Over 170 delegates attended the Adjudication Society’s annual conference in London last week to listen to speakers discuss and debate issues centring on “The users’ experience and what can be done to improve it?“.
However, the conference started with a tribute to Sir Michael Latham whose report, Constructing the Team, was so instrumental in introducing statutory adjudication in the UK. Sir Michael’s report acknowledged the adversarial attitude of the UK construction industry and identified that, while the best solution is to avoid disputes, a system of adjudication needed to be introduced. He recommended that:
“… if a dispute cannot be resolved first by the parties themselves in good faith, it is [to be] referred to the adjudicator for [a] decision.”
Therefore, it was fitting that the first session considered the collaborative and non-adversarial Conflict Avoidance Process (CAP), first introduced by Transport for London (TfL) into Costain plc’s contract for the Bond Street refurbishment and Crossrail upgrade.
Early intervention. Is there a place for a CAP?
CAP is a collaborative and non-adversarial dispute resolution process intended to be used as a form of early intervention in potential disputes, and which process is now being embedded into many TfL contracts. It originated from a desire by Tier 1 contractors to reduce their costs and legal spend on disputes and, equally as importantly, to maintain relationships with TfL at a project level.
The CAP process is intended to be used before the parties resort to adjudication. It involves the appointment of an impartial third party (known as the “CAP Representative”) to provide a non-binding recommendation within 21 days as to how embryonic disputes can be best resolved.
RICS has a list of 19 CAP representatives who can be selected by TfL or their Tier 1 contractors to be appointed to issue a CAP recommendation on a given dispute. It is understood that the process has been used roughly 18 times so far.
Each CAP representative on RICS’ list is an experienced dispute resolution practitioner, with either a mediation and/or adjudication background. The appointed representative (who can act alone or as part of a three-party panel) takes an investigative role, meeting with the parties early to understand the issues and the project in general, and providing a reasoned recommendation as to how to resolve the dispute.
Andy Dixon of Costain plc explained how Costain has embraced the process as an important way of maintaining its relationship with TFL. He compared his experience of adjudication to that of a nuclear missile launch, with significant disruption to the site, and with board members wanting to know what was happening and how the adjudication was progressing. By contrast, his experience of the CAP process is that it has empowered project teams to take control over managing and resolving disputes at an early stage. He recognised the need to have adjudication as a “backstop”, but it is very much a process of last recourse, with Costain seeking to have commercial dispute resolution approaches (such as CAP) in their contracts.
While we can see the value of the CAP process to maintaining relationships with large institutional clients on complex projects, we question whether it is a process that will work effectively on other projects where the desire to maintain a key commercial relationship is not of fundamental importance to a business.
Adjudication is a good experience
A panel discussion, led by Paul Darling OBE QC, explored an adjudication users’ experience, observing that in general adjudication is a good experience heavily supported by the courts. It was acknowledged that smash and grab adjudication is losing its lustre, as is the use of ambush tactics in adjudication. It appears parties are learning from experience and putting in place robust procedures to monitor the issuing of payment notices.
The panel also considered whether it would be beneficial to have a similar review process to the Singaporean review adjudicator, which is a process that permits obviously wrong adjudicators’ decisions to be promptly reviewed by a review adjudicator instead of parties enforcing obviously “bad” decisions through the courts.
The panel also looked at what can be done to reduce the cost of the adjudication process, which is often prohibitively expensive for SMEs.
Construction Act 1996 and the government consultation on it
In terms of the effectiveness of the Construction Act 1996, the next panel considered a number of issues, including a desire to abolish the current restriction on the type of projects caught by the Act’s definition of “construction operations” (in section 105). For example, is it time to abolish the section 105(2)(c) process plant exclusion on power generation sites, particularly given the government’s focus on renewable energy?
The government’s two new consultations are an equally timely tribute to Sir Michael Latham. One is looking at the effectiveness of the 2011 changes to the Construction Act 1996, the other is seeking information on the practice of cash retention under construction contracts. Nicola Walters from the Construction Team at the Department for Business, Energy and Industrial Strategy (BEIS) introduced the consultations to the conference and encouraged delegates to respond to them by 19 January 2018.
Tony Bingham and Neil Kelly led an entertaining whistle-stop review of the consultation questions during their afternoon workshop session, concluding that the 2011 changes to abolish the “contracts in writing” rule had been a success, but that much can still be done to reduce the time taken to deal with unmerited jurisdictional challenges.
Just before lunch, in his talk on the key characteristics of an effective adjudicator, Simon Tolson asked how many female adjudicators were in the room. Two women raised their hands. Next he asked how many of the adjudicators present were under the age of 40: none.
The gender split of adjudicators attending last week’s conference is also reflective of main adjudicator nominating bodies (ANBs). Of the 104 adjudicators on RICS’s panel, less than 4% are women. TeCSA, CEDR and TECBAR‘s figures are marginally better, at 6%, 10% and 20% respectively.
There was a general acceptance from those that we spoke to that more must be done to encourage the training, nomination and appointment of female adjudicators. In 2015, members of the arbitration community drew up a pledge to take action in recognition of the under-representation of women on international arbitral tribunals. The Pledge has over 2,000 signatories, including law firms (HFW signed the Pledge in July 2016), arbitration practitioners, arbitral institutions and academics. The Pledge has had a palpable effect. The number of women arbitrators appointed by institutions rose from an average of 12% in 2015 to 17% in 2016. We consider that a similar pledge could be adopted and promoted in the adjudication community with relative ease and could be very effective.
We took the opportunity over lunch to talk to a number of delegates about what is being done to help younger people become adjudicators. All of the adjudicators to whom we spoke started their careers as adjudicators in 1998, when statutory adjudication was implemented. We would hazard a guess that this means the majority of those adjudicators conducted their first adjudication aged under 40.
In the late 1990’s, when adjudication was the exciting new kid on the block, there were numerous training courses and initiatives to encourage people to become adjudicators. By contrast, now there seems to be very little being done to encourage the next generation of adjudicators to enter the field. No one we talked to was aware of any particular initiatives. Simon Tolson acknowledged that TeCSA has not run a training course for adjudicators since 2003.
The escalating costs of adjudication was an issued raised a number of times during the conference. One way of ensuring SMEs and parties with low value disputes can have affordable access to adjudication would be to have a new tier of low cost adjudication. These adjudications could be run by younger, less experienced (but still well trained) adjudicators, at a fraction of the cost of more experienced adjudicators.
In addition, perhaps thought should be given to whether the Adjudication Society should set up and/or facilitate an adjudicator mentoring programme to help new adjudicators to learn from (and perhaps shadow) experienced adjudicators.
Fees in adjudication
Janey Milligan’s next report, focusing on fees in adjudication, is due shortly and a summary paper of her findings was presented to the conference. Her headline finding is that the average hourly fee adjudicators charge is £210 per hour, with an average of 43 hours of adjudicator time charged to parties. This translates into a cost of £9,030 per adjudication, not taking into account the parties’ own legal costs.
Therefore, it is clear that there is an opportunity for the industry to work towards the implementation of a specialist adjudication procedure for “small claims” and, as noted above, this would be an ideal area in which new and appropriately trained adjudicators could “cut their teeth”.