Welcome to our series of short articles on adjudication under the Construction Contracts Act 2002 (CCA). Adjudication has been available as a forum for construction disputes for over 20 years now, and has transformed dispute resolution in the construction industry. Prior to the existence of the CCA, most construction disputes went to arbitration; now it is common for disputes to be adjudicated prior to arbitration and in some cases, parties won’t take a dispute any further after an adjudication outcome.

In our experience, since the introduction of the CCA the use of adjudication has been cyclical, with adjudication being more or less popular over time. Recently we have seen the use of adjudication become more popular, which may arise from tougher economic conditions, with disputes around outstanding payments more prevalent, and parties looking for a cost-effective and fast way to resolve these disputes.

In this article, we delve into the basics of adjudication under the CCA, the types of disputes that can be adjudicated, and the reasons why parties may commence adjudication.

The rest of the series comments on the adjudication process, and commercial and future aspects of adjudication, with the following articles to come:

• Article 2: The adjudication process
• Article 3: Enforcing and defending enforcement of adjudication determinations
• Article 4: The commercials of and funding adjudications
• Article 5: The future of adjudications and our expectations for this

What is adjudication?

Adjudication is a statutory dispute resolution procedure where an independent third party (the adjudicator) is appointed to make a decision on a dispute arising out of a construction contract. The process is designed to be quicker and less formal than court proceedings and arbitration. The dispute is determined by the adjudicator on the papers, without a hearing or cross examination of witnesses. The process provides for disputes to be resolved on an interim basis, i.e. the losing party can take the dispute further through arbitration or court proceedings (depending on what the contract provides) but the adjudication determination is binding in the meantime.

Parties cannot contract out of the right to refer disputes to adjudication. Disputes can be referred to adjudication in parallel with other dispute resolution mechanisms, for example an adjudication and an arbitration on the same dispute can run in parallel. However, if the other dispute mechanism (e.g., the arbitration) determines the dispute first, this terminates the adjudication. Parties need to be cognisant of whether their contract is a “Construction Contract” for the purposes of the CCA as adjudication proceedings often take parties by surprise.

Summary of dispute types

Any dispute arising under a construction contract can be referred to adjudication. There is no monetary limit on the disputes that can be adjudicated. This means that there are a wide range of disputes which can be adjudicated. These include:

Payment disputes: Claims related to unpaid progress payments, final payments, or any other contractual payments. A significant portion of adjudications relate to payment issues, reflecting the cash flow imperative in construction projects.

Defective work: Disputes arising from allegations of defective, incomplete, or substandard work. These claims can involve assessments of quality and compliance with contract specifications.

Time-related claims: Disputes concerning extensions of time, delays, and associated costs. This may involve analysis of project programmes and the impact of delays on project timelines.

Variations: Disputes regarding variations to the contract, including the scope of work changes and costs associated with these changes.

Contractual interpretation issues: Issues related to the interpretation of terms and conditions of the construction contract. This might involve determining the parties' rights and obligations under specific contractual clauses.

Design issues: In 2016 the definition of construction work was broadened to cover design work. This means that disputes under design or consultancy contracts may be able to be adjudicated. In practice, we see few adjudications under these types of contracts.

Reasons to commence adjudication

Adjudication can be used at any time (i.e., during a project, or at its conclusion), but can be particularly useful to get an outcome on a dispute during the course of a project, to facilitate cashflow, break a deadlock on an issue, or determine an issue that may have implications for other similar issues for the rest of the project.

Some of the other benefits of adjudication include:

Timeliness: Adjudication is relatively quick, compared to court proceedings or arbitration. Depending on the magnitude of the dispute, an adjudication may take three to six months from start to finish.

Cost-effectiveness: The process is generally less expensive compared to other dispute resolution methods like litigation or arbitration. The cost of an adjudication depends on the number and complexity of the issues in dispute. Because of the limited timeframes for an adjudication, the likely cost of the adjudication can be assessed with more precision at the outset of the process.

Expertise: Adjudicators typically have expertise in construction law or construction industry practices. An adjudicator can be agreed between the parties, and this allows the parties to agree on someone they consider has the most suitable expertise for the dispute. If an adjudicator is not agreed, one can be appointed from a number of nominating authorities, from panels of adjudicators with relevant expertise.