Kings College London (KCL) and the Adjudication Society (AS) have recently prepared a report with the objective of publishing robust and comprehensive data in relation to construction adjudication, so that established trends can be reviewed, and the overall success of construction adjudication in the UK can be improved. 10 Adjudicator Nominating Bodies (ANB) and 257 individuals involved in adjudication took part in the survey. There are both expected and unexpected results.
Adjudication continues to be viewed as a generally successful dispute resolution mechanism in the construction industry. However, some key themes can be drawn out from the Report:
- A high proportion of adjudications are said to have been caused by either inadequate contract administration, and/or a lack of competence by project participants.
- Some problems with adjudication have been highlighted that require further attention:
- Perceived bias by adjudicators;
- Lack of diversity amongst adjudicators; and
- The use of smash and grab adjudications.
- The Report considers the approach adopted in Singapore and Queensland, in which adjudicators’ decisions are published in order to create an informal system of precedent.
Causes of dispute
It will not be a major surprise to those involved in adjudications that poor contract administration (49% of disputes) and the incompetence of certain individual project participants (41% of disputes) are some of the most common causes of dispute between parties. However, what can be done to combat this?
The Report highlights the importance of training project participants to administer construction contracts correctly before and throughout the duration of the project. Although it can be tempting to get on with a project as quickly as possible, taking the time to properly train your team on the nuances of that particular construction contract can be invaluable, and save considerable time and resources being expended in the future to deal with an avoidable dispute.
Problems with adjudication
Perceived bias
Adjudicator bias is prohibited under section 108(2)(e) of the Construction Act (in which it states that the adjudicator has a duty to act impartially). However, only 7% of participants said that adjudicators disclose information that might give rise to an appearance of bias most of the time, and 68% of participants said adjudicators disclose this information “never, rarely or sometimes”. This underlines the importance of carefully considering all potential areas of bias when appointing an adjudicator, and to raise any areas of concern with the adjudicator where possible. Adjudicator bias can have disastrous consequences for parties to an adjudication, particularly given the difficulties faced when challenging adjudicators’ decisions.
Lack of diversity
Although a lack of gender diversity is an issue seen across the construction industry in a number of areas, this problem is particularly evident among adjudicators. Women only account for 7.88% of adjudicators in panels in the UK, with at least one of the panels surveyed not having a single woman on its list. This is disappointing, and with gender diversity among court judges slowly improving, it is hoped that a similar improvement is made to the diversity of adjudicators in the near future.
No data is available on the representation on ANB panels of those from ethnic minorities, people with disabilities or those identifying as LGBT+. It would be helpful if future reports from KCL and the AS consider such data.
‘Smash and grab’ adjudications
‘Smash and grab’ adjudications, in which a party to a construction contract can take advantage of a missed payment notice by the other party in order to recover the whole sum applied for, which sometimes may be inflated, continue to be used by parties to secure cashflow. However, the Report refers to Lord Justice Coulson’s negative comments concerning smash and grab adjudications in Grove Developments Ltd v S&T (UK) Ltd, noting that it brought adjudication “…into a certain amount of disrepute”, and mentions the potential for duplication of proceedings where the payer then pursues a ‘true value’ adjudication following the ‘smash and grab’ claim. If the tactic is to be avoided altogether, then reform would be required; however, there is a question as to whether that would be well-received by the construction industry, or whether parties wish to continue to use ‘smash and grab’ adjudications to their advantage. It must also be remembered that the main reason for introducing the scheme was to assist contractor cashflow, improve payment practices, and to eradicate the withholding abuses that were widespread in the 1980s and 1990s.
Publishing adjudicators’ decisions
The Report mentions that, in Singapore, adjudicators’ decisions are redacted and then made publicly available, and in Queensland, all decisions are published without redaction. When asked whether adjudicators’ decisions should be made available in the UK, in order to develop a precedent system, a majority (58%) of participants in the survey said they should not be made publicly available.
Like arbitration, one of the key advantages of adjudication is that it is kept confidential, and parties do not have to be concerned with potential reputational damage should the decisions be published (unless the adjudication is enforced or challenged through the Courts). It seems clear that this advantage will not be taken away from participants any time soon.
Conclusion
The Report provides a valuable insight into the current trends within and issues with adjudication in the UK. Although adjudication continues to be a successful dispute resolution method for construction contracts, it is encouraging to see that KCL and the AS are not shying away from areas in which it could be improved. It will be interesting to see if any reforms are introduced to address these areas over the next few years.