When a construction dispute arises, one of the first questions businesses ask is: how much is this going to cost?

Unfortunately, there is no single answer.

The cost of resolving a construction dispute depends on several factors, including the nature of the dispute, the resolution method chosen, the value involved, the evidence and how the parties approach the process.

A straightforward dispute supported by good records may be resolved relatively quickly. A more complex dispute involving multiple parties, extensive documentation, technical experts and significant sums may require considerably more professional input, which can increase the overall cost.

Understanding what influences cost can help businesses choose a dispute resolution route that is proportionate to their circumstances, rather than simply choosing the cheapest option. Read on to find out more about the factors that can influence the cost of dispute resolution services in construction.

Why is there no fixed cost for construction dispute resolution?

The term ‘dispute resolution services’ covers a range of different processes and professional services, so there is no standard price that applies to every construction dispute.

Depending on the circumstances, costs may include professional advice, preparing a claim or response, legal representation, adjudicator, mediator or arbitrator fees, expert evidence, document review, witness statements, hearing preparation, and enforcement or court fees.

However, not every dispute will require all of these.

A negotiated settlement between two parties with a clear contractual issue, for example, is likely to require a very different level of input from a complex dispute involving several parties and technical evidence.

It’s also important to distinguish between the fee charged by a dispute resolution professional and the overall cost of resolving the dispute. The latter can include the time and professional input required to prepare and present a case, as well as the cost of the process itself.

So, what are the main factors that influence the overall cost?

1. The dispute resolution method you choose

The chosen process will have a significant bearing on the resources required to resolve a dispute (and the overall cost).

Negotiation

Negotiation can be a great place to start, especially where both parties are willing to engage constructively. It’s often the most proportionate and cost-effective initial response because there’s no formal third-party decision maker, and the parties have greater control over the process.

Professional advice can still be valuable, particularly when the contractual or financial issues are complex, but negotiation may help avoid some of the costs associated with a formal dispute resolution process.

The key question is whether the issue can realistically be resolved between the parties.

Mediation

Mediation involves an independent mediator helping the parties explore whether a mutually acceptable settlement can be reached.

Costs can include the mediator’s fee and each party’s own professional costs. A complex dispute may require more preparation before the mediation, but reaching an agreement can avoid the time and expense of pursuing a fully contested formal process. It can therefore be worth considering whether there is enough room for a negotiated solution.

Adjudication

For qualifying construction contracts, the Housing Grants, Construction and Regeneration Act 1996 gives parties a statutory right to adjudicate, subject to the legislation and the terms of the contract.

Adjudication is designed to produce a rapid decision, generally within 28 days of referral, although the precise timetable can vary. This can make it particularly useful where a dispute is affecting cash flow or an ongoing project.

However, a short timetable does not necessarily mean a low-cost process. Costs can increase where there are large volumes of documents, multiple issues, expert evidence or significant preparation required.

Where a rapid decision is needed, particularly while the project or cash flow is still being affected, adjudication may be an appropriate option to consider.

Arbitration

Arbitration provides a formal process for determining a dispute outside court proceedings. Costs can include tribunal, legal and professional fees, expert evidence and administrative costs.

As with other processes, the resources required (and cost) will depend on the dispute. A complex and heavily contested arbitration is likely to require considerably more preparation than a relatively focused matter.

Arbitration isn’t right for every dispute; the question you need to ask is whether a private, formal determination is appropriate for the dispute and the circumstances surrounding it.

Litigation

Court proceedings can involve significant preparation and procedural stages, particularly in complex construction disputes. Costs may include legal representation, expert evidence, court fees, document management, witness evidence and hearing preparation.

There are circumstances where court proceedings are appropriate or necessary, particularly where the dispute requires the court’s determination or powers.

However, the key thing to consider is whether the dispute requires a court’s determination or powers that another resolution method cannot provide because this can be a very time-consuming and costly approach.

2. The complexity of the dispute

Complexity is one of the most significant factors affecting the amount of professional time a dispute requires.

A dispute may involve multiple contractual issues, several parties, variations, delays and disruptions, defects, design responsibility, payment and valuation issues or questions about contractual interpretation.

This does not necessarily mean that a high-value claim is more complicated. A significant claim may centre on one relatively clear issue, while a lower-value dispute could involve numerous technical or contractual questions.

The more issues that need to be investigated, evidenced and argued, the more professional input may be required.

3. The value of the claim

The value of the dispute is another important consideration when deciding how much time and resource to invest in resolving it.

For a lower-value dispute, it may not be proportionate to pursue a lengthy formal process if there is a realistic opportunity to resolve the matter through negotiation or mediation.

For a significant claim, the potential value may justify more detailed investigation, professional advice or expert evidence.

The important question is not simply ‘What is the cheapest route?’ but ‘What is a proportionate route given the value, complexity and risks involved?’

4. The amount and quality of evidence

Construction disputes can involve substantial amounts of evidence, including contracts, drawings, specifications, programmes, variations, payment applications, notices, emails, meeting minutes, site diaries, photographs, RFIs and other project correspondence.

The more material there is to review, organise and analyse, the more professional time may be required.

The quality of those records matters too. Good contemporaneous records can make it easier to establish what happened and when. Where records are incomplete or inconsistent, more time may be needed to reconstruct events and establish the facts, which can influence the cost of dispute resolution services.

5. Whether expert evidence is needed

Some construction disputes require specialist input to properly understand or establish the issues involved. This might include experts in areas such as delay and disruption, defects, valuation, quantum, engineering, design or other technical matters.

Expert evidence can increase overall costs because detailed analysis and reports may be required.

However, the question should not simply be whether expert evidence adds expense. The more important question is whether specialist evidence is necessary to properly understand and assess the dispute.

6. How the parties behave

The way parties behave can also affect the time and cost involved.

Costs can increase when positions become entrenched, irrelevant material is introduced, issues continually expand, deadlines are missed or parties are unwilling to engage in reasonable opportunities to resolve the dispute.

Conversely, constructive communication and a focused approach can help keep costs down. This doesn’t mean a party should compromise a legitimate position but that all parties should keep the dispute focused on the issues that actually need to be resolved.

7. The timescale you are working to

Different dispute resolution mechanisms operate on different timescales, so urgency can influence which route is appropriate.

For example, a business dealing with an immediate cash-flow issue may have very different priorities from one resolving a complex final account several years after a project has finished.

It is also important to consider the cost of delay, as a prolonged dispute can create additional cash-flow pressure, management time, project delays, financing costs, contractual uncertainty and potential damage to commercial relationships.

The process with the lowest immediate cost is therefore not always the option with the lowest overall commercial cost.

8. The importance of the contract

The contract itself can be an important factor in determining how a dispute should be handled and how much it will cost.

Construction contracts may contain provisions dealing with escalation, negotiation, mediation, adjudication or arbitration, as well as procedural requirements and notice provisions.

Before choosing a route, businesses should understand what their contract requires and whether any deadlines or other procedural requirements apply.

Taking the wrong procedural step, or missing a contractual requirement, can create additional complications and potentially increase costs.

How can you reduce dispute resolution costs?

While not every cost can be controlled, there are several steps you can take to make the process more efficient. Here’s how to reduce your dispute resolution costs:

• Understand the dispute before choosing the process – Before deciding how to proceed, establish what the actual issue is and what outcome you are seeking.

• Check the contract – Make sure you understand any dispute resolution provisions, notice requirements and relevant deadlines before taking action.

• Keep good records – Clear, contemporaneous records can make it easier to establish the facts and reduce the time needed to investigate what happened.

• Ensure issues remain focused – Avoid allowing a dispute to become broader than it needs to be. Concentrating on the matters that genuinely require resolution can help keep professional input proportionate.

• Consider early resolution – Negotiation or mediation may provide an opportunity to resolve a dispute before it develops into a more formal and resource-intensive process.

• Get advice early – Early professional advice can help establish the strength of a position, identify the available options and avoid unnecessary steps before significant time and money has been committed.

• Think about proportionality – Consider the value, complexity, urgency and potential consequences of the dispute when deciding how much time and resource to commit to resolving it.
  

Get the right dispute resolution service for your project

There is no single answer to how much construction dispute resolution will cost.

The overall cost is influenced by the resolution method, the complexity and value of the dispute, the evidence available, whether expert input is required, how the parties approach the process and how quickly a resolution is needed.

However, the objective should not simply be to find the cheapest dispute resolution service. It should be to choose a proportionate and effective route for the dispute and the commercial circumstances surrounding it.

This is why getting advice early can really help you understand your options before a dispute becomes more complicated, time-consuming and costly.

If you need support with a construction dispute, Novus Resolve can help you understand the options available and identify an approach suited to your circumstances. Contact our team today to get the right dispute resolution for your project.