Those in the construction industry will likely have heard of adjudication before. Whatever your level of understanding is, this is because it has become a favourable process to resolve construction disputes. Adjudication belongs to a group of ADR (alternative dispute resolution) methods, the others being: mediation, arbitration and negotiation.
It makes sense that any ADR method exists as an alternative to the often more costly and time-consuming litigation, but why does adjudication, specifically, exist in this group? What does it grant that the other methods do not, especially when it comes to cases concerning construction disputes?
The bottom line
Adjudication exists as an efficient, legally binding and cost-effective dispute resolution process, favourable over litigation. It was introduced in the UK via the Housing Grants, Construction and Regeneration Act 1996. While it was initially introduced as a way to improve cash flow for subcontractors working with large employers, it has evolved into a process that can deal with a wider range of issues relating to construction disputes.
Today, the existence of adjudication helps…
Prevent cash flow issues
The main reason adjudication was established is still a key reason it is favourable in the construction industry today. In addition to saving costs compared to litigation, adjudication speeds up payment recovery, allows parties to resume operations with less delay (and less money lost) and prevents parties withholding money for financial gain (maintaining industry stability).
Speed up dispute resolution
Typically, from the moment adjudication is begun, a decision will be reached within 28 days. In some cases, this can be extended but usually 28 days is the expected time period. This is extremely beneficial in an industry where even a moment’s delay can cost significantly in both finances and reputation. The process is designed specifically to be speedy but still result in a pragmatic outcome.
Balance party advantages
Prior to adjudication, smaller construction companies were usually at the mercy of large employers. This is because these large employers had funds to enter lengthy legal battles where smaller construction companies did not. Therefore, the smaller companies were always at a disadvantage in these contracts. Adjudication has leveled the playing field by providing a way for smaller construction companies to recover what they are owed – without additional damage to their cash flow.
Maintain project momentum
All of these factors (cost-effectiveness and speed) tie into one of the most beneficial aspects of adjudication for the construction industry: preventing further project delays. It is something many people do not factor in when considering taking legal action. They process what is directly in front of them – the cost of the legal method. However, in addition to this, there is the significant loss for every moment a project is stalled. So, even if a party gets the resolution they sought, they still may have to deal with the fallout caused by how long it took to reach that decision.
Adjudication provides a quick route to this resolution to avoid as great a delay as possible for all parties involved. Join my webinar next Tuesday 14th October to learn more about the help available to you via adjudication. Whether you are currently dealing with a dispute or wish to avoid a lengthy process in the future, this webinar will answer any lingering questions about adjudication.
