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25 JAN 2022

Adjudication of construction disputes in a post- pandemic world

COVID-19 has changed construction. The industry we had known for many decades, along with the entire world we were living in less than two years ago, has melted away and, indeed, much of it may be gone forever. The impact on economies has been immense and no more so that in the construction industry.

Right from the very beginning, during the first UK lockdown in March 2020, many sites quickly closed. Employees were absent or laid off. Cash flow, a perennial problem, rapidly became a more pressing concern than ever before. Measures taken by the UK Government to keep money flowing to industry employers and workers were forthright and necessary.

It is fast approaching two years since the first lockdown was announced in England, and there have been encouraging signs that things are beginning to improve in construction, and in the wider economy. But the legacy of COVID on the construction industry will probably be with us for many months, even years, ahead.

The most popular method for resolving construction contract disputes in the UK is adjudication. Over the past two years, the crisis threw a spotlight on adjudication as a barometer of the state of the industry. The experience of RICS, which has appointed over 20,000 adjudicators since 1998, is that, just before the UK economy goes into a decline, there will usually be a sudden and short-lived upturn in numbers of adjudications followed by an equally dramatic fall in numbers as the economic downturn kicks in properly.

The Covid effect has led to a slightly different experience. Adjudication appointments made by RICS rose to over 120 per month which represented a monthly increase of around 50%. This continued from the end of March 2020 until late summer. By November numbers had started to fall off, but not spectacularly as would have been expected in the lead up to an economic decline. The decrease in numbers of adjudications was oddly slow, and by early 2021 numbers fell back to just below pre-Covid levels. Since the beginning of October 2021, however, there has been a sharp upturn in applications to RICS for appointments of adjudicators. It’s early days but there are signs that adjudication numbers are again on the rise. This could suggest that the UK economy is entering a new post-pandemic period where disputes about money will escalate, and adjudication numbers will again increase significantly. What are the reasons for this?

Previously unforeseen problems now appear to be intensifying in UK Construction, and also beyond these shores. It is apparent that the post pandemic world is going to be different, and in many ways it already is. A shortage of manpower has been attributed by some in the UK to Brexit, though the impact is seemingly global, which suggests it’s a post-pandemic symptom. There has been record demand for construction products as the sector strives to recover from the pandemic. Increasing demand is putting up prices and it has become immensely difficult to accurately value contracts. Add to this the breakdown in logistics that get materials from one country to another, and the extraordinary increases in fuel costs, and it is little wonder that there is talk of the construction industry facing a potential tsunami of disputes in the coming months and years.  

Going forward, adjudication and adjudicators may need to quickly adapt to a completely new environment. The Covid crisis has kicked started a revolution in telecoms and e-business. People no longer need to (or often wish to) travel to meetings. The residual fear of “catching” Covid will no doubt continue for a long time to come and this is resulting in more parties wanting to resolve their disputes in “safe environments”. The nature and types of dispute have already started to change, and adjudicators will increasingly be called on to take on board issues that have rarely been at the heart of adjudications in the past.

Martin Burns

Head of ADR Research and Development, RICS

November 2021

 

Interested in being an adjudicator? Explore RICS’ Diploma in Adjudication in the Construction Industry which starts in June 2022: https://www.rics.org/adjudication

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