Given the long term nature and complexity of PPP projects, it is not uncommon for there to be some form of disagreement or dispute during the contract management period. Disputes have the potential to damage the relationship between the Project Company and the Procuring Authority. In addition, while they are being resolved there is a risk that the service levels will be affected. The most important goal of any party involved in dispute resolution is to make decisions that will ensure the project moves forward in a viable and sustainable manner while maintaining value for money.
The Procuring Authority and the Project Company may have differing opinions on a range of issues where they have conflicting interests. In this chapter reference to a disagreement is to a disagreement which is not the subject of a formal dispute resolution mechanism. Reference to a dispute is reference to a disagreement where formal dispute resolution mechanisms are implemented. Typical dispute resolution mechanisms are detailed in Section 5.1 (Background).
The Procuring Authority should focus on avoiding disagreements turning into disputes where possible. There are, however, a variety of reasons why disputes arise and they will not always be avoidable. When disputes do arise the focus will need to shift to managing the disputes appropriately to reach a conclusion quickly and in a cost-effective manner while also maintaining a strong relationship between the contractual parties.
This chapter provides a background to disagreements and disputes in PPP contracts in Section 5.1 (Background) and provides guidance on managing disagreements and disputes. The key elements of successfully managing disagreements and disputes are summarised below and detailed in Section 5.2 (Guidance).
A. Understand the rights and obligations of the Procuring Authority and use contractual provisions to protect the rights of the Procuring Authority rather than as punitive measures
B. Monitor the performance of the Project Company to be aware potential issues of and to mitigate the risk of disputes
C. Be receptive to claims and settle them early, where it is appropriate to do so
D. Treat disagreements and disputes objectively: Do not allow a poor relationship with the Project Company to affect the approach taken to a dispute and do not let the existence of a dispute affect an otherwise positive relationship
E. Clarify ambiguous and unclear contract drafting before it leads to a dispute
F. Ensure settlement agreements are prepared with appropriate legal input to ensure the dispute or disagreement is unambiguously resolved
G. Consider the full costs of escalating a dispute and the chosen dispute resolution mechanism
H. Actively seek out negotiated outcomes to disagreements and disputes as such outcomes have the potential to be significantly more efficient
I. Appropriately prepare for and assemble adequate resources before entering into negotiation
J. Consider associated private partners (including the construction contractor) in the resolution of disagreements and disputes related to them
K. Consider mediation where a more structured approach to negotiation is required
L. Appoint the right mediator for both parties
M. Utilise Dispute Resolution Boards where available
N. Set up the Dispute Resolution Board before a dispute arises, but also consider the changing needs of the Dispute Resolution Board for the project
O. Appoint the right Dispute Resolution Board for both parties
P. Where available consider expert determination for disputes that are of a technical nature
Q. Appoint the right expert for expert determination
R. Consider the full implications of moving a dispute to court or arbitration
S. Choose the right arbitrator(s)
T. Prepare to provide detailed evidence when moving a dispute to court or arbitration
Section 5.3 (Summary data analysis) provides a summary of the data analysis with respect to disputes.