Failure to Agree

3.12  A contract may or may not describe the procedures to be followed in the event of a failure to agree. The Authority and the Project Company may fail to agree on the detail of how the process is to be managed (in relation to timescales, reporting formats, or comparators) or on any resulting price adjustment.

3.13  Both parties need to be clear before the process starts, what the dispute resolution procedures are to deal with any failures to agree, and agree how they will be applied. The Authority should also consider whether there are alternative procedures that might be more appropriate and, if necessary, seek to agree such alternative arrangements with the Project Company. This may require the intervention of mediators. The ultimate fall back from a benchmarking exercise is to market test.

3.14  Some contracts prescribe that where there has been a failure to agree either the process or the outcome of benchmarking, the parties automatically move to market testing. Assuming there is a transparent and fair process, a fair market price for the services will then be established through competition. Where such a provision does not exist in the contract, the steps that might typically follow a failure to agree the benchmarks could be:

•  mediation;

•  escalate dispute to more senior levels;

•  a formal dispute resolution procedure; or

•  if agreement still cannot be reached, market testing.