Trevor Drury says the data suggests construction has learned to litigate less and mediate more.
The late 1980s and early 1990s were bleak times for construction. There was an explosion of particularly ugly construction disputes and a raft of business collapses as the industry plunged into recession.
The disorder prompted a full-scale government review of procurement and contractual relationships. The result was the Latham Report of 1994, followed by legislation that, among other things, brought in adjudication in 1998.
These changes were reinforced later by the Egan Report, which similarly sought to curb construction’s adversarial nature and foster more collaborative working.
But the true test of these reforms was always going to be the next severe recession. Would the industry once again explode into strife, disputes and litigation?
Well, we’ve had a pretty brutal recession. Has the UK construction industry matured in how it handles commercial differences?
The data would suggest some success. There’s been no explosion of claims in the High Court and no explosion in the level of adjudications.
Adjudication referrals: Figures for 12 months to April of stated year
The chart here shows the number of cases referred for adjudication. The numbers are if anything in decline, supporting the view that contractual conflict is reducing.
But an alternative reading might be that adjudication itself is maturing; the threat of adjudication being enough to change behaviour. Also there’s less construction work at present, so you would expect fewer disputes being referred to adjudication.
The number of claims in the Technology and Construction Court, meanwhile, seem pretty stable, although there has been a rise in the last three years to just over 500 claims commenced each year compared to 366 in 2007/08.
Even so, proceedings in the court are still running at below a third of the 1995 level, when the numbers hit 1,778.
The data doesn’t prove the new order is totally working, but it does support anecdotal evidence that the UK construction industry has matured and this time around does not seem to be tearing itself apart.
So why is this?
A significant factor is changes brought about by the Civil Procedure Rules (CPR) in 2000 that introduced the pre-action protocols for using alternative dispute resolution techniques with cost sanctions for those that failed to do so.
So we see the commencement of court proceedings reduced to below a third of the level of the mid 1990s and adjudications running below 1,100, whereas there were more than 2,000 at its peak in 2002/03.
On the ground we see that adjudication has helped to resolve disputes quicker and the threat of adjudication has greatly reduced the number of disputes compared to the 1990s. Mediation and negotiation is now commonplace, leading to less wasted time, less cost and better business solutions.
In addition, the use of collaborative contractual arrangements and framework agreements has helped reduce the likelihood of disputes – contractors not keen to upset long-standing business arrangements established through frameworks and the like.
And this success has fostered opportunities. With formal disputes fewer in the UK than in the past, we are exporting our expertise overseas where the type of procurement, contractual relationship and methods of dispute resolution are still based on an adversarial approach to business.
Trevor Drury is managing director of Estia Consulting
