The issue of unlimited liability in government contracting has been high on the Australian Information Industry Association’s (AIIA) agenda for a number of years. Government contracts are crucial to the growth of many local ICT companies, providing the opportunity to enter new markets, work on innovative solutions and obtain internationally recognisable reference sites.

The AIIA has been a long-term supporter of strategic sourcing of ICT functions, as it allows governments to focus on their core mission and lets the ICT industry deliver. However, there are a number of issues preventing ICT companies, particularly small-to-medium enterprises (SMEs), from gaining strategically important government contracts.

In the past many companies have been reluctant to bid for government contracts because of the onerous implications of unlimited liability.

In November 2005 the Department of Communications, Information Technology and the Arts released a draft report “Guide to Limiting Supplier Liability in ICT Contracts for Australian Government Agencies”. This recommends that suppliers’ liability should be capped at appropriate levels when purchasing ICT goods and services and that “uncapped liability should be required only when it is justified by the size, complexity or inherent risk of a project”.

Risk assessment will become a vital part of negotiating liability limits, with the government developing a structured framework to determine potential risks. These new measures will provide greater opportunity for companies to bid and gain that all-important first government customer. The decision to cap liability for most ICT contracts is a crucial step towards ensuring government receives innovative, high-value bids for ICT goods and services from a competitive field of suppliers.

The government’s announcement follows sustained pressure from the AIIA since the 2004 release of “Better Practice, Better Outcomes”, the association’s report into the effect of government liability policies. It argues that limiting liability will result in cost savings, improved project management and better project outcomes. Many of the recommendations from the report have been incorporated into the draft guide.

The AIIA is particularly pleased with the progress being made on this issue. The development of a new government position is critical in our efforts to ensure Australia is not only a good user of ICT but also a good producer. Of course the “devil is in the detail” and there will still be need for further negotiation before the guide is finalised (the AIIA is currently preparing a submission in response to the draft). There is still, for instance, significant flexibility for parties to determine exactly what is “justified by the size, complexity and inherent risk of a project”.

The commercialisation of intellectual property (IP) is also firmly on AIIA’s agenda. IP remains one of the most contentious issues in negotiating contracts, as IP in ICT has a relatively short lifespan and any commercialisation opportunities must be acted on as early as possible.

The Attorney General’s Department is currently conducting a whole-of-government review of intellectual property. While this is important, we hope that the department will move quickly to complete this review as it will fulfil a much delayed election commitment to this industry.