Smash and grab Construction Adjudication

This article is all about the Smash and Grab Construction Adjudication. This term is commonly used when talking about 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 Smash and grab Construction Adjudications

Smash and grab Construction Adjudication is a term used to describe when say a Contractor successfully uses Adjudication to enforce payment of an unfair amount by the Client.

Lets pretend that the Department of the Environment hires Willmott Dixon to build their science facility. Willmott proceed with the works and after four weeks issue a payment notice for £1million pounds. The departments head rings up Willmott and tells him the application is too high and he will pay £500,000 instead. But he never sends through a payless notice. When Willmott gets paid £500,000 they claim the remaining £500k from their Client and when not paid, refer the dispute to Adjudication.

The Client can prove in the adjudication that £500k is fair but the Adjudicators decision awards the remaining £500k to Willmott. Why? Because, the Client did not issue the payless notice and if you don’t issue a payless notice then you will have to pay whatever has been applied for. If you don’t like it, then issue the payless notice !!!

Of course, the Client can wait until the next payment is due and then reduce that payment down by issuing a payless notice but the real danger is that say Willmott goes out of business and the Client loses their £500k overpayment.

When not to use a smash and grab adjudication ?

It desperate times when a contractor pursues the smash and grab adjudication.

Think about it. You work hard to win the tender and get appointed to a project.

You issue a payment notice and the Client does not agree with your application, advises you so but does not do the correct paperwork.

And so you jump in on a technicality and force payment of all the money.

Do you think that is going to help working relations with your Client.

Unless you plan to go into administration, the Client is just going to get the money back on the next payment run.

So it is not a good idea to pursue this strategy if your Client is important to you ?

When to use a smash and grab adjudication ?

You should use this strategy when your Client is being unfair to you and you have exhausted all possible outcomes.

If the Client has not issued a payment notice or payless notice then a Contractor is within their rights to insist on payment of the amount applied for.

When you make the decision to do so, you should have all your paperwork lined up for the adjudication and proceed.

A contractor must follow this strategy if they are unlikely to get paid on time as non payment or underpayment could easily dent or destroy their cashflow and business.

At Stravelles, we feel that a smash and grab adjudication is only a good idea if you have literally no other options and that failing to proceed would lead to administration or liquidation.

Advantages?

The big advantage is that a contractor can get paid fast so as to preserve his cash-flow.

Disadvantages?

If a contractor uses this strategy to get overpaid unfairly then it could destroy relations with the Client.

How does a Client prevent a smash and grab adjudication ?

The Client must issue either a payment notice or payless notice stating what amount will be paid and provide the calculations for how they produced that figure.

So if the Client does their job and issues a payment notice, a payless notice AND pays the amount stated within, they can defeat a smash and grab adjudication.

Difference between a smash and grab adjudication and a true value adjudication ?

A true value adjudication asks the question ‘what is the fair value of the works completed onsite and applicable to be paid for’.

For example, a contractor can issue a payment application for £1million pounds. The Client can issue a payment notice totalling £500,000. The contractor can dispute this figure and bring it to adjudication. The Adjudicator must decide what is the fair value of the application.

Our frustrations with this term

The real ‘Smash and grab’ action of driving a vehicle into a shopfront window and looting what you can is a criminal offence.

So why associate this criminal action with a contractor who is forcing a Client to pay what he claimed, and which the Client was not bothered enough or competent enough to issue very simple paperwork against e.g. a payless notice.

Remember, a payless notice or payment certificate takes perhaps a couple of hours at maximum to prepare – if a Client does not issue these documents then its their fault if they are forced to overpay. In business, if you don’t take care of your business then you will lose out.

We understand that if a contractor takes advantage of a naive Client then yes, this deserves the smash and grab term but this rarely happens in truth. Most Clients are property developers, government departments, businesses and high commercially aware quantity surveyors. So, should a contractor issue a very unreasonably high application for payment the Client will just issue a payless notice and pay that amount. Simple.