From escalating adjudications to strained relationships, this article examines how construction can reduce disputes and create a clearer path to progress
The construction industry is operating under intense pressure. The cost-of-living crisis, rising material prices and ongoing skills shortages are placing unprecedented strain on contractors and subcontractors to deliver projects on time and within budget.
As financial pressure builds, payment disputes and adjudications are increasing sharply – raising serious concerns about cashflow, trust and long-term industry sustainability.
Against this backdrop, Payapps, an Autodesk company, brought together industry leaders at the F1 Arcade in London to discuss conflict avoidance and the critical issue of fair and prompt payment.
The panel featured:
- Ian McIlwee, CEO of the Finishes and Interiors Sector (FIS)
- Reiss Duthie, commercial director at Mitie and UK adjudicator
- Rob Driscoll, director of legal and business at the Electrical Contractors’ Association (ECA) and former adviser to the Cabinet Office and Construction Leadership Council.
Adjudications reach record levels
The session began by highlighting the growing concern around dispute volumes. Referencing research from King’s College London, it was noted that between May 2023 and April 2024, construction adjudications reached an all-time high of 2,264 cases, a 9% increase on the previous year.
The data reveals a troubling trend. Half of the respondents cited inadequate contract administration as the leading cause of payment disputes, while 42% pointed to a lack of competence. Most strikingly, ‘smash and grab’ adjudications – focused on failures to issue valid payment or pay-less notices rather than the value of work per se – accounted for 63% of all cases.
Smash and grab as a last resort
Ian McIlwee described smash and grab adjudications as a symptom of deeper financial stress across the industry. “It’s a bit of a scorched earth policy to get some money back,” he said. “You’re only going to do it as a last resort, because you’ve run out of patience or you’ve run out of cash.”
Ian warned that construction faces two critical shortages: people and cash. Rising costs are creating layers of credit across the supply chain, with many specialist contractors relying on charge cards to cover merchant bills while waiting for payment. He stated, “Cash is not flowing through the supply chain effectively, and people are waiting too long to get paid.” He went on to comment that despite payment league tables and reform initiatives, we’re not really seeing an improvement in payment practices.”
A fragile and fragmented supply chain
Rob Driscoll agreed that the rise in adjudications reflects wider structural fragility. He revealed that insolvencies remain around 20% higher than pre-pandemic levels, despite stabilising in recent years. “In many ways, the chain is more fragmented and more disaggregated than any other industry.” This makes payment even more fragile and volatile, but also makes project delivery more precarious.”
Rob also highlighted the rising cost of adjudication itself. “With the cost of adjudication rising rapidly, you need lawyers, especially where you’ve got to have a commercial dialogue,” he commented, before adding a key reminder, “You don’t want to go to adjudication.”
Payment reform under scrutiny
In December 2024, the Fair Payment Code (FPC) was introduced to improve transparency and payment performance across the construction sector. Replacing the Prompt Payment Code, it allows businesses to apply for Gold, Silver or Bronze status, recognising different levels of payment practice.
While supportive of the intent, Rob questioned whether the new structure would deliver meaningful change. “The beauty of the old code was that you either passed or failed,” he said. “If you passed, it was the gateway to win more government work.”
By contrast, the tiered approach risks confusion. “What exactly the Gold, Silver and Bronze tiers of the FPC actually mean is unclear and going to lead to some market confusion,” he argued, noting that Bronze status requires only basic legal compliance and no longer unlocks public sector work.
That said, Rob acknowledged the Code’s value in setting expectations: “It does at least create a watermark for acceptable payment behaviour in a positive way.”
Why disputes keep increasing
Ian pointed to a combination of regulatory change, contractual complexity and risk transfer as key drivers behind rising disputes. Construction firms are now spending around 1.6% of turnover on legal fees – double the industry norm.
“There is a lot of change happening at the moment. There is an increased cost of compliance and added levels of uncertainty, which makes estimating tougher.”
He highlighted the impact of Part Two of the Building Regulations, which places greater emphasis on competence, accountability and responsibility. At the same time, heavily amended contracts continue to shift risk down the supply chain. “As more design risk is being forced into the supply chain, we’re seeing the quality of technical design being novated,” he said. “The confusion is adding to the level of disputes.”
Ian stressed that risk transfer alone is not a sustainable solution: “We need to find better ways to manage that… that aren’t just taking all the risk and sending it down the supply chain.”
The case for conflict avoidance
As Treasurer of the Conflict Avoidance Coalition, Ian argued that early engagement is critical. “We all need to step up and recognise that there is a better way,” he said. “We have to start building relationships that are not driven to conflict, but driven to avoid it.”
Reiss Duthie echoed this view from the perspective of an adjudicator. He described how disputes can escalate rapidly, citing a smash and grab case where parties could not even agree on the contract. “That turned into a complex, lengthy, and costly adjudication,” he said. “Adjudication can erode trust.”
Getting the basics right
For Ian, conflict avoidance starts with clarity. “It starts with the way that we contract – often people don’t understand what they’re responsible for.” Clear responsibilities, transparent valuations, and well-defined application and payment dates are essential.
He emphasised that many disputes stem from simple procedural failures: “Half of the disputes we’re seeing are due to procedural error thanks to someone being off sick or on leave… nobody knows what’s happening to that piece of paper.”
Technology as a practical solution
Reiss explained how technology is helping address these challenges at Mitie. As a FTSE-listed company, compliance with the Construction Act and strong governance are essential. “Using Payapps brings standardisation to our procedures,” he commented, allowing workflows to be audited and payment notices to be properly authorised.
Automation also frees up valuable resources. Reiss said, “By automating repetitive tasks – like moving data between spreadsheets – we’re freeing up our teams to concentrate on more impactful activities.” For senior leaders, increased visibility over applications and payments delivers “real gains in clarity” and supports more collaborative discussions.
Reiss concluded on an optimistic note: “Digital transformation is unlocking new opportunities for our industry… embracing new technologies that will shape a more efficient, collaborative, and future-ready industry.”
A clearer path forward
The panel discussion highlighted both the severity of current challenges and the tangible steps available to address them. Payapps, for example, helps contractors manage applications for payment more accurately and with improved visibility, reducing missed notices and disputes.
While pressures on construction remain intense, the discussion offered a clear message: through early engagement, better contract administration and smart use of technology, the industry can move from gridlock to green light – creating a fairer, more resilient future for all.
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*Please note that this is a commercial profile.
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