Effective relationship management in a PPP project facilitates the resolution of many disagreements before they escalate into disputes. Triggering the formal dispute resolution mechanism can sometimes be a reflection of broken communication and a damaged relationship between the parties, and even disputes (legitimate or otherwise) have the potential to affect an otherwise positive relationship. PPPs are designed to be collaborative with incentives to encourage the parties to work together on an ongoing basis and find solutions that are mutually beneficial. In one example in the study, the interviewee blamed a dispute entirely on a relationship breakdown. Both parties had a reasonable point for disagreement due to an ambiguity in the contract drafting but the disagreement led to a deterioration in the relationship which made it more difficult to resolve. On a different project, an interviewee described a situation where conversely the relationship between the parties improved dramatically once they had managed to come to an agreement on a dispute.
One typical mismatch between the public sector and the private sector is that the Project Company is primarily interested in the monetary outcome of a dispute whereas the Procuring Authority will always need to be able to justify any compromise agreed with the Project Company, due to its accountability to the public. It is important for both sides to keep these different viewpoints in mind to help avoid further misunderstandings.
Both parties should maintain a professional relationship and continue with business as usual on any aspects of the partnership which are not affected by the dispute to avoid damaging the relationship and the project as a whole.
| EXAMPLE Focusing on maintaining relationships during disputes The practice in a toll road PPP in India provides a good example of where there were a number of disputes over issues such as the changes to the scope related to the inclusion of obligations in relation to an existing railway bridge, but the relationship between the Procuring Authority and Project Company remained strong, with the two parties meeting regularly. |
Specific approaches to maintaining good relationships include maintaining regular communications between the Procuring Authority and the Project Company aimed at resolving issues as they arise at the day-to-day operational level. Specific bespoke meetings may also need to be set up to manage disputes as they arise. Further examples of relationship management are detailed in Section 3.3 (Stakeholder management).
| EXAMPLE Frequent meetings to settle disagreements and disputes The Port of Miami Tunnel project in the USA illustrates the benefits of having weekly meetings between the contracting parties, to work through potential areas of disagreement. If issues cannot be resolved at the operational level, they should be escalated to the strategic level (involving the relevant representatives from both parties as well as advisors where appropriate). Another case study in a developed market identified the use of a 'chairmens' meeting', which included representatives from the Procuring Authority, the Project Company, the construction contractor and the operations contractor during a time of ongoing disputes. These meetings took place for six months on a fortnightly basis and successfully enabled the resolution of many issues. For more information, see the Port of Miami Tunnel Case Study. |
Given the ongoing nature of PPP contracts, it is common for personnel to become overly invested in issues that give rise to disagreements. It may be appropriate to bring in new personnel to settle disputes at a more strategic level. Having well-equipped contract managers is a key step towards avoiding disagreements and disputes. In addition, involving team members with specific skills in relationship building and negotiation can help resolve disagreements that have arisen at an earlier stage. When considering a team structure for contract management it is important for both parties to leave space in their organisational structure to allow issues to be escalated to a fresh pair of eyes. This is supported by the guidance detailed in Chapter 2 (Contract management team set-up and training).
The Procuring Authority contract management team should also consider whether it is advantageous to escalate an issue to senior executive level at an early stage. Senior representatives of the parties may be able to take a more dispassionate approach than operational employees and this may allow the disagreement or dispute to be resolved more quickly than it would be otherwise. It is also important that issues do not become escalated routinely or too easily, otherwise senior members risk also being entrenched in a particular issue and the mechanism may cease to function, leading to the need for more formal dispute resolution mechanism escalations.
| EXAMPLE Importance of strong relationship skills and independence From the point of view of the Project Company in the Central Berkshire Waste project in the UK, a stalemate between the parties was broken by bringing in people who had strong relationship building skills who then focused on improving the relationship with the Procuring Authority. As the staff were new, they had a more independent view as to what had occurred previously and were able to take a more pragmatic approach. For more information, see the Central Berkshire Waste Case Study. |