Using Dispute Boards on PPPs

Dispute Boards appear well-suited to PPPs due to their size and complexity, and there is no reason why the success of Dispute Boards in Australia cannot be replicated on PPPs. Dispute Boards are especially attractive to the government in a PPP because the government bears significant political risk in the case of a public dispute.

The major complicating factor in adapting Dispute Boards to PPPs is the contractual structure of a PPP. As already mentioned, PPPs differ from traditional construction contracts in several key respects. In the Dispute Board context, relevant differences include:

•  the owner, in this case the relevant government agency, enters into a PPP contract with the SPV, who in turn enters into a traditional D&C contract with a D&C contractor, and an O&M contract with an O&M contractor;

•  the D&C and O&M contracts will typically reflect the risk allocation in the PPP contract, and will state that the relevant contractor is only entitled to additional money from the SPV if the SPV can recover such additional money from the government agency under the PPP contract. The D&C and O&M contracts will also typically include the 'linked-claim' provisions discussed above; and

•  the loan agreement between the SPV and its debt financiers will typically require the SPV to notify the debt financiers of any claims made by the D&C or O&M contractor for extra time and/or money, and will prohibit the SPV from settling such claims without the consent of the debt financiers.