The Construction Act has now been in force for four years. Last April, I spoke to the Chartered Institute of Arbitrators in Hong Kong, at the invitation of James Knowles. They had asked me to talk about why I had recommended adjudication in the first place, and what brought me to it.
I explained that I had been chosen to undertake the review because I was not a lawyer. A major driver for the review in 1993 was the virtual war between main and specialist contractors over tender abuse, set-offs, and "pay when paid" clauses. It was felt that the industry was too litigious, and lawyers were part of the problem, not the solution. At the insistence of clients and main contractors, another focus of the inquiry was the performance of the industry and how to improve it. As almost anybody with direct involvement in the industry would have been seen as biased by other sectors, the government and the industry had to make do with a retired politician as reviewer. I was not the first choice, or the second, but I was the only one mug enough to take the job.
The background to my approach to contractual grievances, and to disputes and dispute resolution, was the judgement of Lord Justice Lawton in the case of Ellis Mechanical Services v Wates Construction Limited in 1976. He said: "The Courts are aware of what happens in these building disputes; cases go either to arbitration or before an official referee; they drag on and on; the cash flow is held up … That sort of result is to be avoided if possible." Most of my report was about how to achieve best practice in procurement and site performance, so as to avoid disputes. But I accepted that they could not be eliminated and a system was needed which would resolve them quickly. Arbitration was seen by virtually all my consultees as expensive, slow and nearly always deferred until after the contract was completed. I felt that it should remain as a respected appeal mechanism, but not as the main method of dispute resolution.
I also looked carefully at conciliation and mediation. They had, and still have, much to commend them for those who genuinely wish to settle disputes in a way that maintains commercial relationships. But I felt that compulsory conciliation or mediation was almost a contradiction in terms. Any compulsory process would need to cover all potential aspects of the dispute, with its scope fully marked out into subcontracts. It would also need to be made immune from contractual deletion, amendment or restriction. That could only be achieved by statute. I could not favour mediation as the statutorily required method of dispute resolution, but it remains a welcome voluntary alternative.
Contrary to pessimistic forecasts, adjudication has proved extremely effective, and is here to stay
My widespread consultation led me to four conclusions. There was a strong feeling of injustice about payment issues, but little remedy against unfair commercial pressure. Firms needed work to generate cash flow, and rarely felt able to complain about their treatment. Arbitration and litigation were too slow and expensive.
Meanwhile, adjudication was not an unknown concept. It existed, in limited forms, in several contracts in 1993/94. Consultation showed that there was widespread support for adjudication, from organisations representing main contractors and also specialist contractors.
The Construction Act did not contain all my proposals, and there are aspects of it I did not expect or welcome. However, in general it has worked well. Certainly, that has been our experience at Willmott Dixon, the company I chair. The vast majority of adjudications end the dispute, with only a small fraction going on to the courts or arbitration. Some statutory changes are desirable, and we have heard little recently about the review of the Act that Nick Raynsford promised 15 months ago.