Conflict between public and private partners may be inevitable (Edwards et al 2004: p.55). Broadly speaking, disagreements arise over timeframes, costs and quality issues (Leung et al 2004). Apart from time and money, there are other factors can lead to disputes (Thamhain and Wilemon 1975). These include project priorities (e.g. setting project priorities - see Hope 2012); manpower resources (e.g. a lack of skills to deliver services to agreed standards); and personality conflicts (e.g. personal or professional differences that arise between individuals and which are primarily task-driven or people-focused). Another pertinent factor is conflicting interpretation of contract requirements due to individual or organisational biases or preferences. It is claimed by Cambridge Economic Policy Associates (2005: p.34-35) that the majority of their research participants that had been involved in disputes ascribed them to the interpretation of contractual provisions.
Managing conflict is crucial because disputes can damage relationships. Conflict should therefore be managed to reduce animosity and build understanding and trust. This is particularly true for PPP agreements as concessions tend to last upwards of 20 years. However, not all situations in PPP that give rise to conflict are likely to be actively managed, such as those that have little operational consequence e.g. achievement of KPIs that have little genuine impact on service outcomes (in other situations, conflict avoidance might occur that actually prevents differences from being settled).
Decisions are made between public and private partners in advance of contractual agreements being finalised which stipulate the forms of dispute resolution to be used if conflicts occur. Procedures to resolve these issues will depend on circumstances, but choices tend to involve consensual methods such as negotiation and mediation, and adjudicative methods such as arbitration or expert determination. Litigation is usually viewed as the method of last resort (Global Legal Group Ltd 2007: p.12) due to high costs, adverse publicity and the length of time it typically takes before outcomes are reached (Partnerships Victoria 2001a: p.177).