Contracts are an essential part of local government operations and come in varying forms of complexity and type, from the construction of a major asset or supply of stationery, contracts are part of day-to-day operations. Contracts can create unexpected risks to members if they’re not managed well.
This is why we’ve developed the ‘Guide on contract risks’ to help local governments better understand the key mechanisms and common approaches to allocating risk in contracts. It highlights some of the crucial features of a contract and the important clauses that often crop up whenever the parties to a contract discuss risk.
A contract is the main tool to regulate the relationship between a local government and their service providers, suppliers or contractors.
The guide provides examples of contractual risks that members should be aware of during the contract lifecycle process. It explains the relationship between contractually assumed liability and general liability risks which exist irrespective of a contract.
You can view the guide on the LGIS website lgiswa.com.au under Risk management < Liability risk management.
Western Australia is home to 129 public aquatic facilities and thousands more school, hotel/motel and back yard pools. While many know of the risks within these facilities such as lack of patron supervision, inappropriate use of shallow water and issues associated with slips, trips and falls – non-compliance with equipotential bonding (earthing) requirements can present a relatively unknown or hidden risk.
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Every contract has an element of risk. It can be related to performance, finance, reputation or legal – in the sense that it can create a liability. Managing risk in a contract is always easier when it is transparent, clearly understood and acceptable to the parties involved. It is always better to enter into a contract with eyes wide open; understanding when, how and where you have assumed, shared or transferred liability risk is fundamental to effective management of the contract.
The starting point for any assessment is the risk associated with the performance of the contract. If a risk assessment is not undertaken, it will be more difficult for the local government member to make informed decisions on whether to accept some risks or seek to reduce, remove, share or transfer those risks. Carrying out a robust risk assessment in advance of agreeing a contract will significantly help your local government to minimise any potential liabilities associated with the risks that may be identified.
LGIS can assist members to understand the implication of the risks identified in the context of a particular contract. Specifically, where risks have the potential to create a liability for the member, LGIS can offer contract risk advice on appropriate measures and options to remove, reduce, transfer, share or retain the liability risk. We can advise on the insurance, indemnities and limitation of liability clauses.
To get a copy of the guide please visit the LGIS website to discuss assistance that can be provided or please contact the LGIS risk team.
In 2022/23 LGIS received over 2,300 claims and paid out over $43.8 million. It’s a similar story most years with LGIS handling more than 2,000 claims across property, liability, workers’ compensation, motor and volunteer bushfire fighter protection.
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