Has Legislation Made Construction More Adversarial?

Why It Matters

If the Act no longer curbs conflict, contractors face tighter margins, delayed payments and higher litigation costs, which ripple through supply chains and financing structures across the construction industry.

Key Takeaways

• Adjudication now primary dispute tool, but costs have risen sharply
• Payment‑notice rules tightened, yet legal fees remain unrecoverable
• Profit margins for contractors hover 2‑3%, far below target 5%
• Industry volatility—Brexit, pandemic, inflation—drives more adversarial contracts

Pulse Analysis

When the Construction Act was passed in 1996, policymakers envisioned a more collaborative industry, leveraging the Latham Report’s recommendations to streamline payment and dispute processes. Early adoption promised faster cash flow and fewer courtroom battles, and the legislation introduced clear notice requirements and adjudication as a quasi‑binding remedy. For a brief period, these mechanisms reduced friction, especially on projects funded through private finance initiatives, where transparency was paramount. Yet the Act was drafted for a relatively stable macro‑economic backdrop, a condition that has dramatically shifted over the last quarter‑century.

The past two decades have been anything but stable. Brexit introduced supply‑chain uncertainty, while the COVID‑19 pandemic exposed the fragility of labor and material markets. Inflation has driven construction costs beyond original estimates, and new safety mandates—most notably the Building Safety Act—have added compliance burdens. In this climate, contractors frequently underprice work to win bids, then rely on variations and adjudication to protect thin profit margins. Although adjudication remains the go‑to dispute resolution method, its costs have escalated, and parties still cannot recover legal fees, eroding the "quick and cheap" promise that originally underpinned the Act.

The growing adversarial tone has tangible consequences: delayed payments strain subcontractors, insolvency risks rise, and project timelines extend, affecting investors and public infrastructure delivery. Stakeholders are now questioning whether the Act’s rigid notice regime and limited fee recovery provisions inadvertently exacerbate these pressures. A modernized framework could introduce proportionate fee‑recovery mechanisms, clearer risk‑allocation clauses, and digital notice platforms to improve transparency. Aligning legislation with today’s economic realities would not only restore the Act’s original intent but also bolster confidence across the construction value chain, fostering a healthier, less combative market environment.