Contract managers should proactively ensure that any clauses of the PPP contract that are poorly drafted or ambiguous are clarified, preferably before the PPP contract is signed. Though the negotiation stage of a project is not the focus of this reference tool, one approach is for contract managers to work with lawyers, advisors and other personnel involved in the structuring and negotiation of a PPP contract to meet this challenge by clarifying any clauses that are unclear from an operational perspective prior to signing.
In situations where an ambiguity in the PPP contract becomes apparent after the PPP contract has been signed other solutions must be found. Ambiguous drafting can be a source of opportunistic claims by both parties, particularly when the economic conditions of the project change. One approach is for the parties to conduct workshops to help to agree and determine the true intent of clauses where the parties are unclear. If there is a dispute about the intent of clauses after financial close then agreeing at an operational level how the relevant clauses will operate is likely to be more productive prior to a dispute arising. If required the interested parties can also go down a more formal process path of amending the PPP contract, detailed in Chapter 4 (Renegotiation). Any clarifications have the potential to alter the risk allocation and financial position of both parties and therefore it is worth investing the necessary time and effort in this process, including using external advisors if required.
Ambiguous contract drafting is a common area of dispute and having high quality and clear contract drafting that was well thought out and agreed to before financial close will significantly reduce the chance of disputes, giving the parties less opportunity to disagree on what has been clearly agreed.