It was bound to happen. Adjudication, the lower cost and speedier alternative to taking disputes to court, has ended up being sometimes just as expensive and complex as full-blown, all sides fully lawyered-up, battles in court.
Some reports suggest adjudication can be even more expensive than having your day in court; some cash strapped smaller companies along the supply chain are reportedly discouraged from using adjudication at all because of the expense.
Cost has been one of the reasons justifying recent calls for reform of adjudication. TeCSA has recognised the problem – which has been apparent for a few years – by launching a new service aimed to help at least these lower smaller valued disputes by putting a cap on the fees of adjudicators (see News).
Adjudicators can still earn up to £5,000, plus VAT where applicable, for disputes at the higher end of the range included in TeCSA’s service, which means disputes over amounts up to £100,000, excluding VAT and interest.
TeCSA intends the new service, which is being given a six month trial, to provide smaller companies in particular with a lighter of foot as well as more affordable way to determine disputes. TeCSA says most of its panel of adjudicators have agreed to take part in the new service, which suggests that they would be happy with a fee of up to £5,000 for a dispute between £75,001 and £100,000.
This is still not all that cheap; it could represent over 5% of the sum being disputed, to which should be added the claimant’s own management time. Some will still seek legal and other advice which will have to be added on.
TeCSA’s initiative must be applauded, and it draws attention to the cost issue. But will adjudicators be happy with this level of fee? To an extent they will be venturing into the unknown on a fixed price promise.
Just as breaking ground on a construction project might reveal unexpected complexity, once all the facts emerge in a dispute an adjudicator could find him, or her, self making losses. The scheme doesn’t allow an adjudicator to resign for this reason, or to demand higher payment.
TeCSA expects most of the disputes will be straightforward; just as most parties to construction contracts expect all to go well at the outset of projects.
Adjudicators will be capped at a £2,000 fee for disputes of up to £10,000 – what’s the betting that if things do go horribly wrong it will be on one of these smaller disputes? They will be able to protect themselves to an extent by limiting the number and length of submissions, but there are limits to that.
TeCSA is no doubt right in assuming that most disputes will be dealt with within the level of capped fees available under the scheme, but being an adjudicator was never seen as a risk taking venture and adjudicators see the outcome of over optimistic approaches to risk management in their daily work.
The industry needs to find ways of reducing the expense of adjudication, especially for the smaller companies and smaller disputes that the TeCSA scheme is aimed at. A six month trial might not be long enough to satisfy some adjudicators that they should shoulder an increased burden of risk in an effort to achieve it.
Nick Barrett
Editor