BRR: We're speaking with Linda Richardson. She's the National Practice Leader Commercial with the Australian Government Solicitor in Canberra. Welcome, Linda.
LR: Thanks, David.
BRR: Linda, one of the commitments coming into the election of the Rudd Government was to bring in measures to make it easier for small business to do business with the Commonwealth. What sort of progress has been made to date?
LR: Well, the Department of Innovation has really been working hard on this one. In 2008, they commenced consultation with small business to understand what issues needed to be addressed. Two related issues emerged: first, small business felt that a disproportionate level of risk was being transferred to small business contractors in Commonwealth transactions and, second, they felt that contractors were being required to take out excessive amounts of insurance. This really wasn't due to Commonwealth policy because Commonwealth policy clearly states that agencies should not inappropriately transfer risks to suppliers. So it seemed to be more of a case of a lack of understanding as [to] how to assess risk relating to contracts.
BRR: So is that, I guess, resulting in contractors having to either try to price that into their contracts or were they just wearing the increased costs?
LR: I think, in a lot of cases, small business found it impossible to find the insurance at all.
BRR: Oh, right.
LR: There's been quite a lot of tightening of the insurance market, especially since September 11, so, you know, often it was a case that small business couldn't meet the requirement. But, yes, where they were able to find the insurance, it was at greater cost and that would make them dearer or they would have to absorb that cost themselves. So really what the Department of Innovation thought to do was to develop some material to help Commonwealth contracting officers to assess risk properly and that's when they called AGS in, to help them develop the liability risk assessment guide.
BRR: What's in that guide and how does it help?
LR: The guide comprises three parts. Firstly, there's a methodology for assessing liability risk. Secondly, there are case studies to show how risk assessments can be used in transactions. And then, lastly, there's a model liability clause that can be used in contracts.
BRR: So businesses can actually look at those case studies and compare them to what, maybe, they are contracting for and it's a bit of a direct comparison, hopefully?
LR: That's right. So they can use those case studies and perhaps say to the Commonwealth department that they're negotiating with, 'Well, look, you know, we fall within this case study, so why doesn't our liability clause look a bit like this one?'
BRR: Does the guide apply across all, across the board for all industry sectors and all industry sizes?
LR: Well, the guide was developed because of problems faced by small business but it's not actually small-business-specific. The model clause is suitable for less complex procurement. The only exception really is ICT contracts as there's separate Commonwealth policy for ICT contracts.
BRR: So that's your information, communications technology contracts?
LR: Yes, that's right.
BRR: And, when you say 'model clause', what do you mean by a 'model clause'?
LR: It's really standard language for a liability clause in a contract that can be used in any contract and the clause has two parts. The first is an explanation of how liability will be apportioned between the two parties and then the second part is a simple indemnity clause.
BRR: When was the guide developed?
LR: Over the last year and it was launched in May this year.
BRR: Have you got a sense of whether the guide's having a positive impact? What's the feedback been like?
LR: Well, it has been early days since the guide's been published but feedback from small business has been very positive, especially for the model clause and the guidance on insurance. And I've also had feedback from Commonwealth procurement officers who are finding the guide very helpful.
BRR: Some useful insights. We'll leave it there. Thank you again for your time today, Linda.
LR: Thank you.
BRR: That was Linda Richardson, National Practice Leader Commercial for the Australian Government Solicitor in Canberra.