Australia: Government ICT Policy: Limited Liability, Risk Management, and What it Means For You

Key Points

  • If you are involved in negotiating ICT contracts with suppliers, then recently announced changes to Commonwealth and Victorian government ICT policy could affect the way you approach limitation of contractors' liability, project risk and insurance, and even ownership of intellectual property.
  • In all cases, the critical tool informing your decisions will be risk assessment.

The Commonwealth Government released the draft Guide to Limiting Supplier Liability in ICT Contracts for Australian Government Agencies for consultation late last year. Contained within the Guide is the draft Depart-ment of Finance and Administration Circular, Limited Liability in Information and Communications Technology Contracts. The draft Circular is official confirmation of the policy that Commonwealth agencies should not seek unlimited liability from information and communications technology (ICT) suppliers in most cases.

The draft policy followed the announcement by the Victorian government that it would amend whole of government ICT policies to alleviate three of the key sticking points in ICT negotiations and contracting - unlimited liability, insurance levels and ownership of intellectual property - a measure confirmed with the release of the Victorian Government ICT Industry Plan 2005-2010.

The coming change in Victorian state government policy on ICT contracts

In late 2005, the Victorian government announced that it would implement four new initiatives in its ICT contracting practice to encourage innovation and reduce the cost to business of working with government. The initiatives were set out in the Plan and will involve:

  • establishing a default position under which the contractor (rather than the government) owns intellectual property in ICT developed under contract;
  • re-focusing liability in ICT contracting on actual project risk, and so minimising the need for ICT contractors to bear unlimited liability;
  • re-aligning the types and levels of insurance required in ICT contracts with actual project risks; and
  • (as a logical fourth step) ensuring that tender documentation specifies the expected contract provisions for dealing with these issues or indicates that the provisions will be negotiated with the contractor.

The indications are that a central feature of the new policy provisions will be the need for risk assessment at the procurement planning stage. This will allow agencies to assess the risks involved in a project and then request tenders which comply with appropriate contractual provisions. This aspect of the policy will be no surprise to procurement officers nationally, as a key feature of state and territory government procurement policy is risk management.

The change in Commonwealth government policy on capping liability in ICT contracts

The focus of the draft Commonwealth policy is contractual agreement to limit the sum that may become payable by a party to a contract if certain events happen. The draft policy encourages agencies to use liability capping clauses in most ICT contracts, including for the use of hardware, software and services to create, store, retrieve, transfer, process or present information.

Previously, Commonwealth government policy required unlimited liability of all suppliers, including ICT suppliers, unless there was a compelling reason to limit a supplier's liability in a particular case. The draft Circular states that the liability of ICT suppliers contracting with Commonwealth agencies should, in most cases, be capped at appropriate levels.

There has been no change to Commonwealth government policy on capping liability in non-ICT contracts. Unless there is a compelling reason to cap such suppliers' liability, unlimited liability will still be required.

The key features of the new Commonwealth policy – what to cap, in which contracts, and how

The Guide includes model liability clauses based on the GITC4 contract format. The effect of those clauses is to cap the liability of both the Common-wealth and the supplier for certain types of loss or damage. Some types of loss or damage will not – and according to the policy, should not - be subject to the cap. Loss or damage arising to a third party, or from personal injury, unlawful or illegal acts, damage to tangible property, and breach of intellectual property, privacy, confidentiality and security obligations should normally not be capped.

Importantly, unlimited liability – that is, no liability cap - may still be required as part of ICT contracts where it is justified by the size, complexity or inherent risk of a project. This is because the general principle behind the Commonwealth approach to risk management has not changed; subject to the new policy, risk should be borne by the party best placed to manage it, and the Common-wealth should not accept risks which another party is better placed to manage.

So, how do you navigate through this liability maze?

First, don't panic! The new policy embodies two aspects of contracting with ICT suppliers that have not changed: value for money and risk management. Your aim in any ICT procurement is still to achieve the first, and you do it through the second. And, as always, limitation of a supplier's liability, or "capping", needs to be considered as part of the value for money assessment of a supplier's response.

Both the Circular and the Guide contain steps that you need to follow in the case of all ICT procurements. The upshot of the steps is that a decision to cap liability - even where the cap is a direct result of the new policy and is expressed in the words of the model clauses - must be based on a risk assessment. The purpose of the risk assessment is to enable you to determine the amount of the cap, or for those really large, complex or risky projects, whether a cap is appropriate at all. Accordingly, the risk assessment should initially be conducted when you are planning your procurement. You can then include the cap in your approach to the market, and the relevant clauses with the draft contract that accompanies it.

Because risk assessment (and mitigation) is central to the new policy and is the critical tool informing agency decisions to limit liability, the Guide contains tables of liabilities and examples of common ICT risks and their treatment that can assist you to determine the level of an appropriate cap.

What all agencies should do in response to the draft policies

ICT suppliers, aware of the proposed changes in the Commonwealth and Victorian government spheres, may already be seeking contractual provisions which reflect the changing government policies. Such requests need to be very carefully managed by agencies.

In the Commonwealth case, some of the model clauses will almost certainly be the subject of extensive negotiation, since the draft policy does not appear to mandate the use of the model clauses. This includes the exclusion of so-called "consequential loss", and a release from liability caused by errors / omissions in agency-supplied information. Accordingly, you should seek legal advice on the model clauses, including how to adapt them for use with your documentation. Legal advice – and even further risk assessment - will be especially important if a supplier's response to request documentation includes a statement of non-compliance regarding your preferred liability clauses. In particular, agencies should review their ICT request documentation and contracts to include provision for capping liability in accordance with the new policy, and should make sure that their risk management training / tools are appropriately updated.

For all Victorian and Commonwealth agencies, now is a good time to start reviewing practices, internal policies, and procurement and contracting documentation in preparation for compliance with the final version of the Circular and Guide (in the case of the Commonwealth), and with the changes to procurement policies (in the case of Victoria). The policies express earlier Victorian and Commonwealth government commitments to the Australian ICT industry. So, the key features of the policies will almost certainly continue into their final versions.

For all other State or Territory government agencies, be aware that the changes happening in the Commonwealth and Victorian spheres may impact on the way that ICT suppliers, especially those operating nationally, approach negotiation of liability, intellectual property and insurance provisions in contracts. Other state and territory governments may also be seeking to make similar policy changes to those made by the Commonwealth and Victorian governments.

Where you can get more information

The final version of the Commonwealth Circular and Guide are due out mid-year. A revised suite of GITC contracts is expected at around the same time. The draft Guide and Circular are available through the Department of Communications, IT and the Arts (DCITA) website by clicking here.

You can access the Victorian Government ICT Industry Plan 2005-2010 through the Victorian government's 'Multimedia Victoria' website at:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.