6.7.1 Dispute Resolution Methods

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The disputes over contractual issues that may appear between the Contracting Authority and Contractor during the execution of the contract are an undesired condition, which demands for cost and time in order to be managed. The relationships of the two parties that are usually built through great effort and over extended periods of time suffer the appearance of gaps or they are totally ruined. If the disputes sustain for a long time, then there is a significant increase in the cost for both contracting parties, the achievement of best value for money is affected and any advantages that the contract may return to the Contracting Authority as well as to the Contractor in the end, are nullified. This is the reason why a particularly great effort must be put to create a good working relationship which will ensure a frequent and effective communication as well as preventing the development of any sort of controversy/ dispute between Contracting Authority and Contractor.

Given that, even if the Contracting Authority has invested in the development of a good collaboration relationship with the Contractor, no one can exclude the possibility of disputes from arising; great care must be taken so that the contract concluded with the Contractor includes provisions to maintain this good relationship, as well as provisions regarding the dispute resolution methods that will be enforced, their escalation and their enforcement procedures.

Escalation range of dispute resolution methods

The resolution of disputes comprises a series of processes that are aimed at the settlement of any type of disagreement/ dispute that may arise between Contracting Authority and Contractor. The methods/ techniques for dispute resolution are characterised by two key parameters:

The degree of involvement of the parties in the decision: The dispute may be resolved exclusively between the two parties without any third party involved or through a third party intervention of or by court decision.
The degree of formality: The dispute resolution procedure may be informal or totally formal.

These two parameters are revolving around a common axis, that is, the greater the degree of consent of the parties in the final decision, the less formal the method of resolving the dispute and vice versa.

So, on the one end there is the method of amicable settlement characterised by a climate of cooperation, informal procedures and the absolute control of the final decision by the two parties. In the other end, there is the litigation or the arbitration. These are formal procedures executed within a climate of controversy, involve third parties in the final decision making and this decision is final and immediately enforceable.

The Figure below presents the entire range of the internationally employed dispute resolution methods and the comparative position of each one of these with reference to the degree of formality and involvement of the parties in the decision.

Figure 6-1: Escalation Range of Dispute Resolution Methods


© 2007 Republic of Cyprus, Treasury of the Republic, Public Procurement Directorate
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