Resolution of Construction Payment Disputes: Adjudication in the Kenyan Construction Industry

Introduction

The construction industry is no different from any other industry in regard to disagreements. Disagreements arise in this industry for various reasons and can be resolved in many ways. Despite the fact that disagreements are typically amenable to resolution, there are many obstacles and legal considerations that must be taken into account. Employers have disputes with subcontractors, while developers have disputes with investors. Main contractors, numerous consultants, and specialized suppliers throughout the supply chain have disagreed. Regardless of the nature of the dispute, parties would be more receptive to alternative conflict resolution approaches, given their benefits.

ADR is viewed as a viable alternative to litigation in Malaysia for resolving contractual disputes because it is perceived as less expensive, more private, and less likely to result in ill will or animosity. According to Nii and Torgbor (2013), arbitration is the most used alternative dispute resolution method in the construction industry of the United States. The revised standard forms for construction contracts, the Mediation Act, and the Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012) strongly indicate that ADR will be a common feature of construction dispute resolution in Malaysia. The legislature passed CIPAA 2012 on April 15, 2014, and it went into effect on that date. The 'Statutory CIPAA Adjudication' mechanism established by CIPAA 2012 enables aggrieved parties (typically contractors and consultants) to recover unpaid invoices or resolve payment disputes arising from construction contracts. These conflicts may result from non-payment, underpayment, non-certification, or under-certification.

CIPAA follows the “Pay Now, Argue Later” principle. If either party is dissatisfied with the CIPAA Adjudication Decision, it is intended to resolve payment disputes and promptly, efficiently, and summarily facilitate cash flow. Due to the implementation of CIPAA 2012, contractors and consultants who are short on funds will no longer have to wait until the project is completed before bringing legal action against the Main Contractor/Developer.

However, there is a significant contradiction in this ideology in the Kenyan construction industry, with the industry adopting a “Argue Now, Pay Later” mentality, which neither benefits the contractor, who is starving for resources to survive, nor the employer, whose project is stalled and held at ransom by the banks. The various groups in Kenya have established avenues to resolving these disagreements in an amicable “win-win” manner; nevertheless, as Muigua (2011) highlights, parties appear to turn to traditional litigation as a solution, which creates many challenges to the business. It ends up severing relationships between the parties and the employer, having to find another contractor, which becomes even more expensive and time-consuming, compromises the quality of the entire project, and sabotages any future possibility of these two parties working together.

Therefore, this study focuses on “Resolution of Construction Payment Disputes: Adjudication in the Kenyan Construction Industry” to determine whether all parties know their alternatives for settling disputes. Furthermore, the study focused on contractors' understanding of other dispute resolution procedures or their belief that it is their sole option if they refer to litigation. Furthermore, this research investigates whether industry professionals advise their clients and other industry stakeholders on all available dispute-resolution methods and the problems associated with adopting them.

This research is critical in educating individuals in the industry who are unaware that solutions exist for them if they are being mistreated or taken advantage of by their employers over the standard litigation system, which some will avoid resorting to due to the expenses and time involved. This article will be crucial in their comprehension of how to deal with challenges in the future for parties who are aware of adjudication but are unclear on its benefits or why they should use it in their times of need. Thus, it will give contractors the conviction and motivation to undertake more work because they know they can “defend” themselves, which is essential for the Kenyan construction industry.