The price we pay

How much does it cost to hire an adjudicator? Surprisingly, none of the large nominating bodies collect this type of information, so to fill the gap, Building and Hammonds have been doing some research.

We have analysed data on 169 adjudications, collected through the Building website and sent to Hammonds.

The data shows that the mean average fee is now £3725, an increase of 10% since the study carried out by Glasgow Caledonian University in 2000. Considered in this way the increase is modest. It is more striking when considered in the context of the average sum claimed in adjudication proceedings. The average fee is now approaching 5% of the sum claimed. This is a 50% increase compared with the Glasgow Caledonian study four years ago.

The study suggests that although the amounts in most adjudications are relatively small – 14% involve sums of less than £10,000, and 34% sums between £10,000 and £50,000 – fees may have increased disproportionately for low value disputes.

The data in the table has been divided into bands according to the amount in dispute. The average fee percentage is given for a dispute in each band, followed by the range of fee percentages and the range of fees for each band. Although the overall average fee as a percentage of the amount in dispute is 4.7%, the percentage fee is significantly greater for smaller claims. The differences in fees charged for each band is also striking, although this may illustrate the diversity of disputes now referred for adjudication.

As with any set of data, some results do not follow the trend. To reduce the distorting effect of exceptional data, we have also given the median fee for each band of dispute values.

Our study also indicates that in 46% of cases, adjudicators split their fees equally between parties. Respondents were only ordered to pay the fees in full in 8% of cases. Previous studies have shown that adjudicators find for the claimant in about 66% of cases. This suggests that adjudicators are not following the maxim “costs follow the event” and are instead requiring the parties to share payment equally regardless of outcome.

Our study could not establish whether the increase in fees is a result of an increase in the complexity of disputes. Given the relatively low average amount in dispute, this seems unlikely. Perhaps the better view is that whatever the amounts involved, adjudicators are simply taking a longer time to produce decisions. Often parties require detailed reasons to be included in the decision. Whatever the reason, it is likely that adjudication is proportionately more expensive when used to resolve small disputes. However, adjudication can provide one of the few commercially viable courses of action in small disputes.

Our survey did not collect data on the cost of each party preparing its case and of advisers, and does not compare the cost of adjudication with other forms of dispute resolution.