Key Developments in Construction Adjudication
Construction adjudication, a preferred method for construction dispute resolution, has seen significant shifts in referral trends, adjudicator demographics, and case outcomes. In a year marked by rising inflation and cash flow problems for many businesses in the construction sector, the Report on Construction Adjudication 2023 provides a detailed analysis of the trends, statistics, and emerging issues in construction adjudication over the past year.
As the industry seeks more efficient and equitable resolution methods, understanding these trends becomes crucial. The 80-page report commissioned by King’s College London and the Adjudication Society, and supported by judge Mrs Justice O’Farrell, gives our expert construction lawyers a comprehensive look into the construction adjudication and trends going into 2024.
If you have a construction payment dispute or legal issue, please call our expert construction dispute lawyers for a Free Consultation on 0207 459 4037 today.
Methodology of the Industry Report
The Report on Construction Adjudication 2023 provides the results of two industry surveys on construction adjudication:
- The first was directed at Adjudicator Nominating Bodies (ANBs), with nine responding ANBs providing insight into the trends in construction adjudication.
- The second, broader survey reached out to 158 individuals directly involved in UK statutory adjudication, including 44 who act primarily as adjudicators.
This dual approach aims to provide a comprehensive understanding of the landscape from both an organisational and adjudicator’s standpoint.
Key Findings from the Report on Construction Adjudication 2023
The report presents a range of significant findings that offer insights into the current state and emerging trends in construction adjudication. These findings are pivotal for industry stakeholders to understand the evolving dynamics and prepare for future challenges and opportunities.
Referral Trends: Adjudication referrals have continued their upward trajectory since the introduction of statutory adjudication in 1998. The period between May 2022 and April 2023 saw 2,078 referrals, a figure close to the peak of 2,171 referrals recorded in 2022. This steady increase reflects the construction industry’s growing reliance on adjudication as a dispute resolution mechanism.
Adjudicator Numbers and Background: The total number of adjudicators registered with ANBs has risen to 756 in April 2023, marking the highest figure in eight years. This increase, coupled with the diversity of adjudicators’ backgrounds, indicates a broadening and deepening of the field.
Perceptions of Adjudicator Bias: Approximately 27% of respondents have suspected bias in adjudicators at least once in the past year. This perception underscores the importance of transparency and fairness in the adjudication process and the widespread support for adjudicators to provide conflict declarations.
Claim Values: Most of construction adjudication claims in 2023 fell between £125,000 and £500,000, according to 45% of respondents. However, 25% of claims were valued between £500,000 and £1 million.
Causes of Construction Disputes: The leading causes of disputes include lack of competence of contract participants (48%), inadequate contract administration (42%), and changes by the client (32%). These issues highlight the critical areas where industry professionals must focus to reduce conflicts and enhance efficiency.
What Were the Most Common Claim Categories in Construction Adjudication in 2023?
‘Smash-and-Grab’ Claims
Dominating the landscape, ‘smash-and-grab’ claims were identified by 63% of individual respondents as the most common category over the past year. These claims typically arise when one party seeks to take advantage of contractual or statutory payment timings to secure payment, often before the dispute about the true value is resolved. The prevalence of such claims underscores the criticality of clear and timely communication, as well as the precise adherence to contractual terms regarding payments.
‘True Value’ Claims (Final Account)
Coming in as the second most common category, ‘true value’ claims related to the final account were noted by 40% of respondents. These claims involve the determination of the correct amount due under the contract after the work is completed. Disputes in this category often arise from disagreements over the scope of work, the quality of work, variations, or other contract terms affecting the final account’s valuation.
Loss and Expense and/or Damages for Delay and/or Disruption
Claims for loss and expense and/or damages due to delay and/or disruption were identified by 37% of respondents. These typically relate to additional costs incurred by one party due to the other party’s failure to comply with the contract, causing delays or additional work. Disputes may revolve around the cause of the delay, the responsibility for the delay, and the calculation of the associated losses or expenses.
‘True Value’ Claims (Interim Payments)
‘True value’ claims for interim payments were highlighted by 36% of respondents. Similar to final account true value claims, these disputes arise over the amount due at a particular stage of the project. Given the ongoing nature of construction work, interim payments are vital for cash flow, making these disputes crucial to the financial health and continuity of projects.
How long did it take for a Construction Adjudication to resolve in 2023?
The majority (60%) of adjudications were completed within 29 to 42 days from the referral notice, showcasing the process’s relative speed. However, the complexity of the case is the main factor affecting the length of proceedings, indicating the need for tailored approaches to different dispute types.
The Future of Construction Adjudication in 2024
The Report on Construction Adjudication 2023 discusses several areas of interest that may have significant implications for the construction industry going into 2024. These areas highlight the evolving nature of construction adjudication and the challenges and opportunities it may present in the coming year.
Publication of Decisions
The report discusses the contentious topic of whether adjudicators’ decisions should be published. Currently, 52% of respondents are against the publication of decisions, citing confidentiality and the expedited nature of adjudication as reasons. However, there is notable support for a pilot scheme to trial the publication of redacted decisions, reflecting a nuanced view on transparency and precedent in adjudication.
Diversity in Adjudication
Interestingly, 56% of respondents have never encountered a female adjudicator in their careers. This points to a significant gender imbalance in the field. Efforts are underway to address this, with some ANBs tracking diversity and offering mentorship and training programs. The report highlights the need for continued focus on improving diversity within adjudication panels.
Enforcement and Subsequent Litigation or Arbitration
The report finds that it is rare for adjudicators’ decisions to proceed to litigation or arbitration, with 42% of respondents indicating that not a single adjudicated dispute was referred to litigation or arbitration in the past year. Courts tend to enforce adjudicators’ decisions most of the time (79% of cases). These findings underscore the effectiveness of adjudication as a final dispute resolution method.
Adjudication and Insolvency
The rise in insolvencies in the construction sector since 2022 has affected adjudication, with 23% of respondents having taken part in an adjudication involving an insolvent party.
This highlights the need for careful consideration of insolvency issues in the adjudication process, and the potential for adjudication to play a role in the resolution of disputes even in challenging financial circumstances.
If you want to find out more information on the growing insolvency issues faced by companies within the construction sector and how we can help, our lawyers have written the article – UK Construction Companies in Crisis: Navigating Financial Distress.
Reform Proposals in Construction Adjudication
The Report on Construction Adjudication 2023 also proposes several reforms aimed at enhancing the efficiency, fairness, and overall effectiveness of construction adjudication including:
Expand the Definition of ‘Construction Operations’
A significant portion of the respondents calls for the removal of certain exceptions to the definition of ‘construction operations’ under the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act). These exceptions include those related to drilling or extraction operations, assembly or installation of plant or machinery in certain industries and certain manufacturing or delivery to site activities. The suggested removals aim to broaden the scope of the Act, ensuring more disputes can be settled through adjudication.
Payment Regime and Adjudicator’s Fees
Most respondents oppose amendments to the payment regime of the Construction Act aimed at preventing ‘smash-and-grab’ adjudications. Similarly, there’s substantial resistance to capping adjudicators’ fees or giving adjudicators discretion to award payment of party costs. These views suggest satisfaction with the current payment structures but also point towards a need for clarity and fairness in fees and awards.
Uniform Guidelines on Conflicts of Interest
There is overwhelming support (90%) for requiring all adjudicators to follow a uniform guideline on conflicts of interest. This proposal reflects a widespread desire for increased transparency and integrity in the adjudication process, aiming to reduce perceptions of bias and enhance the credibility of decisions.
Publishing Decisions and Privacy Considerations
While the idea of publishing adjudicators’ decisions is contentious, there is a call for exploring this area further, perhaps (as explained above) through a pilot scheme for redacted decision publications.
Resolution of Construction Dispute – £1.2m Recovered for Sub-Contractor plus costs
Client A approached our expert construction dispute lawyers after receiving a contentious Pay Less Notice which the client assessed at zero.
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Winning Approach to Construction Adjudication
Our lawyers’ extensive industry-specific knowledge and our commitment to justice make us the preferred choice for many businesses in the construction industry. Our construction dispute lawyers are passionate about this industry and are members of the Society of Construction Law and the Adjudication Society.
Our lawyers are recognised among the best lawyers in England & Wales, and have regularly been asked and featured to write authoritative articles in the Financial Times, the Law Society and LexisNexis and have been quoted in City AM, the New Law Journal, Law Society Gazette and Litigation Futures.
Our unique approach to construction adjudications means that we will:
- Arrange a Free Consultation with you & a qualified lawyer to discuss your construction dispute
- Free Asset Tracer & Due Diligence Report
- Arrange a WhatsApp group with you & your legal team in case you have any questions
- Investigate the merits of your issue & create a strategy for success
- Send us your case documents easily through our secure client portal, Go Transfer
- Advise on any judgments & tactics that have proved successful in construction disputes
- Consult with independent surveyors & experts to strengthen your position
- Free sign-up to our Insolvency Tracker & Claims Protection service (worth £1k pa)
- Fixed fees & “no win no fee” arrangements so that you have peace of mind throughout
- Work hard to achieve the best outcome in your construction dispute
Our construction lawyers offer regulated, independent & confidential legal advice and are also dedicated members of the Professional Negligence Lawyers Association, the London Solicitors’ Litigation Association, the Association of Cost Lawyers, the Insolvency Lawyers Association and the Commercial Litigation Association.
Free Consultation with Expert Construction Dispute Resolution Lawyers
Facing a dispute or need guidance on construction adjudication? Call our expert lawyers for a free consultation at 0207 459 4037. We are here to help.
We provide flexible funding options including fixed fees and ‘no win no fee’ arrangements for your construction dispute.
