Judgement day

Several dispute resolution mechanisms are developing to solve problems between the provider of facilities management services and its client or supply chain contractor in PFI/PPP projects. Largely these adopt a 'cascading strategy' with disputes tackled at, say, chief executive level between the parties, but with a fall-back option which might include the appointment of an adjudicator or expert to finally resolve any matters.

However, below I consider adjudication and use as my benchmark the latest facilities management model contract to arrive in the market, the recently published GC/Works/10 (2000) Facilities Management General Conditions of Contract from Property Advisers to the Civil Estate (PACE). This includes general conditions of contract, model forms and commentary.

Contract provisions
Disputes must be dealt with quickly and as early as possible with minimum disruption to the project, minimum impact on relationships and at minimum cost. Condition 47 of the PACE contract, maps out the adjudication process. It starts with a dispute, difference or question arising out of the contract. It requires one party to notify the other of his intention to refer this to adjudication.

The process is fast – within 7 days of the notice the matter is referred to the adjudicator who, under the terms of the PACE contract, is specified in the appendix. This saves time with nominations and appointments.

The notice of referral sets out the facts and issues and includes the supporting documents needed to prove the case. Normally the party referring the matter to the adjudicator wants a decision on one or more issues and, in most cases, these will be performance or payment matters.

The conditions have provisions to cover situations where an adjudicator cannot act, for a variety of reasons, and a substitute is needed. For example when the adjudicator becomes unable to act or ceases to be independent.

The timescale is robust – the adjudicator has 28 days to make a decision but this can be extended by a further 14 days if the referring party agrees.

How much muscle does the adjudicator have?
A great deal. The adjudicator must act impartially and independently and takes the initiative in ascertaining the facts and the law. In other adjudication provisions the adjudicator can be investigative, can talk to parties involved and their advisors, can get the work opened up etc. In practise, the amount needed to be done depends on the quality and depth of the case the referring party puts to him. So beware. The adjudicator, in my view, is not there to do your job for you. The adjudicator is there to make a decision on the issues referred to him.

The decision of the adjudicator is not final – in fact it has been described by leading counsel as 'temporary finality’

Condition 47(8) gives the adjudicator power to vary or overrule any decision previously made under the contract by the employer or the employer's representative. The employer could be a public or private sector person. The adjudicator only provides reasons behind this decision if requested by either party. The jury is out on this one. If you get a decision that goes against you then you might want reasons to see if there are any flaws in the adjudicator's reasoning, logic or facts but it will be costly, as the adjudicator has to write lengthy reasons.

What if you don't like the outcome?
The decision of the adjudicator is not final – in fact it has been described by leading counsel as 'temporary finality'. If you don't like the result then the conditions allow the matter to be referred to legal proceedings or arbitration. But you can't just wave the adjudicator's decision and say 'I don't like this'. You have to start theprocess all over again and you will need a considered view on the likely timescale and costs.

So what can a facilities management provider expect from the adjudication process? Rough justice, some think. But they get a decision and the issue is resolved. The alternative might be a festering sore and costly litigation or arbitration.

Lessons from construction
Many contractors now are concentrating more on non-confrontational processes, on building long term relationships with clients, on increasing the level of non-competitive tendering and on partnering.

In the mid '90s, Sir Michael Latham produced his review of the industry. Of greatest significance were proposals to improve cash flow throughout the industry supply chain, to outlaw onerous payment provisions and to introduce a radical strategy to resolve disputes between parties involved in the construction process.

Traditionally, any disputes on construction projects were dealt with by arbitration procedures after practical completion of the project. It had become a pedantic and very costly business. It would take at least four months for a dispute to be heard by an arbitrator after notice to arbitrate was given, and three months to get a decision.

Latham proposed a fast-track process to deal with disputes as and when they arose, with arbitration or litigation if the outcome was unsatisfactory. Under Part II of the Housing Grants Regeneration and Construction Act 1996, all construction contracts would have to include:

• a statutory right to take any dispute under a construction contract to adjudication
  
• a framework for payments
  
• dates for payments to be clearly agreed
  
• no entitlement to withhold any payments unless
  
• a process was complied with
  
• a right to suspend performance in the event of non-payment
  
• the outlawing of conditional payments

A default mechanism was introduced. If contracts did not comply with the requirements of most sections of the act then the provisions of the Scheme for Construction Contracts would apply.