Type of Service Table 1 Estimated PII Cover (See Note 1) Minimum PII Cover (See Note 2) Feasibility assignments Fee $1M $25M Maximum PII Cover Investigation, design and construction assignments (including quantity surveying assignment) 2 x Fee $5M $75M Design and Build Contracts or contracts including any significant Contractors' Designs/ Alternative Designs Contractors $25M Not applicable Not applicable Designers, if any, appointed by contractors 2 x Fee $5M $75M Independent Checking Engineers or Design Checker (ICE) appointed by contractors 2 x Fee $5M $75M DEVB TC(W) No. 9/ Appendix C Page C 1/2
25 Appendix C Table 2 Type of Service Estimated PII Cover (See Note 1) Minimum PII Cover (See Note 2) Maximum PII Cover Feasibility assignments Fee $2M $50M Investigation, design and construction assignments (including quantity surveying assignment) 2 x Fee $10M $150M Design and Build Contracts or contracts including any significant Contractors' Designs/ Alternative Designs Contractors $50M Not applicable Not applicable Designers, if any, appointed by contractors Independent Checking Engineers or Design Checker (ICE) appointed by contractors 2 x Fee $10M $150M 2 x Fee $10M $150M Table 3 Type of Service Estimated PII Cover (See Note 1) Minimum PII Cover (See Note 2) Feasibility assignments Fee $50M Investigation, design and construction assignments (including quantity surveying assignment) 2 x Fee $150M Design and Build Contracts or contracts including any significant Contractors' Designs/ Alternative Designs Contractors $75M Not applicable Designers, if any, appointed by contractors 2 x Fee $150M Independent Checking Engineers or Design Checker (ICE) appointed by contractors 2 x Fee $150M Notes: 1. Fee is the lump sum fee of the consultancy/construction design/engineering service. 2. The Minimum PII Cover shall be adopted when the Fee renders the Estimated PII Cover being less than the Minimum PII Cover. 3. With the prior approval of a D3 officer or above, the Director s Representative can specify appropriate figure to meet the anticipated risk. DEVB TC(W) No. 9/ Appendix C Page C 2/2
26 Appendix D DRAFT Particular Preamble for the Professional indemnity Insurance Section (XX) Professional indemnity Insurance PROFESSIONAL INDEMNITY INSURANCE Units xx.01 The units of measurement shall be: Professional indemnity insurance for the Works..... item. Itemisation xx.02 Separate items shall be provided for professional indemnity insurance for the Works in accordance with General Principles paragraphs 3 and 4 and the following [Guidance Note: In the case of building contract, delete General Principles paragraph 3 and 4 and.]: Group Feature I 1. Professional indemnity insurance for the Works Professional Indemnity Insurance for the Works xx.03 The item for professional indemnity insurance for the Works shall, in accordance with General Preambles paragraph 2, include for [Guidance Note: In the case of building contract, substitute General Preambles paragraph 2 with the Hong Kong Standard Method of Measurement for Building Works (3 rd Edition Metric February 1979) Section I Clause 9.]: Item Coverage a) procurement of professional indemnity insurance for the Works as specified in SCC Clause { }; b) all fees, premiums, charges for and in connection with the procurement of the professional indemnity insurance. Sample Bill of Quantities for Professional Indemnity Insurance Item Description Quantity Unit Rate Amount No. A. Professional Indemnity Insurance for the Works - Item DEVB TC(W) No. 9/ Appendix D Page D 1/1
27 Appendix E SPECIAL CONDITIONS OF EMPLOYMENT/CONTRACT AND NOTE TO TENDERERS/CONSULTANTS SCE ( ) Professional Indemnity Insurance General Conditions of Employment Clause 47 is deleted and replaced by the following: (1) Without limiting their obligations and responsibilities nor their liability to indemnify the Employer under Clause 22, the Consultants shall effect and maintain with well established insurers of repute, professional indemnity insurance for a minimum amount [ ] in respect of the Services or any part thereof provided by the Consultants, for any one occurrence or series of occurrences arising out of any one event, or each and every claim, from the date of commencement of this Agreement until [ ] years from the date of notification of completion in writing issued by the Director s Representative (hereinafter referred to in this Clause as the requisite period ). The professional indemnity insurance shall be effected with an insurer or insurers acceptable to the Employer. The Consultants shall immediately inform the Employer in writing if such insurance ceases to be available at reasonable commercial rates or otherwise is not maintained in accordance with this Clause or for any reason becomes void or unenforceable. (2) If the insurance policy is project specific, the maximum deductible/excess allowed under the policy shall not exceed 20% of the minimum amount required under sub-clause (1) of this Clause. (3) (a) If (i) the insurance policy contains a limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy, and (ii) the period of insurance under the insurance policy is twelve months or less, then either: (A) (B) (C) the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall be reinstated in full upon exhaustion of the limit of indemnity by reason of indemnity payments made on account of any claim, loss, damage, liability, cost or expense paid or payable under the insurance policy until the total amount of indemnity payable by the insurer under the insurance policy reaches 2 times the minimum amount required under sub-clause (1) of this Clause; or the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall not be less than 2 times the minimum amount required under sub-clause (1) of this Clause; or the limit of indemnity for any one occurrence or series of occurrences arising out of any one event, or each and every claim under the insurance policy shall not be less than 2 times the minimum amount required under sub-clause (1) of this Clause. DEVB TC(W) No. 9/ Appendix E Page E 1/8
28 Appendix E (b) If (i) the insurance policy contains a limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy, and (ii) the period of insurance under the insurance policy exceeds twelve months, then either: (A) (B) (C) the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall be reinstated in full upon exhaustion of the limit of indemnity by reason of indemnity payments made on account of any claim, loss, damage, liability, cost or expense paid or payable under the insurance policy until the total amount of indemnity payable by the insurer under the insurance policy reaches 3 times the minimum amount required under sub-clause (1) this Clause; or the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall not be less than 3 times the minimum amount required under sub-clause (1) of this Clause ; or the limit of indemnity for any one occurrence or series of occurrences arising out of any one event, or each and every claim under the insurance policy shall not be less than 3 times the minimum amount required under sub-clause (1) of this Clause. (4) The Consultants shall provide to the Employer within 60 days from the date of commencement of this Agreement and thereafter, in the case where the insurance policy does not cover the entire requisite period, within 7 days of professional indemnity insurance being effected upon the expiry of the insurance policy: (i) (ii) an undertaking that the current insurance policy complies with the terms in this Clause in Form [ ] in Appendix [ ] to these General Conditions of Employment; and a certified copy of the full insurance policy for the approval of the Employer unless the Consultants can demonstrate to the satisfaction of the Employer that it is not reasonably practicable to provide a certified copy of the full insurance policy in which event the Consultants shall provide a certificate in Form [ ] in Appendix [ ] to these General Conditions of Employment issued by the insurer or insurance broker of the insurance policy and any information relating to the insurance policy that the Employer may reasonably require. (5) If the Consultants shall fail upon request to produce to the Employer satisfactory evidence that there is in force professional indemnity insurance required under this Clause, the Employer may effect and keep in force any such insurance and pay such premium as may be necessary for that purpose. The Employer shall be entitled to deduct such premium, together with expenses incurred, in accordance DEVB TC(W) No. 9/ Appendix E Page E 2/8
29 Appendix E with the provisions of Special Conditions of Employment Clause [ ] 1 recover such amount as a debt due from the Consultants. and/or to (6) In determining the period of insurance under an insurance policy for the purpose of this Clause, any extension or renewal of the insurance policy shall be treated as a separate insurance policy and shall not have the effect of extending the period of insurance. 1 Insert the number of the following Special Condition of Employment relating to setting off money due to the Government from defaulting Consultants promulgated in SETW s memo of 2 June 2003, ref. (59) in ETWB(PS) 106/11 Pt 19: SCE [ ] (1) All damages, losses, costs, expenses, debts or sums for which the Consultants are liable to the Employer under any provision of this Agreement may be deducted by the Employer from monies due to the Consultants under this Agreement and the Employer shall have the power to recover any balance not so deducted from monies due to the Consultants under any other Government consultancy agreement between the Employer and the Consultants. (2) All damages, losses, costs, expenses, debts or sums for which the Consultants are liable to the Employer under any provision of any other Government consultancy agreement between the Consultants and the Employer may be deducted by the Employer from monies due to the Consultants under this Agreement. DEVB TC(W) No. 9/ Appendix E Page E 3/8
30 Appendix E SCC (A) Professional Indemnity Insurance (1) Without limiting its obligations under the Contract, the Contractor shall effect and maintain, with well established insurers of repute, professional indemnity insurance for a minimum amount of [state amount] in respect of the design of any part or all of the Works carried out by or on behalf of the Contractor pursuant to the Contract for any one occurrence or series of occurrences arising out of any one event, or each and every claim, for a period from the date of notification of acceptance of Tender until [ ] years after the date of the certificate of completion of the Works. (2) The Contractor shall procure that the Designer/designer [see Note 4] and Independent Checking Engineer/Design Checker/independent checking engineer [see Note 5] appointed or engaged by the Contractor in connection with the design or checking of the design of any part or all of the Works, shall effect and maintain, with well established insurers of repute, professional indemnity insurance for a minimum amount of [state the amount] in respect of the design or checking of the design of any part or all of the Works, for any one occurrence or series of occurrences arising out of any one event, or each and every claim for a period from the respective dates of commencement of appointment or engagement of the Designer/designer [see Note 4] and Independent Checking Engineer/Design Checker/independent checking engineer [see Note 5] until [ ] years after the date of the certificate of completion of the Works. (3) The professional indemnity insurance referred to in sub-clause (1) or (2) of this Clause shall respectively be effected with an insurer or insurers acceptable to the Employer. The Contractor shall immediately inform the Employer in writing if such insurance ceases to be available or otherwise is not maintained in accordance with this Clause or for any reason becomes void or unenforceable. (4) If the insurance policy effected pursuant to sub-clause (1) or (2) of this Clause is project specific, the maximum deductible/excess allowed under the insurance policy shall be limited to a maximum of 20% of the minimum amount required under sub-clause (1) or (2) of this Clause, as the case may be. (5) (a) If (i) the insurance policy effected pursuant to sub-clause (1) or (2) of this Clause contains a limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy, and (ii) the period of insurance under the insurance policy is twelve months or less, then either: (A) the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall be reinstated in full upon exhaustion of the limit of indemnity by reason of indemnity payments made on account of any claim, loss, damage, liability, cost or expense paid or payable under the insurance policy until the total amount of indemnity payable by the insurer under the insurance policy reaches 2 times the minimum amount required under sub-clause (1) or (2) of this Clause, as the case may be; or DEVB TC(W) No. 9/ Appendix E Page E 4/8
31 Appendix E (B) (C) the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall not be less than 2 times the minimum amount required under sub-clause (1) or (2) of this Clause, as the case may be; or the limit of indemnity for any one occurrence or series of occurrences arising out of any one event, or each and every claim under the insurance policy shall not be less than 2 times the minimum amount required under sub-clause (1) or (2) of this Clause, as the case may be. (b) If (i) the insurance policy effected pursuant to sub-clause (1) or (2) of this Clause contains a limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy, and (ii) the period of insurance under the insurance policy exceeds twelve months, then either: (A) (B) (C) the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall be reinstated in full upon exhaustion of the limit of indemnity by reason of indemnity payments made on account of any claim, loss, damage, liability, cost or expense paid or payable under the insurance policy until the total amount of indemnity payable by the insurer under the insurance policy reaches 3 times the minimum amount required under sub-clause (1) or (2) of this Clause, as the case may be; or the limit of indemnity in the aggregate for all claims for the period of insurance under the insurance policy shall not be less than 3 times the minimum amount required under sub-clause (1) or (2) of this Clause, as the case may be; or the limit of indemnity for any one occurrence or series of occurrences arising out of any one event, or each and every claim under the insurance policy shall not be less than 3 times the minimum amount required under sub-clause (1) or (2) of this Clause, as the case may be. (6) (a) The Contractor shall provide to the Employer within 60 days from the date of notification of acceptance of Tender and thereafter, in the case where the insurance policy effected pursuant to sub-clause (1) of this Clause does not cover the entire period of insurance required under that sub-clause, within 7 days of professional indemnity insurance being effected upon the expiry of the insurance policy: (i) (ii) an undertaking that the current insurance policy effected pursuant to sub-clause (1) of this Clause complies with the terms in this Clause in Form [ ] in Appendix [ ] to these Special Conditions of Contract; and a certified copy of the full insurance policy effected pursuant to DEVB TC(W) No. 9/ Appendix E Page E 5/8
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