A construction introduction to adjudication

Adjudication is a frequently used dispute resolution procedure unique to the construction industry. Established to resolve contractor disputes quickly and cost-effectively, it is often described as a "pay now, argue later" mechanism, ensuring that cash flow continues even when disagreements arise.

What is adjudication?

Adjudication was introduced in the UK under the Housing Grants, Construction and Regeneration Act 1996, commonly referred to as the Construction Act. Its primary aim is to maintain cash flow for contractors and sub-contractors during a construction project. Unlike court proceedings or arbitration, adjudication is designed to be fast, interim, and relatively inexpensive.

The Construction Act applies to most construction contracts, making adjudication widely available across building, engineering, and infrastructure projects. It can be used to resolve a broad range of disputes, including:

• Non-payment or underpayment
• Delays and extensions of time
• Defective work or materials, and
• Breach of contract.

Importantly, parties to a construction contract must have a right to adjudicate. This right is usually expressed in the terms of the contract. If not, the Scheme for Construction Contracts 1998 provides a fall-back position, meaning all of the Scheme's adjudication provisions take effect as implied terms. This ensures that even in the absence of express contractual provisions, parties to a construction contract that is caught under the Construction Act can still access adjudication.

How does the process work?

The party initiating the adjudication is known as the Referring Party, while the other party is the Responding Party.

Adjudication follows a strict timetable, typically completed within 28 days from date of the Referral Notice. The process generally unfolds as follows:

1. Notice of Adjudication – the Referring Party serves a formal notice setting out the nature of the dispute and the remedy sought.

Before serving a Notice of Adjudication, it is essential to check that:

• The dispute has 'crystallised'. In other words, the parties must have a clear disagreement whereby one party makes a claim which is disputed by the other party. A dispute can be crystallised in certain circumstances by silence or failure to respond to a claim.
• Only one dispute is being referred, unless the parties have agreed that the adjudicator may consider multiple disputes.
• The dispute has not already been adjudicated. A party cannot refer a dispute that is the same or substantially the same as one previously decided.

2. Appointment of adjudicator – an adjudicator is appointed either by agreement between the parties or by applying to a nominating body.
3. Referral Notice (day 1) – within 7 days of the Notice Of Adjudication, the Referring Party must serve a Referral Notice on the adjudicator and the Responding Party. This sets out full details of the claim and includes supporting documents such as witness statements and expert reports.

The adjudicator will then set the adjudication timetable and provide the parties with directions. They have absolute discretion on the timescales afforded to the parties to make submissions.

4. Response (days 7-14) – typically the Responding Party may be given a short period (eg 7 – 10 days) to submit their response to the Referral, setting out why the Referring Party is not entitled to the remedies sought.
5. Reply (days 14-21) – the Referring Party may be given the opportunity to respond to the Response, if new evidence has been raised. There are then often further submissions in short timescales all at the discretion of the adjudicator.
6. Adjudicator's decision (day 28) – the adjudicator must reach a decision (known as an Award) within 28 days of the Referral Notice. The Referring Party can extend the period by 14 days but after that both parties must agree to any further extension.

Whilst an adjudicator can request a hearing to have live evidence from witnesses and experts, or legal submissions, this is relatively rare unless the claim is particularly complex. And if a claim is too complex, adjudication may not be an appropriate forum for the dispute.

What happens after the decision?

The adjudicator's decision is binding on an interim basis, meaning it must be complied with in the first instance (subject to any jurisdictional challenge). Courts take a robust approach to enforcement and will usually uphold the Award even if the adjudicator has misapplied the law or reached an incorrect conclusion. If a party is dissatisfied then it is open to it to re-run the dispute in court or arbitration proceedings (depending on the terms of the contract).

In practice, many disputes end with adjudication. The process often brings clarity and resolution, and the significant cost and effort of pursuing further legal action can be a deterrent.

As for costs, the adjudicator will determine how their fees are to be paid. The general rule is that the losing party pays the adjudicator's fees and expenses, although it is not uncommon for costs to be split. Each party is typically responsible for paying its own legal fees.

Final thoughts

Adjudication is a practical and efficient way to resolve disputes in the construction industry. Its speed, cost-effectiveness, and ability to maintain project momentum make it a valuable tool for contractors, sub-contractors, and employers alike.

While adjudication may seem daunting at first, its structured process and emphasis on a quick resolution make it far more accessible than traditional litigation. Understanding how it works – and seeking legal advice early on – can help parties navigate disputes with confidence and keep projects on track.