Making adjudication affordable for SMEs

Martin Burns
Head of ADR Research and Development
Royal Institution of Chartered Surveyors

The evening of Wednesday 18 March sees the launch of the Construction Industry Council’s ground-breaking adjudication procedure for resolving low value building contract disputes, at an event hosted by RICS in Westminster, London.

There is clear evidence in the construction industry that a fresh approach to using adjudication to resolve disputes is needed. This is largely because of concerns raised by small and medium sized businesses that adjudication generally has become too legalistic, too complex and too costly for resolving straightforward issues where the sums involved are relatively small.

There are close to 300,000 construction businesses operating in UK, many of which are SMEs that do not use adjudication. Lots of smaller sized businesses appear to have become disillusioned with adjudication, which they say has developed into a process that is inordinately complicated and expensive. Some even say that adjudication is no longer fit for purpose.

It appears the Government, in the shape of BEIS, is alert to concerns about increasing costs and complexity in adjudication. BEIS has been investigating the extent of real and potential problems for SME’s who say they cannot afford to adjudicate. They would appear to be particularly keen to understand precisely where, in the adjudication process, costs are prone to escalate. That is: are costs being driven higher by overzealous or superfluous lawyer/professional representatives? Are adjudicators at fault for failing to be sufficiently robust and managing the process and timetable efficiently? Are parties at fault by insisting on submitting vast quantities of pointless documents, or failing to adhere to prescriptive timetables and then seeking extensions to timetables?

Whether, and if so to what extent, BEIS intervenes in the future to make adjudication more accessible for SME’s involved in lower value claims remains to be seen. In the interim is is apparent that BEIS welcomes the CIC’s pan-industry initiative to develop a simple, Construction Act compliant, adjudication timetable and procedure for low value disputes

The CIC Low Value Disputes Model Adjudication Procedure (LVD MAP) has been developed under the auspices of the CIC ADR Management Board, whose membership is drawn from leading industry bodies, including RICS, RIBA and the ICE.

Other organisations which are actively supporting the initiative are the CIArb, CIOB, CEDR, IME, IET and UKA. Each of these have been motivated to participate in the development of the LVD MAP in response to growing concerns within the construction industry that adjudication is now too costly, and the process too convoluted, for dealing with anything but large-scale disputes. The primary aim of this pan-industry collaboration is to re-establish industry confidence in adjudication as a method for deciding all types of construction disputes, including straightforward, low value, claims.

The LVD MAP provides a simple and cost-effective procedure that makes adjudication more accessible for SME’s involved in lower value claims. It is aimed at disputes where the amounts claimed are for £50,000 or less, and the issues in dispute are relatively uncomplicated. The LVD MAP offers a nimble way to settle straightforward issues, and allows small businesses to achieve fair, cost effective and transparent decisions by trained and qualified adjudicators. This will be achieved, for example, by adopting a structured timetable and procedure, setting limits on amounts of evidence to be submitted setting a ceiling on adjudicators’ fees at £6,000 and providing clarity for both parties on how much it will cost.

RICS is very supportive of this initiative, and we are delighted that the CIC has agreed to host the launch of LVD MAP at our headquarters in Parliament Square, London.