Successful Adjudication in Major Government Supply Chain Dispute
£160,428.15 repayment ordered and an asserted Compensation Event claim of over £638,000 rejected.
The background
Optimum Resolution acted for a main contractor in a significant NEC4 construction adjudication concerning a high-security government project.
Our client, the main contractor, had engaged a specialist subcontractor to design, supply, and install a complex curtain walling system under an NEC4 Option A contract valued at nearly £1.8 million. Following specification changes imposed by the government project team, disputes arose around:
1 – The subcontractor’s entitlement to retain substantial advance payments after failing to proceed with the works
2 – The proper valuation of the Compensation Event
3 – The validity of the subcontractor’s Pay Less Notice and its subsequent Application for Payment
Faced with the subcontractor seeking to withhold £170,428.15 and assert a Compensation Event claim exceeding £638,000, both without proper substantiation, our client instructed Optimum Resolution to lead adjudication proceedings.
The Adjudication
The dispute involved fundamental NEC payment and Compensation Event principles, and turned on:
- Whether upfront payments made under negotiated payment terms could be retained after no meaningful work was carried out
- The true application of NEC4 clauses 60–66 regarding Compensation Events
- The validity of the subcontractor’s Pay Less Notice and the status of their subsequent payment application
Optimum Resolution delivered the entire adjudication strategy and submissions, handling a highly technical defence of NEC4 commercial mechanisms and the protection of our client’s cashflow position.
The Outcome
The adjudicator found decisively in favour of our client:
- Ordering the subcontractor to repay the sum of £160,428.15 certified under Payment Certificate No.2
- Rejecting the subcontractor’s asserted Compensation Event claim of over £638,000, finding it unsubstantiated and non-compliant with NEC contractual requirements
- Declaring the subcontractor’s Pay Less Notice invalid
- Ordering the subcontractor to pay 100% of the adjudicator’s fees, confirming our client as the successful party
Reflection
This case demonstrated:
- The value of strict NEC compliance, poorly prepared or opportunistic Compensation Event claims will fail when properly challenged
- The importance of protecting advance payments, where no works are carried out, the payer is entitled to recover funds, despite aggressive subcontractor tactics
- The need for robust and well-prepared Pay Less Notices, the adjudicator upheld Optimum’s arguments in full on this point, reinforcing case law clarity in this area
Optimum’s Role
This was a commercially vital dispute for our client, with nearly £170,000 at stake in the short term and over £638,000 in further claims blocked through a successful adjudication strategy.
Optimum Resolution delivered this victory on a lean, focused fee base, providing full legal and NEC tactical support in a highly contested adjudication process.
