By their nature, relationships in the defence contracting chain are complex and multifaceted, spanning the law as well as project and relationship management, governance, communication and reputation.
High project values and sensitive timeframes add an additional challenge.
This unique contracting environment calls for a different approach from business as usual contract management and dispute resolution.
The Department of Defence is not an ordinary counterparty. It is a sophisticated institution operating under public procurement rules, internal governance requirements and intense scrutiny.
It’s important to understand the Department’s decision-making pathways, delegation levels, probity obligations, audit risk, government policy and the operational importance of the capability being delivered.
ASDEFCON provides standardised procurement and contracting templates for Defence acquisitions, designed to support consistency, risk management and accountability across complex procurements.
Defence contracts are usually extremely detailed and prescriptive. Key details are found in notice provisions, governance forums, change control mechanisms, milestones, escalation clauses, acceptance processes, reporting obligations and dispute clauses. A commitment to strict compliance (and understanding the why) is highly valued, builds contractor credibility and trust, and best positions the contractor for any disagreements.
Project records and documentation are critical to managing the contract relationship and addressing disagreements as they arise.
Complex projects generate a large volume of emails, meeting minutes, technical papers, progress reports, CDRL’s, risk registers and contract deliverables. That material must be catalogued and securely stored at all times.
Chronologies assist to mitigate against changes in the project team or the fading of corporate memory. They are powerful tools to share a story with decision-makers who are new to the situation.
In defence contracting, global capability and broader objectives will eclipse smaller issues in dispute. Even where the parties disagree, there may be a shared interest in maintaining continuity of performance, preserving operational outcomes and avoiding disruption and minimizing LD’s.
Commonwealth dispute resolution guidance recognises that parties may be expected to continue performing while a dispute is on foot, and that disputes should be handled promptly, ethically and cooperatively. That reflects a broader truth: a contractor that can remain a reliable delivery partner while also dealing with a dispute in parallel will distinguish itself from its competition.
That does not mean accepting uncompensated scope growth or ignoring contractual rights. It means being deliberate about separating the dispute from the delivery task, wherever that is commercially and legally possible.
There are likely to be limits on the leverage available in Defence disputes. In some circumstances, litigation, injunctive relief and formal procurement challenges may be available. For example, The Government Procurement (Judicial Review) Act provides suppliers with formal mechanisms to complain, seek urgent relief and pursue compensation in certain procurement contexts.
A defence contract will normally contain a Disputes clause, that will set out a process that may culminate in mediation, arbitration or litigation in the courts.
But formal rights are only one part of the picture. Commonly in Defence matters, leverage comes from a combination of legal merit, technical credibility, documentary discipline, goodwill and trust, and the ability to offer a practical path to resolution.
The question is not simply whether a party can commence a process. The question is whejac
ther commencing that process improves outcomes for the contracting parties, taking into account cost, time, future work, reputation and the strategic importance of the customer relationship.
Defence disputes are capable of early resolution when the parties can align contract variation requirements, financial delegations, governance approvals, probity expectations and project realities.
The most effective resolutions are usually practical, documented and capable of being explained in one sentence: this is the issue, this is the agreed way forward, and this is why it represents a proper outcome for both sides.
This article was written by Mark MacLennan, Partner, Defence