In March 2021, the Government announced that they would be setting up a national infrastructure bank*.
Legal indemnity

The bank will provide loans to the public and private sector and will be used to fund local infrastructure projects. Ultimately, £40bn will be available with the first £4bn being made available to the public sector.

We have already seen a desire by contracting authorities to become more involved with construction projects through the placement of owner controlled insurance programmes (OCIP). OCIP’s are essentially the same as a contractor controlled insurance programme (CCIP), but placed and managed by the contracting authority. In taking control of the project insurance, the contraction authority can be certain that they achieve best value in the placement of the programme, and at the same time significantly reduce the impact of a contractor default. A major cause of project delay and overspend in the past few years.

One area not generally covered by OCIP’s or CCIP’s is the financial impact of a procurement challenge during the project. Whilst relatively rare, there have been occasions where projects have suffered significantly from a failure to follow procurement law. In the case of Faraday Development Ltd v West Berkshire Council [2018] a voluntary transparency notice (called a VEAT) was issued to deal with the Authorities belief that part of the contract did not require advertising in accordance with the procurement regulations. However, the courts held that the VEAT contained insufficient detail and the contract was therefore deemed ineffective.

The implications of a contract being classed as ineffective are significant and can result in project delay and additional costs. This matter has now been address by Gallagher’s Legal Indemnities team with the development of an insurance solution to offer protection in the event of a procurement challenge being lodged during a construction project.

The solution provides indemnity for:

  • Abortive costs, i.e. costs of materials expended and/or works that have been undertaken / legal fees and professional fees.
  • Increased costs associated with a delay in the development, such as increased finance costs.
  • The cost of contractual liabilities incurred.

Each policy is underwritten on a bespoke basis to account for the fact that no one project is ever the same.

Please contact us if you would like to find out more. In the meantime, please download our Legal Indemnity Guide. The download provides some useful information on the world of legal indemnities and some interesting case studies which you may find helpful.