Dáil Éireann Debate, Wednesday - 25 February 2026
95. Deputy Cian O'Callaghan asked the Minister for Public Expenditure, Infrastructure, Public Service Reform and Digitalisation his view on what is termed ‘The 1% Clause’ in public sector contracts, namely that a company, if found to be just 1% liable, can be held 100% liable for the financial fallout of a defect in a project; and if he will make a statement on the matter. [15382/26]
Amharc ar fhreagraThere are no “last man standing” clauses and “1%” clauses in public contracts.
It is not public contracts that allow for a ‘last man standing’ approach but rather the absence of a provision in a contract to prevent the application of the Civil Liability Act
A Net Contribution Clause (NCC) is a clause agreed in a contract between parties which, in the case of wrongdoing, limits the liability to that share of any total liability for the same damage for which the party itself is responsible.
Multi-party disputes are common in the construction industry given the number of different parties engaged on a project. The Civil Liability Act 1961 provides that where two or more defendants are concurrent wrongdoers, they are fully liable for the damage suffered by the plaintiff.
This means that in the event that one or more of the defendants are found liable by the court and one or more of the defendants is unable to meet the judgment against it for its portion of the damages caused, the other defendants, i.e. those that are joined in any action, will be liable for the full amount and not just their own respective portion.
NCCs are commonly requested by designers in their professional appointments and collateral warranties with clients in order to overcome the provisions of the Civil Liability Act 1961, set out above.
My Department has taken a number of measures to address the concerns of the industry with respect to excessive liability being placed on them through public contracts. These include:
• The introduction of liability caps into consultancy and works contracts which gives certainty as the extent of liability a party engaged by the state on a consultancy or construction contract is expected to bear.
• Guidance has been published for contracting authorities on what are appropriate levels of liability to apply in contracts and proportionate levels of insurance to seek.
• Provisions have also been included to address situations where a consultant or contractor (operating under an existing contract) can only obtain a level of insurance cover that is lower than is contractually obliged.
The measures focussed on ensuring that otherwise capable and competent consultants and contractors are not excluded from procurement competitions as a result of the reduced level of professional indemnity insurance cover that is available in the market.
As part of the consultation under by my Department industry stakeholders and insurers were advised that it would not be recommending the introduction of net contribution clauses into the consultancy and public works contracts for the following reasons:
• It was felt that the measures introduced in 2022 and in particular the introduction of limits on liability went a significant distance towards improving the risk position in public consultancy and construction contracts.
• It would not be appropriate for one arm of the state to seek to counter the prevailing public policy under the Civil Liability Act by including provisions in standard form template contracts to limit its impact.
• All of the members of the project team engaged by the public sector undergo a pre-qualification process where their financial capacity is considered under a range of different sub-criteria which include their capacity to obtain insurance at specified levels. The technical capability criteria also investigate the prospective project member’s track record in delivery. As a result there is a reasonably high level of confidence in the capacity of the tendering field to deliver a project.
• The conditions of contract governing the engagement of consultants and contractors published under the Capital Works Management Framework all include obligations on the executing parties to maintain insurance at the specified levels for the duration of the contract.
• Where correctly implemented, a robust inspection regime for project team members and assigned certifiers engaged on public works projects, combined with the provisions set out in Clause 8 Quality, Testing and Defects of the public works contracts should ensure that the risk of claims on insurance is mitigated to the greatest degree possible.
• Where issues of negligence do arise, taxpayers would expect that the state should be in a position to recover losses where there is insurance available.
There are many reasons as to why firms choose to participate (or not) in a public contract, it may depend on the specialist area, the size, scope and timing of the service requirement or indeed the level of work and liabilities that they have already on their books.
My department has taken significant steps in striking a fair risk balance in public contracts as outlined above. Further procurement reforms have been identified in the Accelerating Infrastructure Report and Action Plan which are due to be implemented this year which are aimed at facilitating greater participation in public works projects and instil greater confidence in the pipeline of projects that will be tendered in the coming years.
