Adjudication is a process created by the SOP Act to resolve a disputed claim for payment due under a construction contract. It can help resolve payment disputes quickly, fairly and at a lower cost than going to court.
An independent adjudicator receives written submissions from both sides of the payment dispute, conducts inspections or conferences where necessary, and decides the amount, if any, due in respect of a progress payment claimed under the SOP Act.
The adjudicator makes the determination within 10 business days. This time may be extended by a further five business days if the claimant agrees.
The decision is interim, and does not affect the parties' rights and obligations under their contract.
Selecting an Authorised Nominating Authority
An adjudicator must be appointed by an Authorised Nominating Authority (ANA) – an organisation that is authorised by the Victorian Building Authority to nominate adjudicators under the SOP Act.
ANAs receive adjudication applications, nominate adjudicators and administer the adjudication process. They are required to ensure that the adjudicators they nominate are properly trained and qualified, and comply with professional standards of conduct.
The relevant construction contract may include a list of ANAs that may be used in the event of a payment dispute. If the contract lists three or more ANAs, the claimant must choose one of them. If it specifies fewer than three, or none at all, the claimant may select any ANA listed on Authorised Nominating Authorities (ANAs).
The adjudicator must have relevant educational qualifications and substantial experience in the administration, management and supervision of construction contracts or in dispute resolution relating to construction contracts.
In conducting the adjudication, the adjudicator must be fair and act independently. An adjudicator cannot accept an adjudication application if doing so would create any actual or likely conflict of interest, or any perception of conflict of interest or bias on their part.
The Adjudicator Standards of Conduct and Adjudicator Core Competencies that apply to all adjudicators nominated under the SOP Act are included in the Authorised Nominating Authorities Conditions of Authorisation (PDF, 332.46 KB).
Any complaints about an adjudicator should be referred to the ANA.
The adjudication process
The claimant lodges an adjudication application with the ANA, which refers it to an adjudicator as soon as possible. The adjudicator notifies the parties that the application has been accepted. If the adjudicator does not notify them within four business days after the application was made, the claimant can withdraw it and make a new one.
A copy of the application must be given to the respondent. The respondent has up to five business days to give the adjudicator a written response, but only if they have given the claimant a payment schedule. The claimant gets a copy of the adjudication response.
After agreeing to adjudicate, the adjudicator has 10 business days (or up to 15 business days if the claimant agrees) to reach a decision. In conducting the adjudication, the adjudicator may do any of the following things:
- request further written submissions from either party, in which case the other party must be given an opportunity to comment on those submissions
- set deadlines for further submissions and comments by the parties
- call a conference, which must be conducted informally – legal representation is not allowed unless the adjudicator permits it
- carry out an inspection of any matter to which the payment claim relates.
The adjudicator must notify any relevant principal, and any other person identified as having a financial or contractual interest, about the adjudication application.
At the completion of the process, the adjudicator determines the amount (if any) that the respondent must pay the claimant, when it is to be paid, and the rate of interest payable. The determination is given to the ANA, which gives a copy to the parties as soon as practicable.
An adjudicator may require the full payment of their fee before releasing their determination.
What the adjudicator considers
The adjudicator must consider the following things only:
- the SOP Act and Regulations
- the contract
- the payment claim
- the payment schedule (if any)
- the claimant’s and respondent’s submissions
- the results of any inspection.
The adjudicator must not take any excluded amount into account.
Applying for adjudication
When to apply
Claimants may apply for adjudication when they have served a payment claim on a respondent under section 14 of the SOP Act and, as a result, one of the following circumstances has arisen:
- The respondent provides a payment schedule showing that the amount they propose to pay (the ‘scheduled amount’) is less than the amount claimed on the payment claim (the ‘claimed amount’).
- The claimant can apply for adjudication under section 18(1)(a)(i) of the SOP Act.
- The claimant has 10 business days after receiving the payment schedule to apply.
- The respondent provides a payment schedule but does not pay any or all of the ‘scheduled amount’ when it is due.
- The claimant can apply for adjudication under section 18(1)(a)(ii) of the SOP Act.
- The claimant has 10 business days after the due date for payment to apply.
- The respondent fails to provide a payment schedule and fails to pay any or all of the ‘claimed amount’ when it is due.
- The claimant can apply for adjudication under section 18(1)(b) of the SOP Act.
- The claimant has 10 business days after the due date for payment to notify the respondent that they intend to apply.
- A claimant can only apply under section 18(1)(b) if they provide the respondent with a section 18(2) notice.
How to apply
The claimant applies for adjudication by lodging an application with an Authorised Nominating Authority (ANA).
Both the claimant and the respondent will be notified within four business days that an adjudicator has accepted the application. If they have not been notified by then, the claimant may withdraw the application (by notifying the ANA in writing) and make a new one. Any new application must be made within five business days of the missed deadline.
The application must:
- be in writing
- identify the payment claim and the payment schedule to which it relates
- be accompanied by any application fee charged by the ANA.
The claimant may make submissions that are relevant to the application, including the reasons for disagreeing with the payment schedule.
Copies of documents that the claimant wants the adjudicator to take into consideration should be attached. As a guide, the following information is relevant to all adjudication applications:
- the construction contract under which the claimant did the work or supplied the goods or services
- the payment claim
- the payment schedule
- evidence of the work done or goods or services supplied, such as invoices from suppliers, measurements, test results, quality assurance certificates and expert reports.
Serving a copy of the application on the respondent
A copy of the application, including the attachments, must be served on the respondent, preferably at the same time as the original is lodged with the ANA.
The copy may be served in any of the following ways:
- delivered in person – it is served when the respondent receives it
- lodged during business hours at the respondent’s ordinary place of business – it is served when it is received at that address.
- sent by post to the respondent’s ordinary place of business – it is served two business days after the day it is posted
- faxed to the respondent’s ordinary place of business – it is served at the time it is received, unless it is received after 4 pm; if it is received after 4 pm, it is taken to have been served on the next business day
- provided in any other manner specified in the contract.
For more information
- See Responding to an adjudication application for information on what to do it you receive an adjudication application.
- See Adjudication review for information on the grounds for review and how to apply.
- See Options for claimants after adjudication for information on what to do if the respondent doesn’t pay an adjudicated amount.