Advantages and disadvantages of Construction Adjudication
This Article is all about the Advantages and disadvantages of Construction Adjudication. If you want to learn more about Construction Adjudication we have an online course for sale on this website.
Stravelles run a course in Adjudication which aims to allow the student to run their own adjudication as the referring or responding party without paying for legal representation.
We support legal representation in more complex cases but we want to encourage especially smaller companies to feel more confident fighting for their contractual rights.
Introduction
In this section, we are going to look at the pros and cons of adjudication so you have the ‘full picture’ of this dispute resolution procedure.
Adjudication existed long before being introduced to the construction industry by the Construction Act.
Advantages of construction adjudication
Private – only the parties involved in the process hear about it. This protects the reputation of both parties as opposed to the dispute being heard in open court with resulting newspaper articles being issued.
Cost- It’s not as expensive as Litigation (courts) or Arbitration (essentially a private version of the court system)
Speed – the process takes 28 days from start to finish although more time can be requested.
Binding decision* – the Adjudicators decision is binding although it can be appealed to Arbitration or Litigation through the Technology and Construction Court – however the Adjudicators decisions are rarely successfully challenged by the losing party.
Cash-flow – Adjudication allows a contractor or sub-contractor to protect their cash-flow if the Client does not pay.
Disadvantages of construction adjudication
Cost – it does have a cost – the RICS charge about £500 to recommend an adjudicator and expect an adjudicator to charge at least £5,000 pounds. You don’t necessarily need to hire a lawyer to prepare your paperwork, you can do it yourself as long as the arguments are not extremely legally technical.
Time – it does take time out of your day to fill in the forms and prepare all of the documentation.
Legal fees- unlike litigation, the Adjudicator may not have the power to order the losing party to pay the winner’s legal fees.
Risk – there is always the risk that the other party will just not pay any monies and go into administration or adjudication. It is important to note that if one party refuses to pay you will be liable for the entire cost of the adjudication, so you have to be aware of this risk. For example, say an Adjudicator issues a decision that awards you £50,000 and claims £5,000 in adjudication fees. If the other party does not pay then you need to pay the adjudicator fees while you pursue the other party.
Rough justice – there is the argument that adjudication can be used to unfairly get overpaid. For example, a contractor can submit their progress payment application to their Client completely in accordance with the contract, but seek a lot more money than they are entitled to. If the Client does not issue a payless notice in accordance with the contract then the contractor could use Adjudication to force the overpayment. The Client can appeal to Arbitration and the courts process but in the meantime they still have to pay. But is that Adjudications fault ? The Client needs to have their paperwork in order. (While I say Client, I could easily say Main Contractor).