Today, this article will go through the basic terms related to construction adjudication and explain them.

What is adjudication?

Adjudication refers to a statutory dispute resolution method under CIPAA which was enacted to deal with payment claims related to construction work or consultancy services and provide options for payment recovery.

It is different from arbitration and litigation in which the two are commonly the last resort where all parties are ready to terminate the contract. In comparison, adjudication provides a swift neutral decision on dispute where neither party will be unfairly favored.

Here are commonly-used terms in the adjudication process.

Payment Claim: Served by the unpaid party (Claimant) to the non-paying party

Payment Response: Served by the non-paying party (Respondent) to the unpaid party within 10 working days

NOTE: When one party admits to the claim, they are required to state the whole amount as listed. The party disputing the claim will need to state the amount disputed and their reason for doing so.

Notice of Adjudication: Served together with the supporting documents by the claimant

Appointment of Adjudicator: Appointed by agreement between all parties within 10 working days from the Notice of Adjudication or within 5 working days from a receipt requesting for an adjudicator appointment by the director of the Asian International Arbitration Centre (AIAC).

Terms of Appointment: Negotiated and agreed with the adjudicator by all parties within 10 working days

Adjudication Claim: Served together with the supporting documents by the claimant to the respondent and the adjudicator within 10 working days

Adjudication Response: Served together with the supporting documents by the respondent to the claimant and the adjudicator within 10 working days

Adjudication Reply: Served together with the supporting documents by the claimant to the respondent and the adjudicator within 5 working days

Representation: All involved parties may be self-represented or be represented by an outside party, such as solicitors, appointed by them

Adjudication Proceedings: Conducted according to the adjudicator’s directions. Oral evidence may or may not be involved depending on the adjudicator.

Decision: Must be issued according to one of the following:

• Delivered within 45 working days from the service of adjudication response or reply
• 45 working days from the expiration date of the prescribed period for the adjudication response if no adjudication response was received
• A further time as agreed by all involved parties

The adjudication proceeding is binding unless one of the following takes place:

• The proceeding is set aside by the High Court
• The matter has been settled by all involved parties in writing
• The dispute was decided by arbitration or the court
• There is a stay of adjudication decision

The case can be reopened if either or both parties do not agree with the adjudication decision. In such an event, the case is solved through either arbitration or litigation or the termination of the construction contract.

In conclusion, contractors and companies can gain a deeper knowledge regarding CIPAA 2012 by understanding the various terms and processes within the construction adjudication process, ensuring that they receive a speedy dispute resolution solution that is both time saving and cost effective.

The post Terms to Know Within the Construction Adjudication Process appeared first on Mac Consultancy.

Cash flow refers to the movement of income (or revenue) into and expenditure out of a business.

In the construction industry, it’s a vital concept as contractors need money to pay subcontractors, material suppliers, as well as daily operation expenses during a project’s timeline.

However, negative cash flow (when there are more outgoing costs than incoming profit) also exists within the industry and can cause various drawbacks in a project’s completion. Let’s examine the critical issues that cause negative cash flow in businesses.

The first and most prevalent cause among the others is the pervasive attitude by various parties.

It has become an unfortunately common practice for paymasters to be late in issuing payment certificates as well as late in honoring them.

This culture has inevitably affected contractors’ cash flow and profit, creating a domino effect that goes as follows:

The second point is that contractors also often overlook the importance of payment provision in construction projects, despite the fact that it is a major concern for most if not all contractors.

The contractual provision governs the rights and entitlements of contractors to be paid, which relates back to the need for cash flow among contractors.There are two criteria needed to be met for the payment clause:

• Certification Period
• Period of Honouring Certificate

A majority of contracts tend to ignore or exclude the certification period as it relieves the contract administrator from being tied with a constraint period to make valuation and issue a payment certificate.

Even so, that is why the commonly used standard form of contracts such as JKR Contract (PWD) and PAM Contract have these two criteria to provide clarity in terms of payment for work done for the contractors.

To summarize, contractors must develop awareness from time to time regarding this matter to ensure that they will be able to receive the monetary rewards that they were promised.

Contractors should be aware of their rights contractually and legally and avoid being subjected to negative cash flow or worst still, become insolvent. It’s also beneficial as it narrows the room for exploitation of any party under a contract.

The third point is the availability and effectiveness of dispute resolution mechanisms.

Apart from the conventional litigation, there are various alternative ways often regarded as Alternative Dispute Resolution (ADR) to resolve disputes which include mediation, adjudication, and arbitration.

Mediation, for example, provides an alternative way to settle the dispute without the need to go to court. Involved parties could consider options and suggestions made by the mediator to ensure a win-win solution, as well as maintaining a personal and business relationship between involved parties.

The statutory adjudication under CIPAA 2012 was enacted and came into force on 15 April 2014 to cure this very payment problem in the construction industry. Through CIPAA 2012, a speedy and cheaper dispute resolution which considers all aspects of the situation can also be provided. Thus, the issue of late payments, pervasive negative cultures and behaviours can be overcame to avoid negative cash flow problems in the future.

The third method is arbitration which is an effective way of obtaining a final decision or award in a dispute, or a series of dispute, without needing reference from a court. It requires construction contracts to have an arbitration clause and is more informal compared to a typical court proceeding. It is, however, a private and consensual process whereby the involved parties are at liberty to decide on the arbitration terms such as the number of arbitrators, language used as well as the venue of the proceeding.

In conclusion, it is clear that there needs to be a greater understanding among contractors regarding the critical issues affecting their cash flow in business.

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