In a well-planned and well-managed Partnerships Victoria project, disputes between the parties should be infrequent, but may occur because of unforeseen outcomes or circumstances. Like service delivery issues, disputes should be dealt with as early as possible and at the appropriate level in each organisation, so that they can be resolved quickly and effectively. The solution should be critically considered by someone who has an understanding not only of the immediate context of the dispute, but also of the broader possible consequences of the solution adopted. |
A crucial role for the contract director is to try to ensure, through early intervention and management, that formal protracted disputes are avoided. These early intervention and management strategies should encourage negotiation between the parties and provide incentives for the parties to discover a solution themselves rather than pursuing formal dispute resolution mechanisms. In seeking to resolve disputes through informal means, the contract director should consider the commercial context of the dispute as well as the contractual context, as both are important in the early stages of a dispute. The contract director should also consider seeking appropriate advice (if required). If a party escalates a dispute unnecessarily, or resorts to an inappropriate dispute resolution process, this can further damage the relationship.
If a dispute cannot be resolved in the short term, it is important that it is promptly dealt with through a formal dispute resolution process set out in the project deed. Commercial principles in relation to dispute resolution are outlined in the National PPP guidelines: commercial principles and the Partnerships Victoria standard project deed guidance notes.
The parties should be required to undertake various informal dispute resolution processes prior to accessing more formal dispute resolution processes, as formal dispute resolution processes are costly, do not lend themselves to an early or negotiated outcome and are damaging to the relationship.
The parties should review the formal dispute resolution procedure and consider whether it is appropriate to agree on a process for dealing with disputes before the formal procedure is invoked. Alternatively, it may be desirable for the parties to agree on a process for invoking the contractual dispute resolution procedure if this process is not detailed in the project deed. More recent project deeds require negotiation between senior management before any more formal resolution procedure can be commenced. The dispute resolution procedure should be set out in the contract administration manual.