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15 years on – is
adjudication working?

15 years on – is adjudication working?

January 9, 2015
Adjudication

Adjudication as we know it today is located within Part II of the Housing Grants, Construction and Regeneration Act 1996 (“the Act”), which came into force in 1998.

We recently attended a seminar by Dr Ian Trushell, Director of the Adjudication Reporting Centre at Glasgow Caledonian University. Dr Trushell discussed research statistics for reported adjudications in the UK, based upon returned questionnaires from UK adjudicator nominating bodies and from a sample of adjudicators. Some of the statistics make interesting reading, and indicate trends in the use of adjudication.

Almost every sector of the UK economy was affected, and to varying degrees continues to be affected, by the recession. The construction industry was hit particularly hard. Outstanding money became critical for cash flow and the survival of many businesses.

Adjudication was heralded as the way forward in resolving construction disputes quickly and cheaply, in the form of an interim decision. But do these statistics show that these aims have been achieved?

  • The number of adjudications per year in the UK appears to be falling.
  • The party raising the adjudication was successful in almost 70% of cases in April 2012.
  • The most prevalent areas of dispute centre on payment, whether at the end of a project or at interim points throughout; and the value of the work more generally.
  • In 2012, more adjudications were for sums between £10,000 and £50,000.
  • Approximately 73% of disputes are between main contractors and employers; and sub-contractors and main contractors.
  • Almost 70% of adjudications use a documents only procedure, without any hearings.
  • Almost one in five adjudication decisions were not issued after 42 days. The timeframe given in the Act, without any extensions is 28 days.
  • More than one in four adjudication decisions were challenged in April 2012.
  • Adjudicators hourly fees appear to be on the rise.

These figures indicate that adjudications appear to be taking longer and costing more. Adjudication may still be appropriate for some disputes, possibly where it would be beneficial for the decision maker to have specialist knowledge. It is always possible for the parties to negotiate a settlement instead.

Another form of alternative dispute resolution appears to be gaining in popularity – construction mediation. Construction mediation depends on the agreement of the parties to mediate and a willingness to compromise. If these hurdles are overcome, construction mediation may be able to preserve the working relationship of the parties. Construction mediations may take place during a construction contract, therefore offering the opportunity for disputes to be resolved as a project progresses. Mediations can be organised relatively quickly and, can potentially, be completed within one day. Given the statistics above on the length of time some adjudications are taking, construction mediation may provide a faster and more efficient solution.

The method of resolving construction disputes will, most likely, continue to evolve. It will be interesting to see whether adjudication and construction mediation can exist side by side, or whether parties will favour one of them.

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