Litigation Risks in Public-private Partnerships
Tuesday, July 25, 2017
P3
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LITIGATION BETWEEN PARTIES TO THE AGREEMENT
A well-drafted P3 contract should have a dispute resolution clause providing for some type of mandatory notification of the alleged default(s), an opportunity to cure the same and, perhaps, even a mandatory alternative dispute resolution procedure to be used before a lawsuit may be filed. Governments typically loathe spending money on litigation of any sort. Accordingly, the agreement should be drafted to encourage the informal resolution of minor or easily curable issues without (the threat of) litigation.
Private partners most often find themselves as defendants in a suit filed by the government partner as a result of issues like grave construction flaws (such as the collapsing tunnel ceiling that killed a Boston woman as a result of shoddy work on the Big Dig); a major ambiguity in the underlying agreement; or a serious error on the private entity’s part in calculating or preparing its bid. Importantly, the risk associated with all such issues can be managed in advance; doing so may require more time and the investment of additional resources, economic and otherwise, on the front end, but the risk of failing to do so is considerable. Consulting with an attorney at the beginning of a P3 relationship can pay major dividends by entirely avoiding or significantly mitigating future litigation costs.
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