CHAPTER 5 DISPUTE RESOLUTION FRAMEWORK FOR INFRASTRUCTURE PPPs
5.6. Monitoring and Evaluation
Finally, for disputes involving parties that do not have contractual arrangements within the PPP such as union movements or the users of the infrastructure project, a human approach is recommended despite the absence of contractual DR provisions to guide the process. While there is a temptation to focus on the cost of their demands, it is recommended that decisions on whether to meet the demands of such groups should consider the social aspects of the dispute.
For instance, for the train guard scenario described in Section 4.5 of this thesis, there is no price that can be tagged to a criminal incident affecting helpless passengers on board, which could have been mitigated by a train guard. All infrastructure PPP parties should always be mindful of the overarching responsibility to deliver a service that meets the needs of the general public.
active monitoring and evaluation of DR processes. The framework can be customised to individual project settings to develop a specific DR system for each project as needed.
Private partner (SPV) Public
partner
Equity investors
Debt financiers
Head D&C contractor Head
O&M contractor
Sub-contractors (various) General
public
Union movements,
civil society organisations,
etc a) Understand the nature and source of dispute
•Nature of dispute: the parties involved in the dispute;
the interdependence of the dispute with other disputes; political motivations (if any); whether the parties agree to what is at stake; or whether the dispute is a tactic to buy time
•Not possible to predict all potential dispute that will be encountered at project start
•Sources of dispute from this research: contractual issues; improper risk allocation; attitudes and behaviour of project parties; unforeseen events;
inherent set-up of infrastructure PPPs; competence of project parties; governance issues; under-pricing of risk and unbalanced risk allocation; differing opinion among PPP parties; the motivation for adopting the PPP project delivery model; or political interference b) Assess and moderate attitudes and behaviour
•Work towards commercial trust among PPP parties, and democratic trust between the government and the general public
•Understand the different bargaining positions of each party involved in the dispute
•Assess whether and how parties can be influenced towards collaborative behaviour
•Understand the relative power of the parties involved in dispute
•Judge whether the dispute is forward-looking or is focused on apportioning blame
•Ascertain if any of the parties are seeking publicity from the dispute - dominating, obliging, integrating, and compromising
d) Reactive DR
•Allow for creative problem-solving; 3 – 6 months for linked claims, 1 month for other claims
•Implementation of DR interventions should be aligned with relevant proactive arrangements presented in step c).
•Humanly approach for disputes involving parties without contractual arrangements within the PPP
•
e) Monitoring
•Evaluation of effectiveness of DR interventions
•Highlighting how DR provisions stipulated in PPP contracts perform
•Identifying any misjudgements or errors in approach to issues and disputes
•Documenting any missteps, their causes and forge a way of avoiding them in future similar situations.
•Documenting can be done in the communication, information sharing, and coordination platform
•Purpose is not to hold the project or the project parties to a standard of faultlessness
Distributive
•Parties assert contractual rights
•Public entity withholding funds and emphasising contractual clauses
•Party in a stronger bargaining position adopts the dominating style
•Party in a weaker bargaining position adopts the obliging style
Compromising
•Stalemate because of equally strong bargaining positions
•Focus is on distribution of benefits (give- take
approach)
Integrative
•Collaboration and cooperation high at beginning of project, but gradually deteriorate as the projects progress
•Informal social
‘contract’ utilised for problem solving
•Focus on enhancing relationships
•Co-operative approach is recommended for the benefit of the general public.
c) Proactive DR
•The way a PPP is set-up and planned contributes to proactive DR
•Important to address issues proactively before they advance into disputes
PPP project structuring and DR provisions
•Establish an authority to oversee the government’s actions
•Balanced risk allocation and risk sharing
•Where possible, thick SPVs preferred to thin SPVs
•Sufficient time for issuing a notice of dispute; linked claims: 3 – 6 months, other claims: at least a month
•Clear duration of each DR process
•Specify the right individuals to represent each of party
•DR provisions for the different contracts within the PPP project cascaded from the upstream contract
Communication and coordination
•Clear
communication channels
•Joint communication and information sharing platform - Integrate efforts
and processes - Effective
coordination - Central repository
for information - Awareness of
parties’ problem- solving orientation - Early exposure of
issues
- Data for briefs to general public
Limit escalation of issues into disputes
•Rational project management approach
•Joint DR forum (PPP Board) for collectively handling issues among all infrastructure PPP parties
•In case of cost concerns, PPP Board can be set up for D&C phase only
•Communication, information sharing, and coordination platform to be used Considerations
in selecting the PPP model
•Motivation for selecting PPP model should be broader than risk transfer and private sector capital utilisation
•A real partnership in the PPP project environment is more effective than a zero-sum game
(iii) Distributive behavioural inclination
•Arbitration; target resolution within 2 years
•Litigation; target resolution within 3 years
(ii) Compromising behavioural inclination
•Expert
determination; target to resolve within 8 months
•Adjudication; target to resolve within 8 months
(i) Integrative behavioural inclination
•Collaborative resolution of issues led by contract/ project managers; target to resolve within 6 months
•PPP Boards (Same board used in step c) above); target to resolve within 8 months
Dispute can arise between any of the PPP parties and may involve two or more parties. Over time, the different formal business contracts interact with the informal social “contracts”
Figure 5.2: Framework for constructive DR in infrastructure PPPs
The empirical framework developed in Figure 5.2 provides a guide for resolution of disputes in infrastructure PPP projects, with an awareness of how behavioural orientations of project parties during dispute influences their DR approaches. The bottom line of the framework is to encourage constructive DR that addresses the concerns of all infrastructure PPP project parties (Zhang and Chen 2013).
The framework can be applied on both social and economic infrastructure PPP projects to manage conflicts and resolve disputes arising among any of the parties involved in the projects.
It can be applied for disputes arising between subcontractors and contractors, contractors and contractors, contractors and the SPV, the SPV and the government, the government and the [general] public, among other possible combinations of parties who may be involved in any given dispute.
The framework proposes proactive DR measures to inform the procurement options analysis – the process that leads to the decision on whether a project should be delivered using the PPP model, the structuring of PPP projects including their DR provisions, communication, information sharing and coordination plans, as well as interventions for addressing issues proactively before they advance into disputes. This is backed by an understanding of the sources of each individual [potential] dispute. Furthermore, the framework emphasises the importance of establishing an understanding of the behavioural orientations of project parties and teams.
For issues that escalate into disputes despite application of proactive DR techniques, the appropriate reactive DR response is selected based on the behavioural inclinations of the parties involved in the dispute. Once a DR intervention has been applied, its performance is monitored and evaluated and lessons learnt are documented in the communication, information sharing and coordination platform established for the project. In the event that the dispute is not resolved by the applied DR interventions, a re-assessment of the sources of the dispute is done and subsequent stages of the framework are repeated until the dispute is resolved.