REUTERS | Alexander Demianchuk

Adjudicating PPP/PFI contracts

Everyone who is familiar with the Construction Act 1996 knows (or should know by now), that certain contracts are excluded from its payment and adjudication provisions. This includes the top tier contract between the local authority (usually) and the project company in PPP/PFI deals.

I read Edward Davies’ recent blog post with interest. I particularly liked the bit where he said he routinely advises his clients to make their contracts Construction Act compliant, regardless of whether or not they are excluded from its ambit. He even went so far as to suggest that:

“…most of the Construction Act is simply best practice and there is usually no good reason not to comply”.

I wholeheartedly agree with Edward. He may have been talking about his experience in advising clients in the water and power industries, but if I were advising a client, I too would be tempted to suggest their contract provides for adjudication.

I have not been involved with a dispute concerning the nuclear sector, perhaps because the current generation of power stations were built long before the Construction Act came into force. However, I have acted as the adjudicator in relation to a number of excluded PFI and/or PPP contracts.

In my experience as an adjudicator, it doesn’t matter what the subject matter of the contract is, adjudication can still work to the benefit of both parties. Parliament may have produced a rather odd looking list of contracts that fall in/outside the Construction Act, but I’m finding more and more that parties are opting-in to adjudication, just like Edward suggests that his clients do.

For example, I acted as the adjudicator in a dispute between two parties who had entered into the top tier PFI agreement in relation to a unique research facility. In that adjudication, the employer sought certain declarations as to various alleged breaches of the agreement. The outcome of the dispute turned on expert scientific and engineering evidence. The submissions and evidence relied on by both parties was extensive. However, it was possible to resolve the dispute within 42 days from the service of the referral notice. Shortly after I had reached a decision, the parties were able to reach a final settlement.

If the contract had not included an adjudication clause, and the parties were left to resolve their disputes through more traditional means, such as arbitration or litigation, the length of time to resolve the dispute would have been significantly longer.

While the dispute was large, and the effect of the decision was significant (in monetary terms), the skills needed to manage the adjudication and reach a decision as to the parties’ obligations, were no different to the skills needed to resolve a large dispute where the Construction Act applies.

In this example, there were some minor procedural differences between the adjudication procedure prescribed under the PFI agreement and a Construction Act compliant adjudication. However, this did not prevent the overall procedure being the same as the procedure when the dispute relates to a “construction contract“.

One final point: the adjudication benefited from having solicitors and counsel involved who were experienced in construction adjudication.

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