There's no formal procedure. Most times, there will be some haggling behind closed doors and after it's clear who will become the candidate, he gets crowned at a party convention (in the spring of 2009 probably).
If there are two guys who won't compromise, the party delegates at the convention decide by voting, but I can't remember that has ever happened.

"If you know your enemies and know yourself, you will not be imperiled in a hundred battles." Sun Tzu