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20 August 2020

At last! Cost-capping on adjudication goes live  

A recent announcement from the Construction Industry Council (CIC) has attracted little attention, which is surprising, because it is a significant step towards making adjudication an accessible route to resolving low value disputes.   

A background to adjudications 

Adjudications were introduced in 1996 as a quick (28 day) interim resolution of construction disputes.  However, whilst the process itself might be quick, often it is not cheap, and a recurring criticism of adjudication is that the costs - both of the adjudicator and the parties’ representatives - effectively make it a prohibitive form of dispute resolution, particularly in low value disputes.       

New caps on adjudication fees 

On 5 May 2020 the CIC launched its low value disputes model adjudication procedure (CIC LVD MAP).  It is aimed at disputes of up to £50,000 and where the issues to be determined are relatively straightforward. The adjudicator’s fees are linked to the value of the dispute, so:  

Value of dispute 

Adjudicator’s fee 

Up to £10,000 

£2,000 

£10,001 - £25,000 

£4,000 

£25,001 - £50,000 

£6,000 

Types of disputes 

Some of the common low value disputes in the construction industry may include: 

Quality and workmanship  

Delays in work / time  

Payment (delayed or withheld)  

Variations  

Are your contracts ready for this change? 

“It is important to note that the MAP applies if it has been expressly incorporated into the contract or if the parties otherwise agree to use it. Therefore, you may benefit from having your contracts or templates reviewed by our team to ensure they comply”, comments Steven. 

In addition to the above, the adjudicator will be entitled to a further £1,000 plus reasonable expenses where s/he meets the parties and/or attends site.  

The MAP sets out other indicative examples of when the scheme would be suitable, including: where each submission (Referral Notice, Response, Reply etc) is limited to one lever arch file and a jurisdictional challenge (if any) can be dealt with in 2 hours of the adjudicator’s time.  

Disputes over £50,000 not excluded 

Interestingly, whilst the MAP is aimed at disputes up to £50,000, it is not actually limited to them. The parties can agree to use it if the value of the dispute exceeds £50,000, and in those circumstances the adjudicator will set out their proposed fees and expenses. On the face of it, this would still appear advantageous to the parties, who could have a capped fee and know the potential liability in advance, rather than for the adjudicator to simply bill on a ‘time spent’ basis.     

Perhaps, most significantly, the MAP is supported by ten of the leading adjudicator nominating bodies (including CEDR, RICS and RIBA) all of whom will apply the scheme and charge a uniform fee of £300 for nominating an adjudicator.     

A welcome change for construction firms 

The MAP is likely to be of interest to those small and medium sized construction businesses who may find themselves involved in a dispute but until now may have considered it uneconomical to refer it to adjudication. The MAP is certainly a step in the right direction to try and bring the costs of an adjudication under control.   

Further services 

B P Collins’ construction dispute resolution team has extensive experience acting for small and medium sized businesses, including in adjudications.  

If you have a dispute which may be suitable for the MAP, we will discuss with you and put forward a cost effective and proportionate pricing structure which may, if appropriate, include certain fixed fees. That way, not only will you have the benefit of expert legal advice from our team, you will also have certainty about your potential cost exposure – including the adjudicator’s fees. Our aim is to make adjudication accessible once more for lower value disputes.       

For further details please contact Steven Smith on steven.smith@bpcollins.co.uk or 01753 279039.

Steven Smith

Steven Smith

Tel: 01753 279039

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