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Revised SCE( ) at App E to TCW 9/2007, page 1 of 3

DEVB TC(W) No. 9/2007 – 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 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) 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

(B) 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

(C) 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.



(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:


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





(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) 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

(ii) 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



with the provisions of Special Conditions of Employment Clause [ ]1 and/or to recover such amount as a debt due from the Consultants.

(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.”

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:


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

(B) 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


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:




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



(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) 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

(ii) 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

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:


sub-clause (2) of this Clause complies with the terms of this Clause in Form [ ] in Appendix [ ] to these Special Conditions of Contract;


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.

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”.

DEVB TC(W) No. 9/2007 Page 1/8

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 2007. 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

香港特別行政區政府 The Government of the Hong Kong Special Administrative Region


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


so as to associate the PII requirements with the anticipated risk exposure;

(b) 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;

(c) 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

(d) 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) Pre-tender stage (b) Consultancy/works contract award stage (c) From commencement to 6 years after completion of a consultancy

agreement/works contract (d) 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.


(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.


• 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


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


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) 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.

(ii) 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.

(iii) 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.


(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)

Appendix A

DEVB TC(W) No. 9/2007 - Appendix A Page A 1/1

Appendix B1

DEVB TC(W) No. 9/2007 - Appendix B1 Page B1-1/1

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. )

Appendix B2

DEVB TC(W) No. 9/2007 - Appendix B2 Page B2-1/1

Risk Analysis Matrix

Consequence Probability

Insignificant

(1) Minor

(2) Moderate

(3) Major

(4) Catastrophic

(5)

Rare (1) 1 x 1 = 1 2 3 4 5

Unlikely (2) 2 4 6 8 10

Possible (3) 3 6 9 12 15

Likely (4) 4 8 12 16 20

Frequent (5) 5 10 15 20 25

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

Appendix B3

DEVB TC(W) No. 9/2007 – Appendix B3 Page B3-1/1

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

Appendix C

DEVB TC(W) No. 9/2007 - Appendix C Page C 1/2

Methodology to Determine the PII Cover

Level of Risk (Average Score from risk analysis)

Estimated Consultancy Fee (Design fee in connection with Works Contracts)

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)

Table 1 Type of Service

Estimated PII

Cover (See Note 1)

Minimum PII Cover

(See Note 2)

Maximum PII Cover

Feasibility assignments

Fee $1M $25M

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

Appendix C

DEVB TC(W) No. 9/2007 - Appendix C Page C 2/2

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


2 x Fee $10M $150M


Contractors $50M Not applicable Not applicable


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


2 x Fee $150M


Contractors $75M Not applicable


2 x Fee $150M


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.

Appendix D

DEVB TC(W) No. 9/2007 - Appendix D Page D 1/1

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 (3rd 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 No.

Description Quantity Unit Rate Amount

A.

Professional Indemnity Insurance for the Works

- Item

Appendix E

DEVB TC(W) No. 9/2007 - Appendix E Page E 1/8

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:


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





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(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:


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


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



(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) 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

(ii) 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

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with the provisions of Special Conditions of Employment Clause [ ]1 and/or to recover such amount as a debt due from the Consultants.

(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.”

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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:



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(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:







(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:


sub-clause (1) of this Clause complies with the terms in this Clause in Form [ ] in Appendix [ ] to these Special Conditions of Contract; and


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(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 insurance policy:


sub-clause (2) of this Clause complies with the terms of this Clause in Form [ ] in Appendix [ ] to these Special Conditions of Contract;



(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 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

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shall be treated as a separate insurance policy and shall not have the effect of extending the period of insurance.

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 for Establishment Works, add at the end of

sub-clause (8) “excluding the certificate of completion for Establishment Works”. b) For a works contract with a separate Section for Landscape Softworks and Establishment Works,

add at the end of sub-clause (8) “excluding the certificate of completion for Landscape Softworks and Establishment Works”.

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Note to Tenderers/Consultants Tenderers'/Consultants' attention is drawn to SCC/SCE [ ] regarding the professional indemnity insurance requirement under the works contract/design and build contract/agreement. Please also refer to DEVB TC(W) No.9/2007 for details of the above.

Appendix F

DEVB TC(W) No. 9/2007 - Appendix F Page F 1/1

TO THE GOVERNMENT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION Dear Sirs, Insert name of contractor / consultant Insert contract / agreement number and details Insert policy no. and name of insurer LETTER OF UNDERTAKING We hereby undertake that the above professional indemnity insurance policy effected pursuant to *[sub-clause (1)/(2) of Special Conditions of Contract Clause { } of the above Contract/sub-clause (1) of General Conditions of Employment 47 of the above Agreement] complies with the terms of *[the said Special Conditions of Contract Clause { } /the said General Conditions of Employment Clause 47]. Yours faithfully, * Delete as appropriate.

Appendix G

DEVB TC(W) No. 9/2007 - Appendix G Page G 1/1

CERTIFICATE OF INSURANCE TO THE GOVERNMENT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION Dear Sirs, Insert NAME OF INSURED Insert CONTRACT / AGREEMENT NUMBER

TITLE DATE PARTIES: The Government of the Hong Kong Special Administrative Region (“the Employer”) and [ ] (* “the Consultant” / “the Contractor”)

Professional Indemnity Insurance

We *[are the Insurer / act as Insurance Broker] to *[“the Consultant” / “the Contractor”] above and confirm that the Insurance Policy with main terms detailed below has been effected for the period __________ to ______________ and that all invoiced premium has been paid *[and has been/will be settled with the Insurers]. Main terms of the Insurance Policy are as follows: Insurers/Security: Insert Insurer Name(s) Policy No.: Insert Policy Number Insured Business/ Project: Insert details Retroactive Date (if any): Professional Business/ Firm’s Business: Insert Business Description/Professional Activities as shown on the policy

schedule. Sub Consultants: Confirm that the policy extends to cover liability attaching to the Insured arising

out of the services to be provided by any sub-consultants appointed by the Insured.

Territorial Limits: Confirm that clauses on Territorial Limits include the coverage of Hong Kong

and any other places where the work or design work may be carried out. Jurisdiction: Confirm that the policy covers claims brought against the Insured under the Law

of HKSAR and in the Courts of the HKSAR. Indemnity Limit: HK$ _____________ any one claim and/or

HK$ _____________ in the aggregate and/or Reinstatement(s) up to total HK$ _____________.

Excess: [For Project Specific policy only] Confirm that the Excess / Deductible level does not exceed 20% of the minimum amount stated in *[General Conditions of Employment Clause 47 of the above Agreement /Special Conditions of Contract Clause [ ] of the above Contract]

Exclusions: Confirm that the policy contains no exclusions other than the following list: <List

the headings of all exclusions contained in the policy> Yours faithfully For and on behalf of (insert name of Insurer / Insurance Broker as applicable) * Delete as appropriate.

Appendix H

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PII policy Checklist NAME OF INSURED Check to ensure that this complies with the requirement under Contract. CONTRACT NUMBER AND DETAILS Check to ensure that this aligns with the signed Contract and the Scope of Work included in such. PERIOD If the period does not align with the date of notification of acceptance then check to ensure there is a retroactive date that aligns with the contract commencement. If an Annual Programme is being evidenced then check with the contractor / consultant to ensure that suitable cover was in place at contract commencement. (Because PII is of claim-made basis and backdating may not be practical, it is advisable to remind the contractor / consultant at least fourteen (14) days prior to each renewal. The contractor / consultant must provide a renewal certificate within seven (7) days of each renewal.) COVER (If copy policy is available) / Insured Business or Project / Professional Business Check to ensure that the required coverage will be provided or the Business Description/Professional Activities covers the Services provided by the consultant / design carried by or on behalf of the contractor. The following clauses are NOT the typical or standard insuring clauses but instead serve as a reference for the project officers to determine whether the provided policy of insurance and/or certificate of insurance fulfill the requirements under the contract:

[The Company / Insurer] agrees to indemnify or pay on behalf the Insured against legal liability for any Claim for compensation first made against the Insured during the Period of Cover and which is notified in writing to [The Company / Insurer] during the Period of Cover, for breach of professional duty in the conduct of the Professional Business Practice carried on by or on behalf of the Insured by reason of any negligent act, error or omission committed or alleged to have been committed on the part of the Insured. [The Company / Insurer] agrees to pay, the Costs and Expenses incurred with the written consent of [The Company / Insurer] in the defence or settlement of any Claim covered by this Policy. Provided always that such Costs and Expenses shall be part of, and not in addition to, the Limit of Indemnity.

TERRITORIAL LIMIT Check to ensure this covers Hong Kong and any other places where the work or design work may be carried out. INDEMNITY LIMIT Request the contractor / consultant to state in the indemnity limit and check to ensure this complies with the contractual requirement. If the limit is aggregated, requirements in line with or of same effect as contained in this TC(W) are necessary. EXCESS [for Project Specific policy only]. Check to ensure these are reasonable and in line with this TC(W), as applicable. INSURER (S)

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Check to ensure that the Insurer(s) is an authorized insurer, Lloyd’s or an association of underwriters approved by the Insurance Authority in Hong Kong or in other jurisdictions where the insurance is effected. CONDITIONS / EXCLUSIONS (if copy policy is available) or EXLUSIONS listed Check to ensure that the conditions/exclusions or exclusions listed should not restrict coverage in respect of the work being undertaken. For easier reference the market exclusions contained in the PII policy wordings, which are commonly found in the prevailing insurance market conditions, include but are not limited to: (a) Asbestos Exclusion (b) Prior Circumstances / Matters Exclusion (c) Radiation and Nuclear Exclusion (d) War and Terrorism Exclusion (e) Warranty, guarantee or contractual obligation Exclusion (f) Liquidated Damages / Penalties Exclusion (g) Liquidated Damages/Exemplary Damages/Fines and Penalties (h) Trading Debts/Commercial Risks (i) Related Party/Controlling or Financial Interest PREMIUM Check to ensure that all of the invoiced premium has been paid.

Appendix I

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MAINTENANCE CERTIFICATE Dear Sir, Contract No. (Title) Maintenance Certificate of the Works In accordance with Clause {Insert Number} of the General Conditions of Contract, I hereby certify that you, as the Contractor for the above Contract, have completed your obligation to execution the Works on (date), but not continuing obligations under the Contract including without limitation those under Special Conditions of Contract [ ] Professional Indemnity Cover. Yours faithfully. ………………………………… The Engineer for the Contract c.c. D of A CTA (F), DEVB Head of Office/Branch/Region STA (or responsible Accounts Officer) SE/CA (or responsible Contract Adviser) Engineer’s Representative

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