Adjudication has long existed as a way for subcontractors to improve cash flow with large employers – employers that otherwise may use their size to take advantage. Most of the time, this would come from withholding payments on the grounds of defects or other unfulfilled contract obligations. While adjudication has evolved to cover a variety of disputes related to construction contracts, payment still remains one of the most common.
Therefore, it is no surprise that many turn to adjudication when they need to secure payments. Especially when you consider that a resolution can be reached within weeks – which is very appealing to those who cannot afford further project delays due to a payment dispute.
To fully understand how adjudication secures payment, let me walk you through the adjudication timeline with examples from a previous case.
Before beginning the process
Before beginning adjudication you must first be sure that the claim has crystallised. This means that the details of the case have been presented to the other party and understanding of those details has been confirmed. If the claim has not been crystalised, the other party (the responding party) will have grounds to dismiss the adjudicator.
Case example: A contractor engaged on a mixed-use development had completed works but faced repeated delays in payment, with the employer alleging defects to justify withholding. The contractor crystalised the details of this claim so that it could go through to adjudication.
Once the claim has been crystallised
To officially begin the process, the referring party (the party bringing the claim) must serve a Notice of Adjudication to the responding party, followed by a Referral Notice that contains the full details of the claim. Within 7 days, both parties must agree on an adjudicator and settle the terms and conditions of adjudication.
Within 7-14 days, the responding party must serve a response (can be thought of as a defense). Both sides must also present evidence that can be used to support their claims that the adjudicator will review.
Case example: By carefully setting out the contractual payment obligations and evidencing that alleged defects were minor and unrelated, we secured an adjudicator’s decision in the contractor’s favour.
The adjudicator’s decision
By the 28th day of adjudication, the adjudicator will have reached a decision. In some cases, this may be extended, either due to notice errors or an agreement by both parties. Typically, the whole process will reach a conclusion within that 28 day period. The adjudicator’s decision is binding until the underlying dispute is finally determined by court proceedings, arbitration or by agreement of the parties via negotiation or mediation.
Case example: The employer was ordered to release over £325,000 within seven days, allowing our client to maintain cashflow and complete the project.
Can adjudication only be used for payment disputes?
While it is common, payment disputes are not the only kind that can be solved via adjudication. Project delays, requests for time extensions or defective works disputes can also be resolved by an adjudicator.
If you would like to learn more about the scope of adjudication in relation to construction disputes, I recently hosted a webinar on how adjudication can be used to protect projects before issues escalate. View it here.
