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CONTRACT MANAGEMENT DISPUTE RESOLUTION AND COURSE CORRECTION

CONTRACT MANAGEMENT DISPUTE RESOLUTION AND COURSE CORRECTION. AJAY RAGHAVAN Counsel. Training Workshop, Bhopal, February 2009. DEALING WITH DISPUTE AND CHANGE IN THE CONTRACT. DRAFTING PRINCIPLES. STATIC – DYNAMIC:

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CONTRACT MANAGEMENT DISPUTE RESOLUTION AND COURSE CORRECTION

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  1. CONTRACT MANAGEMENT DISPUTE RESOLUTION AND COURSE CORRECTION AJAY RAGHAVAN Counsel Training Workshop, Bhopal, February 2009

  2. DEALING WITH DISPUTE AND CHANGE IN THE CONTRACT

  3. DRAFTING PRINCIPLES STATIC – DYNAMIC: • DRAFT the contract to establish principles yet leave room for response to dynamic situations • UTILISE schedules and annexes to deal with variables – keep the main body for static principles SIMPLICITY AND CONSISTENCY • ENSURE consistency in substance through simplicity in structure

  4. CHANGE PRINCIPLES CHANGE MANAGEMENT: • RECOGNISE that no contract is perfect • PROVIDE for change management principles that will define equitable procedures to manage change COSTS OF CHANGE • DESCRIBE a process to derive the real costs of change in a mutually acceptable manner • CREATE accurate scope documents to spell out what is required by way of change

  5. BREACH MATERIAL BREACH: • DEFINE material breach as distinct from ordinary breach • LIST provisions that constitute material breach • ELIMINATE confusion resulting from poor drafting CURE • DESCRIBE the process and notice periods for curing breach • DEAL WITH incurable material breach

  6. COMPLETION WHEN TIME IS OF THE ESSENCE: • PRESCRIBE milestones for completion • EXHAUSTIVELY LIST all applicable dependencies that could result in delays • ELIMINATE as many dependencies as possible CARROT AND STICK • CREATE an appropriate incentive and penalty regime in relation to performance targets • DEVISE suitable earn-backs

  7. DISPUTES DISPUTE RESOLUTION CLAUSE: • DESCRIBE the process for escalation of disputes – both in relation to material and non-material breach • SET OUT the time frame for resolution of disputes and the consequences of delay

  8. DEALING WITH DISPUTE AND CHANGE PROVISIONS AT THE BID

  9. DURING PRE-BID MEETINGS DISCUSSIONS: • ESTABLISH the negotiating position by setting out the process in detail in the draft contract • PRESENT the broad terms of the contract to articulate the position of the Government • DISCUSS these views with the bidders to understand their “pain points” • PROVIDE revised documentation in response to discussions with the bidders

  10. DURING FINAL NEGOTIATIONS NEGOTIATION STRATEGY: • TAKE a hard line on the final position of the Government • FOCUS on ensuring that no overlap is created between provisions during negotiations • ENSURE a single negotiating team or team leader who is responsible for coordinating the process

  11. MANAGING THE DISPUTE PROCESS FAIRLY

  12. THE CHANGE MANAGEMENT PROCESS BALANCE: • The costs of change both in time and in money terms • Assess the impact of change on dependencies RECORD: • The details of the requested change and the agreed costs and time impact • Revise performance targets, penalty-reward mechanism and earnbacks accordingly

  13. CHANGE MANAGEMENT IN PRACTICE RECORD: • Use the change management process and do not agree to changes in an ad hoc manner • Record all changes agreed and their impact on performance targets and price DISPUTES: • Recognise disputes early and escalate them into the dispute resolution process early • All disputes begin as disagreements

  14. LIKELY GROUNDS FOR DISPUTE

  15. SCOPE OF WORK LACK OF CLARITY: • On the various components of the scope of work at various phases of the project • On the extent of changes possible to the scope of work without the need for a fresh contract COMPLETION: • Difference in the interpretation of what amounts to completion of the scope of work

  16. BASELINE ASSUMPTIONS LACK OF CLARITY: • As to the starting assumptions relating to the pre-PPP position • As to the extent to which the dependencies will have a bearing on services QUALITY OF EXISTING DATA: • Difference in the standard of recorded data with the Government

  17. PERFORMANCE TARGETS FAILURE TO ACHIEVE: • On account of the failure by the Government to provide the dependencies • On account of intervening acts by state parties • On account of Force Majeure INTERPRETATION: • Difference in the interpretation of the performance targets

  18. PENALTY - REWARD REGIME INTERPRETATION: • DIFFERENT interpretations of how the penalty-reward regime works • LACK OF CLARITY in the definition of the milestones LIMITATIONS ON LIABILITY: • DIFFERING VIEWS as to what falls within the cap on liabilities and what does not

  19. STRATEGIES FOR DISPUTE AVOIDANCE

  20. REPORTING AND REVIEW EARLY WARNING: • ASSESS performance on a regular basis to catch a potential dispute early • ESCALATE disputes to ensure that they are closed CHANGE: • UTILISE change management effectively to ensure that potential disputes can be headed off

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