Negotiation should be the first step taken as soon as it becomes clear that a disagreement will not be resolved without active intervention by the parties. There may be a structured process set out in the PPP contract designed to make negotiation more effective; however, a structured process is not necessary. Negotiation merely involves the parties communicating with the objective of settling a given disagreement or dispute. Negotiation should be entered into with a clear objective of understanding the issue and attempting to resolve the disagreement.
Negotiation has the potential to be far less costly than escalating the disagreement to the next level of the dispute resolution process, although it still has the potential to be costly and take time. Circumstances will arise where there is the potential for significant time to be wasted discussing an issue on which the parties are too far apart. For such issues, it may be more efficient for the parties to seek an informed third-party decision that is binding on the parties (through court, arbitration or some other dispute resolution mechanism). The other approaches are typically more expensive and likely to take more time to resolve and all appropriate efforts should be made to resolve the dispute at an earlier stage.
Use of protected (often referred to as 'without prejudice') meetings should be considered in addition to open meetings to allow further space for parties to move away from entrenched positions based on their sense of contractual entitlement without risk of compromising their position should formal proceedings result. Without prejudice privilege is not recognised in all jurisdictions. Even where such approaches are not recognised it may be possible to agree contractually that the contents of certain meetings and written exchanges will not be referred to by either party should formal proceedings result. Without prejudice privilege can be easily invoked but is often misunderstood so it is sensible to seek legal advice before attempting to implement this idea. It is important to understand the status at the start of the meeting, if not earlier, to avoid the risk of inadvertent compromise and also to avoid parties approaching the meeting at cross purposes.
When settling a dispute through negotiation, the impact on other (similar) projects needs to be taken into account as parties on other projects might look to such resolutions and have the effect of setting a precedent.