“Restoring Confidence in Public- Private Partnerships: Creating more Collaborative PPP’s, including Use of Dispute Boards”
- Mark M Moseley, Moseley Infrastructure Advisory Services, United Kingdom
- Lindy Patterson QC, Barrister, 39 Essex Chambers, London
- Serge Y. Bodart, Consultant Engineer, Switzerland
“These transcripts have been automatically created. We apologise for any errors and will correct names etc. if we are alerted to them”
Good morning, everybody. We'll just, it's it's 901. Thank you for coming on in a timely manner. We'll just, we'll wait another couple of minutes and then we'll get started in the, in the in the meantime, everybody's very welcome. See one or two familiar faces. They're mine, Mr. Petworth. Good morning, everybody. Nice to see. Well, good morning. Morning, everyone. Good morning, everyone. Morning. Good morning. I direct my
good words of sympathy as deserve for Louise who is attending this because she's one of my pupils at the moment. You forced her to sign up then? No, it was young Michael there, but I wasn't going to mention any names.
slimming up. Now we've got 26 on a couple of preliminary points. We're running this as a meeting. So everybody should be able to see who's on. But Martin balter will generally have everybody muted apart from the panel. And he wants to say something, when we get after we get going, then put your hand up, and I'll bring you in. This is being recorded, and will be put out on the buy and resell on the Dr. bf website. And we also have the chat facilities. So at any time, if you want to talk to the panel, then please just type go on to chat and type in that also, we will have a couple of poll questions during the course of the proceedings, which require yes or no answers, and which the panel is unable to influence because we can't vote. We'll put the results up as we go along. So everybody's very welcome. I think this is the seventh meeting. we traditionally start by asking people who are attending for the first time, obviously, apart from the panel to introduce themselves. So if you would like to raise your hand, if you're attending for the first time, then Martin will bring you in. And you could just briefly introduce yourself. So Martin, if you look out for raised hands, and off we go. Anybody raising their hands? David Wallace, David Wallace. David, would you like to briefly to introduce yourself? David, you're very welcome.
You're right. Yes. I've recently returned from the from 15 years in the Middle East, and have been asked to attend with pleasure by my partners tomorrow and my one day of cross console. So here I am. I've been within dispute resolution for about 20 years, predominantly Middle East, predominantly international arbitration, although bioenergetic Yeah. Okay, with no adjudication, law, and at least that just didn't happen. Okay. And we'll see what were the next few years takes us.
Thank you, David. very welcome. Any Anybody else? Anybody else with their hand up? don't see anybody else at the moment, Michael? Yeah, that's that's me. I think you are not able to talk to Dr. Perry. Yes, please go ahead.
Sorry, you are not able to see my video. But I am attending for the first time I'm actually from India, I have a drB f representative of India and have been quite busily involved in developing the RBF within India. So it is of a quite interesting subject or interesting development or event which perhaps we can follow out here. Okay. Well, thank you very much. That's live. Anybody else? Michael camaldolese. Very briefly gone.
Yeah, I'm really tall. As Doug mentioned, I'm very lucky to be undertaking pupilage with him at the moment. So very great opportunity. My background in civil engineering, but I've also studied construction law and dispute resolution at Kings and I've spent many years in helping clients to avoid dispute. So I work as an independent consultant advising clients and which naturally gives me an interesting speak boards and, obviously hope to further my experience in that field going forward. So thank you for having me.
Thank you. You're very welcome. Okay, well, let's, let's move on to the beginning of the meat in the sandwich. The topic is going to be restoring confidence in public private partnerships, creating more collaborative ppps, including the use of dispute goals. Before I introduce our panel, I'd like to ask Julie Forsyth, who's just very recently taken over as the drB. F. UK representative just to say a few words briefly about the drB F in the UK. Julie, over to you.
Thank you. Well, let me add my welcome. First. I'm just talking I'm just going to tell you a little bit about the which some of you will already be members but the dispute resolution board Foundation, just the UK side of it really is what I know about but it's a worldwide organisation. I have the unenviable task, nor an impossible task perhaps of filling john Papworth shorts, shoes. He was just left with the UK representative, representative of the D RBS. And luckily, I've the great advantage of having with me, a UK rep team, which john built. Thank you, john, before he left of Victoria, Tyson, and dragon be Adrian bell. So there are four of us doing the work of john together with the hard work of Lorna Svetlana borisova. Who organises us all and helps gets things make sure we get things done. And so we in the UK, we've been going from strength to strength I've been involved for quite a few years now. We've now got in check 68. members understand in the UK, so it's one of the largest apart from America, where it's based, originally started up. We're one of the largest country representatives, groups that we have all of them. So we trying we're trying very hard to put on a lot more events now and build it up. JOHN started somewhere trying to keep them going and add others. We have started recently doing a meet the members event where new members can meet me or not old, my old current members. And the old members can introduce themselves gives you a chance to raise your profile, but also get to know some other people interested in DBS and tell us what you want from the D RBF.
Which is something we're trying to do to focus on that. We're also working with other bodies in the UK such as the ICS, trying to get build up cooperative agreements, so that we can make use of everybody else's membership to build and promote the use of dispute boards. We're getting more and more diverse away from the traditional construction infrastructure type projects, in welcoming people from marine and oil and gas backgrounds, all sorts of things that that will work with love to have anybody that's interested in dispute boards experienced in dispute boards, wants to help us promote them. People that actively are interested in taking part in events and talks and giving talks. Were very welcome. Just let us know if you want to know more. The website is drb.org, which has a lot. I think they're updating it at the moment. And you'll see that space, as I said in the us with our wonderful and Russo and her team. And we're all really excited about the US now imagine has hope. So just if you have any questions, come back to me, or any interest in joining or if you're already a member and you want you have some ideas for events, such as this breakfast that Michael does anything else. We're completely open to new ideas and new events and we'd love to hear from you. So I'm excited to hear more obviously from Mark surgeon Lindy, so I'll come back to you. Okay,
thank you. Thank you very much, Judy, for that. So I've already outlined the topic I just very briefly going to introduce our speakers. So the first person is going to be Serge bodard, who's an engineer, and he's been involved in a consultant in many PPP, projects and works internationally as a dispute board member. He's also as our mark and Lindy members of the D RBF. Task Force on ppps and we'll learn about more about that as we go along. Second up is Lindy Patterson QC, who's an international arbitrator, adjudicator and regular dispute board member and chair and is a member of 39 Essex chambers in London. And last but not least is Mosley, who's the principal of Mark Mosley, advisory, sorry, infrastructure advisory services. And he's held positions at the G 20s, global infrastructure hub, and as the lead lawyer in the PPP group at the World Bank, so really interesting combination of skills and expertise and experience. So I'm going to invite Serge to kick this off, we want to make this as interactive as possible. So as Mark Lavelle says, or Peter Lavelle says on RT on, then do feel free to jump in at any time by raising your hand. So search over to you.
Good morning, everybody. So I understand this is a breakfast meet and not a brunch meet, which means we all have to go to work after. So we're going to try to keep it concise and have enough time for questions that you might have. So the first thing I'd like to do is is to follow up on what Michael just mentioned about the task force. So Lindy Mark and I remember of p3 task force within the drB F. And really the the main objective of that task force is to promote the use of DBS and PPP projects. So that's the main issue. It's also organised by region. So we are the task force for region two, region two and has approximately eight members and two passports. Just a brief presentation of what we are doing at the moment. Of course, we we try to participate in this difficult times to conferences, and active participation, you know, being part of a panel where we can present DBS and ppps. We also, within the drB f conference organise workshops, maybe some of you have participated to where workshops on the use of DBS and ppps in one of the International Conference, the last one was the one we did with Lindy, in Berlin in 2018. We try also on a regular basis to meet users, employers, contractors, you know, always with this main idea of how can we, you know, promote the use of DBS and ppps, which are not used as extensively as conventional contract. But that should be one more thing where we were doing we produced a white paper back in 2017. That was the occasion of the International the RBF conference in Madrid. And we are at the moment updating this paper it is accessible on the RBF website. And the idea of this update is really to to put some more information in terms of case studies, what what what real cases can we present, and how, in those real cases DBS were used, and practice in PPP projects. So that's, that's one thing we are heavily focusing now at the moment. So anybody who is ready to share a case study, which they are confronted, or they were confronted, we are available, of course to discuss and we'll be happy to. Okay. So that's a brief introduction to to the task force. And again, anybody of region two wants to join the task force is very welcome to do so, if you're interested. You will find all the contact details necessary if you wish to do so, before we discuss some of the challenges of having DBS within a PPP structure I just want to present we don't have slides, but there is one one diagram I would like to put forward because this is going to give us some background to the discussion we are going to have later. So, you have here a typical PPP structure whereby you have a procuring authority, usually public sector, a role department or water department typically which contracts an entity which is which is created on for this specific project for that specific project. That why it's called a special purpose vehicle because it's created for a specific project. And this, this SPV, as we call it, will then has the task of not only designing and building the infrastructure, and for that they have dnb subcontractor. But it also has the the task to operate and maintain the infrastructure over the contract period, typical contract period 20 3030 years, it's a long term contract. And for this,
these Task Force, it needs to be financed, which means that the special purpose company or vehicle will also go for searching the financing of the project. And that is where the three P's come in, because it's a public private partnership. And part of the private added value to this project would be the financing and financing is typically a mix of debt and equity, typical balance would be 20% of equity 80% of that debt finance. So that is the structure. And we all know the use of DBS in a conventional contract, which would be between an employer and an a DB contractor. But as you can see, here, there are more entities involved, there are more layers involved. And that raises a certain number of questions and issues as how to implement a DB in order for it to be the most efficient and and, and to to serve its purpose, which is, as we all know, first of all, the avoidance of dispute, and then the resolution of dispute. So this is the background and what we are with with with blendy. And Mark, what we would like to bring as issues is, and I'll give a few examples before I pass the floor to my colleagues, but typically, the one of the questions that immediately comes from this structure is where do we put the DB? Where does it act? You know, at which level? Do we have DB for the whole structure? Or do we have several DBS? That's typically one of the questions on which we are bringing bringing some thoughts, then, of course, such issues as the frequency of meetings, you know, the famous question about studying the bees. I mentioned before long term contracts, so they might be issues of renegotiation between but during that term of the contract. Also, long term contract means you need to monitor the performance over that long term period. This is also an issue where can the DB, you know, help and make things more more smooth. And then at during the q&a, or after the q&a, what I would suggest to do is you know that we also discuss of real cases, real case studies. I'm actually working on one for this white paper I just mentioned before, and maybe some of you would like to bring a some some personal experience in case studies that you had in the past. So that's a little bit the overall the overall programme for today. And if there is no question at this stage, then I would pass the floor to Lindy.
Thank you, sir. Good morning, everyone again, yes, sir Chavez has raised some very interesting issues, which I guess I come at from the viewpoint of a lawyer. But as we know, for any of you who've been involved in ppps, the contract structure is immensely complex. There are lots of different separate and interrelated contracts. So the first question, I guess, as a lawyer, I do ask is, where do you sit the dispute board? If we accept that, generally, PPP is the type of contract where a dispute board would be useful? And I would suggest that that is the case because they run for many years, they have multiple issues, and it's all about preserving relationships. So hopefully, everyone's on the same page that something like dispute boards would be useful. But that immediately then takes you to this question of where do you sit the dispute board. Now, initially, Of course, you would say, Well, of course it has to be in the headline contract the project, the contract between project call or the SPD, as it's shown by search in the slide and the employer or public authority. But there is one big issue with that. And that is that, of course, really none of the work is done in that headline contract, because it's all subcontracted down the line. So project call will normally be a very slim vehicle, and will have passed down to a design and build subcontractor and to an operation and maintenance subcontractor, almost all of the obligations.
So in that context, if you only have a dispute board sitting at project level, what influence I would suggest Do they have over the subcontractors, and that is the design and build or operation and maintenance contractors who are doing the work and who will probably have the disputes. And this is something that anyone who's been working on PPP and dispute boards has had to wrestle with and what we had identified in our task force paper was three different options as to how you might deal with this, which is that you set up the dispute board at Project agreement level, but you alone the key subcontractors, and depending on the stage that the project is that that will either be the design and build subcontractor or the operation and maintenance subcontractors to attend meetings to participate in the discussion. The problem then, of course, is is there an impact if there is no contractual compulsion on these subcontractors to attend? Now, I know that in Australia, where DBS in ppps are quite prevalent, they have wrestled with that they have as a preliminary meeting usually invited project called to bring along the design and build subcontractor and to keep them there.
So that is one way, it's a sort of non contractual one, it's a matter of arrangement, you're depending on people agreeing that it's sensible. Another way is, of course, to include include within the key subcontracts the same dispute borders under the project agreement. That's also a possibility, although you would need to recognise that there will still be disputes that are not project agreement level, which I would suggest the dispute word might not be able to deal with in the same way. Another option that has been done quite regularly is to have a form of non binding protocol or statement that the key subcontractors sign, whereby the say that they will cooperate with the project agreement dispute board, it will adhere to its determinations or recommendations, non binding, but I guess a sort of statement of intent. And again, that's something that's quite regularly done. And the fourth option, which is a variant of that is including some form of reference within the subcontracts to the dispute border project agreement level with a statement such as the subcontractors will comply with the determinations or recommendations of the dispute board. So these are pretty challenging structural questions, which I think everyone regularly wrestles with it is, of course, fine when you start a project and everything is going well. But if there's a non contractual arrangement, and things go off the rails a bit that of course, then create some difficulty with the dispute board. So that's something that we regularly look at and are interested in experiences, which I think vary across the countries and region. A second issue, which, again, is wrestled with a bit is how long do you put the district board in place, because as we know, many of these PPP is run for 30 years. So unless you're appointed as a very young dispute board member, you might be 110 by the time the project is, is finished, and this is one that has been looked at, particularly in Belgium, where it's so common to have dispute boards and ppps. And in fact, in our conference in Madrid, we had someone speak there who really spends his life sitting on dispute boards and recognised He's been appointed for 20 or 30 years, a discussion that we've had within the task force is, should you alternate or change? The members of the dispute board, depending on the stage that the contract or project is that, because it's the skill set of the dispute board, when you first established which might focus more on construction, for example, appropriate when you reach operation and maintenance stage? What I would say generally, from my experiences that the construction disputes under a PPP have a very long tail. And for example, in the UK, we're still seeing construction disputes under companies that were established 1520 years ago. So it's not that that skill is not required. But there are other ones that come in another one is the financial model, there may well need to be changes to the financial model in the project agreement. Is there a dispute board member that has the skill and experience to be able to deal with that? So we discussed in our paper, should there be a rotation, for example, perhaps trying to keep some constancy with the dispute board members but recognising that it may need to adjust? I think there's also been a suggestion that maybe you don't keep a dispute board in place for the full term of a project. But perhaps you keep it in place for 1015 years, something like that. So those are the sorts of issues that I guess I'm really focused on more as the lawyer and trying to work out contractually, how you set it up, but also recognising the the issues that arise now I think on that, unless we have any questions I will hand over to Mark is going to talk about sort of wider issues that arise with ppps mark.
Thanks Lindy, and thanks to both you answers for getting the ball rolling on today's discussion. I should also, of course, thank the Dr. bf for inviting me to join today's meeting. For my Park, I'd like to add a few words to what Sasha and Lindy have just said about some of the challenges in using dispute resolution boards on PPP transactions. But then I want to spend the bulk of my time talking about the opportunities and and why we should be using to a greater extent, Dr. B's in ppps. So first of all, in terms of the challenges, I guess I'd begin by emphasising the point that both sarrish and Lindy had made, namely that ppps are really quite different animals from ordinary construction projects or EPC type transactions. And they've got a number of distinguishing features. But the two of them that both Sarah and Lindy have mentioned are particularly important. It's the duration of the contracts, and the extensive number of really important stakeholders that are involved in PPP transactions. So as Lindy noted, ppps, typically last 20 or 30 years or longer, and they've got multiple phases to them, which are really quite different. So you've got the construction phase, you've got the operations and maintenance phase. And then typically, you also have a hand back phase where the facility goes back to the government. And that has some unique issues associated with it. And it's simply not feasible for the reasons that Lindy mentioned to have a Dr. B function throughout that whole process in the same way that would during a two to three year construction project. And it's also been mentioned a PPP is not a straightforward transaction between an employer and a contractor. If you recall the slide that sarastro put up, there's a whole bunch of players on the stage, including the SPV and its equity sponsors and lenders along with the subcontractors handling various phases. But in addition, and this point wasn't made on the slide, but it's it's critically important.
The government entity up at the top, that's not a simple model f A you've got on the slide this reference to the procuring authority, which may well, for example, be a line ministry. But that's not where the story ends, you've got very, very frequently, other government entities looking over the shoulder of that line ministry. Very frequently, the legislation in countries will provide either that a central PPP unit, and or the Ministry of Finance, will be closely monitoring the activities of that PPP. Why? Well, it's because of the very significant contingent liabilities that are usually associated with these large PPP infrastructure projects, and the potential impact of those contingent liabilities on the fiscal picture for the government. So that's why ministries of finance are also involved. And so that begs the question that Lindy posed, namely, how do you get all of these players around the table for the drB to function? And how do you ensure that all of these players, such as for example, let's central PPP unit, or a ministry of finance, have bought into the drB as an effective mechanism for both avoiding and resolving disputes. So these are some real challenges, and we can't ignore them. But the flip side of the picture is that, alongside those challenges, these unique features of ppps create, in my opinion, a real opportunity for dispute resolution boards to help to address some of the key concerns, which ppps currently face. Recently, I was asked by the Asian Development Bank to prepare a paper on one of those big concerns, namely the significant global slowdown in PPP activity, as was dramatically pointed out, in the recently released very recently released global infrastructure hub infrastructure monitor report. There's been a marked decline over the last few years in PPP investments. And in my paper that I did for the ADB, I argued that one of the key reasons for this global lack of enthusiasm is the growing sentiment that is mutually shared by governments, and by the private sector, that long term PPP contracts are simply too inflexible, and that they are ill equipped to deal with unanticipated risks, such as obviously, a global pandemic. And accordingly, I've suggested that in order to restore confidence in PPP use globally, the contracts need to be more collaborative in nature, recognising that they are supposed to be based on this long term partnership relationship. And one of the ways that we can achieve that more collaborative approach is to take a look at how disputes are handled in PPP transactions. In the typical PPP contract, you've got a scheme, which, frankly, normally leads to a very rapid recourse to arbitration, which really breaks down and destroys the partnership relationship. And in my view, dispute resolution boards could be very, very helpful in creating that more collaborative approach, which is needed in order to restore confidence. And that I think, should be a major selling point that we should be using to encourage the embodiment of drB arrangements into the PPP contracts that are now being drafted. And then finally, I want to put on the table. And it's candidly it's an untested new contention on which I would welcome the comments of my fellow panel members and of the audience.
Another argument for using Dr. B's on PPP transactions, and that reason has to do with a separate major concern in the PPP world, namely the prevalence of PPP renegotiations briefly mentioned by Sarah she in his opening remarks, but I think it's worth time spending where Look at spending a little bit of
discussion on this issue of renegotiations. By definition, a PPP renegotiation involves rewriting the terms of a PPP contract, as opposed to a mere adjustment that is made in accordance with the original contract. And the dirty little secret, if I can use that phrase in regard to PPP is, is that renegotiations are globally extremely common. They may not be a all that frequent, frequently seen in the United Kingdom, but globally, particularly in Latin America, and in South Asia. The data shows that up to 1/3, perhaps one half of all PPP transactions are being renegotiated. And this is again, a function of that inflexibility and the fact that they last over time. But interestingly, the renegotiations are not all happening in year 10, or year 15. Very, very commonly, they are happening within the first few years after financial close, again, perhaps a reflection of just how complex these contracts are. And again, that they are relatively inflexible. Now, this is a real challenge this phenomenon of renegotiation, particularly for governments, and particularly for governments in the developing world, they may feel that their private sector project company, on a major PPP project has very significant leverage visa v the government in a renegotiation situation, given the public pressure that will be on the government to ensure that that PPP highway or PPP bridge or hospital remains available for us, not withstanding this renegotiation going on between the parties.
So governments feel that they can be pressured by the private sector in those kinds of situations. Also, governments struggle with how to carry out a renegotiation in a way that demonstrably preserves the so called value for money of a PPP transaction. And the problem, of course, is that during a renegotiation, the government is dealing directly one on one as it were with the project company, without the benefit of the competitive tension that existed as a result of the presence of multiple bidders when the original PPP contract was awarded. So you don't have that competitive tension. And it's that competitive tension that at the time of the original award, the government could say, Yes, we got value for money because this was the best possible deal. You don't have that when you're in a renegotiation. And so governments ask, how can we demonstrate that we've, yeah, we've renegotiated this contract, but it's still presenting value for money. So Against this background, it seems to me that Dr. B's can offer a real benefit in terms of both avoiding and dealing with this phenomenon of PPP renegotiation, using their well developed dispute avoidance practices. drB panel members may well be able, in many instances, to ensure that the parties to a PPP work together so as to forestall the need for a renegotiation request. And if a PPP does become completely on viable, and needs to be renegotiated the drB could conceivably help steer the renegotiation in such a way as to give comfort to all of the stakeholders, particularly the government, that value for money was still being achieved. And I haven't thought through all of the implications as to exactly how this would work. But it seems to me that there is potentially here a very powerful and novel argument in favour of using Dr. B's on PPP projects. And again, I'd be interested in hearing the thoughts of others on this concept. With that I'll turn it back to Martin
or Michael sorry. Yeah, okay. obsession. anybody's got any points that they really burning? Sorry, Michael, I cannot hear you very well, I don't put my boom mic. Unless anybody's got any points that they want to raise from what we've heard so far. Any hands up Martin at all? Okay says over to you to round up.
Yeah, I mean, I just want to maybe add a few things to what Lindy and Mark have have said and maybe bring a little bit of what I have experience in some of the ppps I have encountered as a consultant engineer, one of the issues and always thinking, how could a DB help, you know, one of the issues I came across is after the design and build, which we know typically what are the problem in a design and build phase, but what I see is the commissioning of that phase, and then the start of operation is very critical. Because this is the time you know, when you're going to start operate the infrastructure and and of course, you will, you will have you will have issues solve etc. This is the How do you call it the runoff period. Okay. And so going back to what Lindy said, I think it is extremely important that the DB members which were there for the design and build phase, be still there for a couple of years in that very critical phase because I mean, they've experienced the issues during the design and build now we're going to start operate and infrastructure and that know how needs to be kept and to be available, because then they are more prepared and better prepared to deal with issues that can arise in that critical phase of startup operate. So that is a thing. And I agree with with what Lindy has says then after that, on the long term, we need to think how do we how do we how do we address these issues, but then also during the operation or nm phase and Mark reminded you know, 30 year period, things change, of course, and even the performance that typically you will find in a PPP contract where you have a list of of performance to reach with with with a penalty penalty regime next to it, you know, if you don't pay for it, this is the penalty all this over a period of 2030 years, there might be some changes. And this is where I think also then the DB, you know, could DB in place could smoothing things and say listen, the situation has changed environment of this project catchline so we need to revisit the performance without changing the whole contract, etc. But you know, adjust the performance to today's situation, because change change has have evolved, you know, and so this is also goes along with what Mark said said before, one thing as as a last point I would like to bring in and then we can open the discussion to bring case study, which I'm analysing at the moment. This is a PPP in France, in France, PPP are still very much implemented, there's a lot of PPP is in France, and there is a practice of PPP is in France. So I've been confronted to quite a few French project. And this project which took place some years ago now is a railway, you know, the high speed line between Paris and in Boulder. In this case, the parties have had to pbxs to come back to what Linda said before we had there were two DBS there was a conventional DB between the SPV. So we are at the lower level here between the SPV and the DMV contractor, what we have probably all done as as a conventional contract, you know, the DB was sitting at that lower level.
And there's been a few referrals, but mainly on construction. But the case came where the SPV which is the employer in this case, and and the BB subcontractor or contractor had to invite the operator at the table because there was an issue which was not only a design and built it had an impact on the operation maintenance. So in this case, without having something really structured into contract, the DBS invited suggested to the parties Please invite the operator at the table because this issue we need to have it discussed together with the operator. And the end, the whole thing went smoothly, you know, it was a bit of an adjustment to the situation, but it ran smoothly. But this is just to say that at some point of time, you you cannot avoid this situation in a PPP where you have three persons or even four persons around the table. Because in this case, what I said is there were two DBS there was one this dB, which was conventional dB. And there was another DB with five parties around the table, which were the the SPV. Of course, the, the the authority and the authority, the procurement authority, the SPV. They're the dnb, subcontractor, G, O and M subcontractor. And on top of that, you had the SNCF, which is the public organisation which runs public trains on the railways, you know, because you can imagine that on a high speed section, which is part of the whole network, it can be interfaces with such an operator as sensitive, which is the public operator, the story tells us that in that second dB, where you had five parties around the table, nowhere for was submitted and things were sort of sold out, sort out sorted out, without the need of using a DB that these are the facts, I don't know all the details, but these, these are the facts. So bottom, bottom line is that in that first conventional dB, at some point in time, that third party, the operator had to come to the table worth invited to the table. And that in that other dB. They were they were no referrals. So just to give you some, some some case study background. Okay.
Okay, just I was just gonna say I was just gonna talk for a moment very briefly about the result of the poll. So first question is, do you know that the use of DBS on PPP projects over 70% said no? Second question, do you think the DBS have a role to play in making PPP projects more collaborative? I'm pleased to say 100% said yes. So that kind of bears out what you have to say. fascinating stuff. Surgeon very interesting to see what's going on in Belgium and France. So does anybody have any, any questions, so or points that they'd like to raise? Please raise your hand. So that includes
lindian marks. So let's see who we've got. Don't be shy and coming forward. Duty full size wants to make a comment, Julie, and john?
Hello, I've got a question. I've done I've worked with ppps. A little bit in the past, but I have very little knowledge. So it may be a silly question. I'm interested in your day, one of the things we've discussed quite often with DBS is the who can talk to whom and who must be in the room. So how does that work? If you have a dB, that deals at one level with meetings and issues, and then I suppose third, you then another time bring in perhaps the LM contractor, who hasn't been a party to those previous discussions? But can they not argue that they're being prejudiced by any in any decision? Because they haven't been a party to those DB discussions? But the other parties have? And is there perhaps any basis for that? Are they at a disadvantage because of that? Sir, she wants to comment on that. That was, I was gonna let the lawyer talk about this. Okay, come on. I think
Juliet's along the lines of the various options that I discussed in my presentation, it will really be a matter of by agreement, whether you sign some sort of protocol or whether it's simply you're dependent upon the goodwill of parties to participate, you know, it really is going to depend on on what what parties have agreed or what's been written into the contract. I mean, I think we've all seen provisions in a subcontract level where there's reference to cooperation, compliance with them decisions up the line, that sort of thing. So I would suggest the first step is the contracts to see what's there. And then if there's nothing there that there's some form of protocol or or agreement entered into whereby the can be involved. Okay.
I bet it's just because it is one of those We all think of that if you're making any decisions that you're hoping people will comply with, you need to make sure that you're not there as well. So and that is sort of one of the first options that people seem to go to is that there's some kind of prejudice against them. So it's just borne in mind. Yeah.
I think yeah, there's a lot also about the dispute board instilling confidence in parties. And if the dispute board involves at the first meeting or asks that at the first or even second meeting, and other stakeholders come along, or an invited to participate, I think then you can start to instil some confidence, my personal view, and it's a slight side issue, but it also picks up on marks. One is your big issues, funders, in my in my view, because they have an entirely different viewpoint. But yet, their engagement is, of course, absolutely critical. And as I see it there also, and very likely to be the blockage to any renegotiation along the lines that mark suggesting because you're going to completely change the risk profile, and the funder will see Well, that's not the basis on which we invested in this project. So involvement of funders, who will be very, in my experience reluctant to get into this is is a big issue, I think to consider as well. Okay.
I will just briefly reinforce that the lenders or funders, critically important in these transactions, and if you are talking significant changes to the PPP contracts, they are they have to be around the table in one sense or another because they are going to have the last word. I also wanted to pick up if I may, on a couple of just briefly if we can. Sure. Suresh asked about, you know, the experiences with ppps. And I can Oh, quote from the report that the global infrastructure hub did in 2018, on managing PPP contracts. And there's a whole chapter on disputes in which they make the recommendation that dispute resolution boards should be used. Their data showed that 22% of the PPP contracts that were reviewed globally, did have Dr. B's. And out of the data sample 9% of the disputes that arose were successfully resolved using a drB. So I think that's a some useful information. Also very briefly wanted to respond to Ben Gross's question in the chat. He asked about the methodologies for appointing drB panel members on PPP transactions, different methods have been used. But the report that I just mentioned, indicated that in their sample group, what happened most frequently was each of the two main parties to that top contract the government and the SPV would appoint a dispute resolution board panel member, and then those two panel members would agree on the third member, as you would do for sort of an arbitration. That's not always the case. I'm not necessarily recommending that that's the best approach. But that's what the data found in this study. Okay, thank you, Mark. I think john Bishop is next up.
Thank you very much. Thank you very much. Which was very, very informative. I have a problem. It's not strictly up to say from a PPP project, but from a long term consulting project, where there's been a dispute board on the dispute board was appointed for the project. And a major disagreement occurred between one participant in PPP terms out of might be in say the O and M contractor. And they had a very formal and had to make a decision as a dispute board. And then it turns out that there is a dispute with the design and build contractor on very similar circumstances, but the dispute board now has a whole lot of knowledge given to it. In the first dispute, relevant to the second dispute, which the DMV Contractor In that case, didn't have. How do you handle that conflict to risk if you're having a dispute board for PvP project or another major solium project, I think it's a it's a problem, which if it's not handled, by the way, you set up the contract structure and the DB structure will bring dispute boards into disrepute in PPP project. So I'm a great dispute board fan, but I do believe you need to resolve that problem. Right at the outset, so any problems is one view Lindy, but
sorry, Lindy, looks like you again. Thank you. Thank you, john. Yeah, thank you, john. I mean, that that is, you know, very interesting. I do not have the answer. But it's, it's really a point that's very well made. And of course, we're conscious of that in arbitration. So I guess what you're really saying is that to avoid there being some concepts of bias or prejudice, or whenever you might see your party's not it not being a level playing field, somehow there needs to be written into the contract, some acceptance, that the board will have knowledge from some other matters, but it Yeah, I mean, it's a really important point. And I think that actually, you know, Task Force, we need to consider that, because I agree entirely, you need to deal with that going forward. And I hadn't actually thought of that particular point. Yeah. Oh,
that's a really interesting point. I would briefly add that you've got a little more flexibility. Of course, when you're dealing with a drB than you would in an arbitration setting, you know that the strict rules about hearing all of the parties don't necessarily pertain. But obviously, it has to meet some basic tests of fairness. And that's the question that john is raised. So yeah, it's a valid point, you've got a little more flexibility in a drB than you would in other settings. But still, you can't ignore those basic fairness issues. Okay. Thank you, Louise, I think you had your hand up Louise Hall.
Yeah, thank you. I was just wondering, what are the main causes of needing to renegotiate the contract early on, you mentioned that a lot of those negotiations happen in the starting year. So just want to, you know, what's prompting that
says, Do you want to pick up? I think I will leave the floor to mark. Yeah. Mark. Okay. Yeah. Again, there's data on this in the global infrastructure hub report. They are. It's first of all important to note that renegotiation requests are initiated, not just by the project company side, the private sector side, but also by government sides. And, you know, they may arise due to perceptions that there's windfall profits happening. On the private sector side, they can be driven by unanticipated construction costs that were greater than had been expected at the time of the bid. Changing tariffs are a big one. And government policy changes are obviously a big factors. They those are the sort of official if you were will reasons for the renegotiation. But there is some suggestion that what is all too frequently happening is what's politely called opportunistic behaviour, that there are many instances around the world of biters, consciously, deliberately, putting in very, very low prices in order to win the contract, and then aggressively renegotiating it shortly thereafter, if a government has signalled that it is prepared to entertain renegotiations, then you do that get that kind of opportunistic behaviour taking place. And that has been a problem in a number of countries. Okay, thank you, Mark. Do we have any, any other anybody else who wants to put a question or make an observation? and Martin, anybody got their hands up here?
Christopher? Christopher, Mohsen Christopher, over to you. Please unmute. Good. Thank you, everybody. It's
been an enlightening series of talks. I must confess I'm hoping to my depth on this because my background is in law. Michael, we don't hear. Christopher, could you turn up the volume that we think we'll get close to the microphone get close to the microphone. That's probably better. It better now. A bit. Yeah. Go. Again, the question is really for Lindy. When I did contract years ago, my understanding is that the parties to a contract wish to change the contract that creates a Novation of contract. And all parties have been signed up to that contract. Is that the situation with PPP? They do have to
Yeah, Christopher, I I not sure that it Novation is the issue. I think the bigger issues are ones of public procurement. Which again, is is is a huge issue if you're having to renegotiate because, you know, the unsuccessful bidders will potentially kick up a pass if they're still around. No Novation would tend to be the issue where a party is being replaced. But I think what we're talking about here is revising the terms of a contract rather than changing the parties. I mean, parties do sometimes get replaced. But I think we're talking more here about changing the terms or the risk profile.
Okay, that's great. Thank you. Lindy public. I think the first time we mentioned public procurement, I mean, those rules have a big amount to all this and including all so even on the point, the selection of the body to a point, the point the dispute board, or indeed the the dispute board itself. Do we have any other takers, we're just about on an hour, but we can run for a few more minutes. If everybody's happy. Anybody else got any thing they'd like to? Hear we go David Wallace. David, over to you.
Isaiah, it's very quick question. And it's it's the the source, the quality and the numbers of the people that would make up the panels of the DB. Would there be a single source for example, the RBA? Would there be multiple contracts for for for industry panellists. We see that working? Well. That's an interesting point. that follows on from my point about public procurement. In my search don't
Yeah, maybe just as a practical reference, and in my experience, the were the drB. In this case, I just mentioned the drB was selected from different sources that would not one source would run, you know, the typical way. contractor or authority on one side SPV on the other side, and then the third part, the third member would be nominated. That that's my experience. Linda, did you want to jump in?
I know I can. Sometimes the contract provides it as well. The identify members. Yeah,
yeah. And in terms of the skill sets, which I think David was also driving at. Normally what you find, and certainly what is recommended in this global infrastructure hub report is you need people with engineering skills, you need people with costing skills, you need people with legal skills, because the again, these are quite complex contracts. And so it's that kind of mix that you will typically see, you know, on a DRV panel for a PPP. Okay, thanks, Mark. I mean, just on that subject. I know john Papworth has expressed his views on the need for a kind of, if you like a gold standard, a pool of people who can actually do this work. I don't know whether you want to make a comment, john.
We're not really thanks for picking on me, Michael. I didn't think I'd let you get away scot free? I don't think there is. I think the most important thing about a dap is that the people enjoy each other's company and can get on together. If you've got a team that can get on, you can do pretty well, anything. The only observation I would make is if you're sorry, I shouldn't laugh really. But if you're expecting somebody to be around for 30 years, you better be sure when you choose them at the start. that's likely to last the course.
Some of the fairly long term projects they might not yet have been born, of course. Okay, thanks. Thanks, john. Maybe One final question this Dr. Ross. Dr. Ross. Derek, can you unmute me?
Could I go back to sorry, Julie's and john Bishop's a topic about people being involved in multiple, multiple d bS? I think I think it probably boils down to disclosure. There are, I mean, there are two levels really, disclosure of what you're on. And the other is disclosure of what you know. But I think you need to be very transparent about the DBS you belong and the parties you've been associated with. And on other DBS, you're going to learn things that may have an impact on a particular dB. And certainly, as an adjudicator, if parties or a party is spreading a line that in my experience is not correct. The adjudicator will have an obligation to actually reality test with that party and say, okay, or this is what you're putting forward. But is that, in fact, how do you come to that conclusion? I didn't DBS, we then have, we have this wonderful problem, that during a DB hearing, the DB is not entitled, or is actually in breach of its obligations. If it expresses a view during a hearing? Or very often, it can be very difficult to actually ask a question without actually expressing a view. But to come back to Julie's point on john bishops point, I think it is very much a matter of totally transparent disclosure, disclosure disclosure of even if you think it's even if you think it's not necessary and doesn't violate the IBA traffic loads. It's important that people know where you've been and where you come from. I think it's up to the dispute resolver to declare any particular facts that they're aware of that have a bearing on the issue in dispute.
Well, thank you, Derek. And as we wait, now, we've been waiting for 363 days, I think for the Supreme Court, UK Supreme Court. Halliburton chub is the 12th or 13th of November last year. Yeah. Lindsey, do you have any observations on on Derek's rather astute point? No. Okay. Good. Search, or mark, any, any thoughts? Is that good? Yeah, that's good. Okay. Yeah. Yeah, that's very good. You know, suss out.
disclosure, for me is clear. And then also adherence of the parties. I mean, if the parties are fine, then that's another important aspect of that issue.
Mark, any final thoughts? agree completely with the last point about disclosure and about, as I said, it says, just said, getting the parties to, to buy into the drB concept, and that includes all of the parties affected by the decision. Okay. Well, unless anybody else has got any burning desire to ask a question or make any observations, Martin, can we see anybody? I was going to wrap it up? No, I think that's it, Michael. Okay. Well, we had, we started off with what we did quite well, we had 36 people, but we had 30 people on the beginning. I think we've drifted down with through 29 to 26. So thank you very much for your attention. And thank you also to people who were on the call from as far away as Romania and also from India. I'd also like to thank our speakers, Serge, Lindy, and mark and also for all of those who contributed so we can't really do applause But anyway, thank you very much to the three of you. And thank you for your time, and put This together. I think the certainly I think we will learn a lot about the task force. I'm certainly going to have a look at this at the global infrastructure report that looks extremely interesting. And we look forward to our next meeting, which will probably be at some point in January, this will be once again, a difficult act to follow. And thank you very much, everybody. I was going to suggest Lindy mark and Serge May, would you like to stay on the call, we'll just have a quick wrap up amongst ourselves. And then we're not in if you'd like to get everybody else to leave the meeting. That would be great. Thank you very much, everybody, and have a great unsaved day