Adjudication is a dispute resolution procedure. For the purposes of this guide, adjudication is a reference to the procedure introduced in the UK in 1996 by the Housing Grants, Construction and Regeneration Act (Construction Act).
The types of issues typically referred to adjudication are:
- payment issues - for example, valuation of loss or damage, disruption and prolongation costs, sums due and outstanding in applications for payment;
- declarations as to an entitlement to an extension of time, scope of work issues;
- claims arising from defective or incomplete works.
This list is not exhaustive. Generally, any dispute under a construction contract as established by the Construction Act may be referred to adjudication. Since a party may adjudicate at any time, it is usual for disputes to be adjudicated while the contract works are taking place rather than at the end of the project. Instead of pursuing one big dispute at the end of the project, parties tend to adjudicate discrete issues.
The common criticisms and risks of the adjudication process are:
- ambush - it is not unusual for one party to spend considerable time preparing its claim before commencing adjudication proceedings. The other party may not have enough time to respond adequately to the allegations being made. To that extent, there is always a risk of an 'ambush'. This can of course work both ways: the party referring the dispute to adjudication may not find out the details of the defence until the other party's response is received.
- quality of adjudicator - if the parties cannot agree on an individual to act as the adjudicator, the selection will need to be made via an adjudicator nominating body ('ANB'). The quality and competence of adjudicators varies tremendously. There is a risk that the person nominated may not be competent - technically or otherwise - to deal with the matter referred.
- poor decisions - in the event that a poor decision is made, the parties are stuck with it - adjudicators' decisions are binding unless subsequently overturned by a court or arbitrator. Case law has confirmed that even if the adjudicator gets the law or facts wrong, this is not a ground on which to have the decision set aside.
- complex disputes - in certain cases a dispute may be so factually and legally complex that the parties agree that it may be more appropriate to litigate or arbitrate.
The adjudication process has, however, enabled parties who were owed money to improve their cash flow position from where they would have been, prior to the Construction Act coming in to force. Adjudication provides a relatively cheap and quick method of ensuring that if a party is owed money, it can apply to an adjudicator for a decision and in a matter of weeks a decision will have been made.