CHAPTER 4 RESULTS AND DISCUSSION
4.6. Summary of Aggregated Empirical Findings
This chapter presents a summary of the empirical results from the research study. For data quality and validation purposes, three different data collection processes were undertaken with different sets of individuals. The summarising and triangulation of collated data from the focus group discussions, questionnaire surveys and semi-structured interviews yielded important findings as discussed in this section.
The participants in all three empirical data collection processes had a wealth of experience in infrastructure PPPs spanning different stages i.e. project formulation, pre-contract negotiation and financial closure, D&C, O&M phases, insolvency processes, and contract reviews on liquidation. And, some participants were invited into the PPP projects only after disputes arose at variable stages of the projects. There was a good representation of policy, legal, engineering, academic, and project management professionals.
To get a general sense of infrastructure PPP practitioners’ impression of the significance of this research, the questionnaire survey was used to probe a number of aspects. It was established that 75% of respondents agreed that disputes significantly affect the success of infrastructure PPP projects, and over 85% of respondents agreed that effective DR is crucial to the success of infrastructure PPP projects. Also, about 40% of the practitioners expressed their dissatisfaction with the current DR processes, 27.2% expressed uncertainty of their level of satisfaction and 31.5% reported that they were satisfied with the DR processes.
Additionally, a comparison of public and private sector views on critical DR issues, critical recommended DR practice, and critical success factors was made. Overall, the results showed no statistically significant difference between the responses of public and private sector practitioners. The few differences in opinion of public and private sector practitioners had
minimal effect on variation of the findings. Among other findings, one of the differences in opinion was that speed of DR was more important to the public sector than it was to the private sector practitioners.
A summary of other key findings from the empirical data collection processes is presented below.
4.6.1. Summary findings for current DR practice
Participants from all three data collection processes described the DR environment of PPP projects as more complex than that of “traditional” infrastructure delivery contracts owing to the multiple parties involved in the PPP projects, each with differing DR provisions in their respective contracts. Participants from the focus group and semi-structured interviews agreed that among other reasons, PPPs are becoming less popular because their implementation is usually based on rigid price contracts for which contractors are required to accurately predict what will happen in 20 – 30 years. This is not only impossible but also fuels many disputes that are experienced in the infrastructure PPP project environment.
Additionally, there was consensus among all the focus group participants that DR planning in infrastructure PPPs is inadequate at project level. Also, both focus group and interview participants agreed that little attention is paid to the depth of DR provisions at contracting stage.
This was partly attributed to the competitive nature of most PPP bidding processes in Australia.
Consequently, the last thing a bidder wants to be seen doing is overly scrutinising DR clauses as that could imply that they are predicting disputes on the project.
Furthermore, it was confirmed that guidelines for resolving disputes in infrastructure PPPs are usually standard stipulations in PPP contracts by the government or the representative they appoint to do so. This agreed with findings from literature that DR processes are usually stipulated in PPP agreements and formulated as a tender requirement (Harisankar and Sreeparvathy 2013; Osei-Kyei et al. 2019). For contracts between the SPV consortium and the
entities within them, the DR systems are usually formulated by the SPV. The research participants reported that different infrastructure PPP contracts usually specify different levels of DR procedures to be followed. In most cases, however, DR procedures tend to be recommended in the order of executive level negotiation, expert determination, mediation, arbitration, and finally litigation as the final option if disputes cannot be resolved by preceding processes. On some projects, dispute boards are constituted.
PPP practitioners reported that dispute boards and adjudication were the most frequently used techniques, followed by litigation, arbitration, expert determination, and mediation. Negotiation was ranked as the least commonly used DR technique in infrastructure PPPs. On duration of the DR techniques, litigation was reported to take the longest period of time, followed by arbitration, dispute boards, expert determination, mediation, adjudication, and negotiation. This agreed with the findings of Marques (2018) and Ridley-Duff and Bennett (2011).
Finally, the order of progression of DR processes and respective timelines were reported to be inadequately elaborated in the DR provisions and some interview participants argued that the DR guidelines are not adequate for the variable range of disputes that is encountered on infrastructure PPP projects.
4.6.2. Summary findings for behavioural antecedents during dispute
From the questionnaire survey data, it was determined that the only statistically significant behavioural tendency in relation to the DR environment of infrastructure PPPs was that an external party usually moderates interaction among the project parties that is aimed towards managing disputes. This behaviour is typical of both integrative and compromising DR dimensions of DCT (Tsai and Chi 2009) as presented in the conceptual framework in Section 2.8 of this thesis.
The above did not significantly differ from the findings from the semi-structured interviews where participants reported that in the early stages of projects or when issues are first
encountered, infrastructure PPP project parties work more collaboratively and cooperatively – a characteristic of the integrative DR dimension of DCT (Rahim 2001). However, as the projects progress, the collaboration gradually deteriorates and each party is inclined towards asserting their contractual rights when disputes arise. This is sometimes characterised by an adversarial approach that is focussed on enforcing the terms of the project agreement. In some cases, public entities ensured compliance by withholding funds and strongly emphasising contractual clauses. On some occasions, the party with a stronger bargaining position adopted the dominating DR style of DCT and that in a weaker bargaining position adopting the obliging DR style of DCT in the spirit of not ruining future opportunities to work with the other party.
However, sometimes parties reached a stalemate because each of them had a strong case in favour of their interests. This behaviour is all typical of the distributive DR dimension of DCT (Özkalp, Sungur and Özdemir 2009). The scenario of equal bargaining positions sometimes resulted in the compromising DR dimension of DCT (Boonsathorn 2007).
4.6.3. Summary findings for sources of disputes
More generally, disputes were reported to arise from risk-related issues. While the questionnaire surveys revealed “improper risk allocation” as a critical source of disputes, the semi-structured interviews suggested “unbalanced risk allocation” and “under-pricing of risk”.
Focus group discussions, on the other hand, reported “unclear risk allocation”, and “parties taking on too much risk”. This was all in line with literature (Chung, Hensher and Rose 2010;
Chan et al. 2015).
Other critical sources of disputes as determined from the questionnaire survey included contractual issues; issues related to attitudes and behaviour of project parties; unforeseen events such as change in demand arising from economic fluctuations, natural disasters, disease outbreaks, war, among others; issues related to inherent set-up of infrastructure PPPs; issues related to competence of project parties; and governance issues.
In addition to these, the semi-structured interviews reported differing opinion among parties of the PPP, the motivation for adopting the PPP project delivery model, and political interference.
The focus group discussions found other sources of disputes as: under-pricing the project, breakdown of commercial relationships, exposure of SPV to liabilities that they cannot pass on to either the government or contractors, failure to resolve issues in a timely manner, and disagreement on the parties responsible for different scopes of work.
4.6.4. Summary findings for DR issues in infrastructure PPPs
Both qualitative and quantitative research processes reported inadequate information sharing, poor communication, and inadequate monitoring and evaluation systems to facilitate continuous DR improvement, as the main issues affecting DR in infrastructure PPPs. In addition to these, the focus group discussions and questionnaire surveys identified poor collaboration.
All these issues were also identified by Musenero, Baroudi and Gunawan (2023).
Furthermore, it was established from the semi-structured interviews that there is dissimilarity of DR provisions specified in the different contracts that are typically found in major infrastructure PPP projects. Also, the time allocated for issuing notices of dispute in most infrastructure PPP DR provisions was reported as being so short that sometimes parties prematurely or unwillingly issued notices of dispute. Moreover, “thin” SPV arrangements were noted to have longer decision-making timelines during DR than “thick” SPV arrangements.
Additional issues that were noted from the focus group discussions included: unclear guidelines on who is responsible for oversight of the public partner’s actions, inefficacy of applied conflict management and DR systems / processes, and absence of elaborate DR guidelines. These agreed with the findings of Currie and Teague (2015).
From the questionnaire surveys, the following critical issues were established: political interference in delivery of the infrastructure PPP project, lack of flexibility around exploring
DR options outside the DR stipulations in the contract, and lack of a unified DR system specifically designed for each infrastructure PPP project.
4.6.5. Summary of critical success factors for DR
The following critical success factors were established for DR in infrastructure PPPs: neutrality of the mediator, flexibility of PPP project parties, confidence in the DR system, fairness by all parties, confidence of the infrastructure PPP project parties, speed of DR, and privacy of the dispute matter from the media and/or public.
4.6.6. Summary of recommended DR practices
The following DR practices were recommended as the most critical by the survey participants:
exploring solutions that are acceptable to all project parties in dispute, understanding each infrastructure PPP project partners’ obligations, understanding each infrastructure PPP project partners’ objectives, transparency and open communication among project parties, proactive identification of anticipated DR-related issues for the entire infrastructure PPP project cycle at the beginning of the project, involving the private sector in early stages (e.g. formulation) of the infrastructure PPP project, establishing relationships among dispute resolution issues, applying a dispute resolution system that has been specifically developed for the infrastructure PPP project, constant monitoring and evaluation of dispute resolution interventions for different dispute situations, and understanding and incorporating behavioural tendencies and attitudes of infrastructure PPP project parties in dispute situations.
As a step towards improving DR in infrastructure PPPs, participants from all three sets of the data collection processes suggested that the best way to manage disputes in infrastructure PPPs is to avoid them using collaborative and joint means of conflict management and dispute resolution. In the present study, such means were hypothesised as a joint DR system. The top four advantages of using a joint DR system were noted as: (i) accommodating the interests of multiple stakeholders on the infrastructure PPP project; (ii) relationship management over the
long duration of infrastructure PPPs; (iii) enhancing communication amongst infrastructure PPP project parties; and (iv) integrating differing organisational culture and dispute resolution practice of different project parties.
Additionally, the surveys established recommended practices as adoption of more balanced risk allocation and sharing for infrastructure PPPs, setting up a communication platform specifically for each project, increasing time provisions for issuing notices of dispute from the common 5 – 10 business days to up to 180 days depending on the nature of the issue at hand, involving the right people in the DR process, and having thick SPVs in the project set-up.
Through correlation analysis, it was found that all the recommended DR practices correlated with the critical DR issues that were identified during this study, suggesting that they were all relevant for addressing the issues.
CHAPTER 5 DISPUTE RESOLUTION FRAMEWORK FOR