The first PPP Dispute Boards

The first PPP in Australia to adopt a Dispute Board was the Sydney Metro Northwest Operations, Trains and Systems (OTS) contract. The second was the Sydney CBD and South East Light Rail PPP contract. Interestingly, the Dispute Board model adopted on each PPP differs.

The Light Rail PPP adopts the traditional Dispute Board model, where the Dispute Board has both a dispute avoidance function and a decision making function, with the latter being interim binding.

While giving the Dispute Board a decision-making function allows it to resolve disputes which can't be settled amicably, it does have a downside. The downside is that the determination of disputes usually creates a winner and a loser. Losers often resent the determination and lose respect for those who made it. This loss of respect for the Dispute Board can undermine the Dispute Board's ongoing dispute avoidance role.

The parties on the Sydney Metro PPP have tried to address this problem by removing the decision-making function from the Dispute Board. Instead, any determinations which might be required will be outsourced to an independent expert agreed upon by the parties or, failing agreement, selected by the Dispute Board.

By outsourcing determinations the parties hope that the Dispute Board will be able to emulate the past success of other Dispute Boards in avoiding disputes, without being tainted by determinations or decisions which one party will almost certainly consider to be incorrect.

The Dispute Board Agreement for each PPP is between the government agency (TfNSW), the SPV and the Dispute Board members only. The D&C contractor, the O&M contractor and the debt financiers are not parties to the Dispute Board Agreement. However, in both cases these other parties were aware of, and effectively endorsed, the composition of the Dispute Board.

Importantly, the Sydney Metro PPP contract requires the SPV to ensure that the D&C contractor and O&M contractor attend Dispute Board meetings, if TfNSW requests this. It also permits their attendance it the SPV's request, in the ordinary course. A representative of the debt financiers must also attend Dispute Board meetings, if requested by TfNSW. The attendance of all relevant parties at Dispute Board meetings will facilitate the consensual resolution of any pass-through claims.

The Light Rail PPP contract, on the other hand, only allows the D&C contractor, the O&M contractor or the financers to attend Dispute Board meetings on a case by case basis with TfNSW's specific consent.

The efficacy of Dispute Boards on these PPPs remains to be seen, and there is much scope for considering alternative methods of integrating Dispute Boards into future PPPs. For instance, future PPPs may see the SPV and its contractors enter into a separate DAB Agreement with the same DAB members to deal with those disputed claims under the D&C contract or O&M contract that do not become disputes under the PPP contract.