Notwithstanding the potential benefits of the 'give and take' contract management approach postulated by interview participants, conflict is almost certain to occur during a 25 to 30 year concession period. Broadly speaking, two key sources of conflict are identified by interviewees (PT05; PF04; PF12; PT06; RK11; PT03; PT11; PT14; PF13; PT13; PF10).
The first source of conflict relates to situations that arise where there is potential for significant financial impacts/unforeseen cost burdens that can shape public partner VfM outcomes. Examples of these types of disputes, relating particularly to the delivery of services for social infrastructure projects, occur where:
• the public partner rigidly applies abatement for delay or under-performance during the transition phase into operations i.e. when systems and processes are still being bedded-down which results in push-back by the private partner (PT14);
• decisions taken by the state hinder the private partner in some way e.g. doublebunking in prison cells due to overcapacity that leads to higher operational costs (such as energy consumption) being absorbed by the private partner (PT11); and
• where there is non-performance or under-performance by the private partner for the delivery of defined services (PT05).
The second source of conflict relates to failure of one party to meet the expectations of the other where:
• the intent of a service specification has been misunderstood; or
• where a KPI has not been adequately defined (PT05; PT11).
Put differently, disputes can occur because the private partner has a different understanding of the service it is supposed to be delivering (PT06) or how wording contained in contractual clauses should be interpreted. Different perceptions and interpretations can therefore have a profound effect on achieving VfM outcomes where the 'word' can outlive the 'intent' in agreements (PT13; PF12; PT12). PF04 provides the following example:
'We [currently] have a case in the Full Court of the Supreme Court over which forum should hear a dispute about whether "may" means "must". Yes, it's pedantic but it's the kind of detail that we're spending hundreds of thousands of dollars, in our case, to find out.'
Before enacting formal dispute resolution mechanisms, partners should make sufficient attempts to resolve the issue (PT05) and at least develop a shared understanding of what the facts are and what the consequences should be under the contractual framework (PT03). The degree to which the partners are able to do this may come down to the type (or quality) of relationship that the partners have (PT03) and the level of confidence and capability that public partner employees possess in dealing with their private partner counterparts (PT05). Within this context, RK11 believes that having the right experience can be crucial to achieving good outcomes as less experienced employees tend to seek expensive legal advice too often, without first considering what the public partner's position should be and attempting to reach that desired outcome through negotiation with the private partner. Furthermore, the legal opinion offered may not actually address the problem at hand, but instead is geared towards a view of what lawyers think the court would take if it had to answer the question (PT13). PF12 has a similar opinion:
'If [contract managers] rely too heavily on legal advice to interpret clauses, it will be costly and they might get advice that's not always in their best interests. A contract is a guide and if contract managers need an additional guide to interpret the guide, then they're in trouble.'