A £340,000 Adjudication Loss. Your "Lesson Learned" Excuse

The Board Meeting

The adjudication decision was sitting on the table. Everyone in the room could see the number.

The MD cleared his throat.

"We've decided to tighten up our contract review process."

He delivered it with the tone of a man announcing a strategic initiative. Proactive. Considered. In control of the direction of his business.

I sat quietly and said nothing. Because what I was thinking was not something that would have been well received in that room.

He hadn't decided anything. A £340,000 loss had decided it for him. Three months earlier, this same MD had waved away a conversation about contract administration with a line I have heard, in various forms, more times than I can count.

"We'll sort the details later. Just get on site. Relationships matter more than paperwork."

Now he was demanding legal review on every tender. Full clause analysis. Risk matrices. Written instructions before any work proceeds.

He was taking credit for wisdom he didn't choose. Experience had forced it on him in the most expensive way possible. And he was reframing it as leadership.

This is one of the most persistent and costly self-deceptions in the construction industry. And it is worth examining with some precision, because the gap between what it costs to learn this lesson the hard way and what it costs to learn it the right way is, in this case, exactly £340,000.

The Anatomy of Reactive Wisdom

There is a particular pattern that repeats across construction businesses with depressing regularity. The business operates with informal practices that carry latent commercial risk. Nothing happens for months or years. The informality feels validated by its own apparent success - "we've always done it this way and it's always been fine."

Then it isn't fine. A disputed instruction becomes an adjudication. A verbal agreement becomes an unenforceable claim. A relationship that was "more important than paperwork" turns out to be less important than £340,000, at which point the paperwork becomes very important indeed.

The response is process change. New procedures, new review requirements, new levels of sign-off. Presented as strategic evolution. What it actually is, is scar tissue - the minimum adaptation required to avoid repeating the specific pain that just occurred.

The problem with scar tissue as a management philosophy is that it only protects the wounds that have already been inflicted. The next loss comes from a different direction, through a gap that the new process doesn't cover, and the cycle repeats.

What the MD in that board room implemented was not a lesson learned. It was a lesson purchased, at significant cost, from a very specific set of circumstances. The broader lesson - that contractual discipline is not bureaucratic overhead but commercial protection - remained unlearned, because it had been reframed as his idea rather than the adjudicator's verdict.

The Optimist Trap

The "relationships matter more than paperwork" position is not held by stupid people. It is held by commercially experienced people who have, in many cases, built successful businesses on the back of strong client relationships. The instinct is not entirely wrong - relationships do matter in construction, significantly and genuinely.

The error is the "more than," and it surfaces under pressure.

When a project is progressing well and the client relationship is strong, verbal instructions are unproblematic in practice because there is no dispute to resolve and therefore no need for the paper trail. The informality feels like efficiency. The written confirmation feels like bureaucracy. The paperwork feels like an insult to a good relationship.

When the relationship comes under pressure - when there is a cost overrun the client needs to manage, when there is a dispute about scope, when there is a programme problem that is generating claims - the dynamic reverses. The client's interest in the verbal instruction changes. Their recollection of what was said, when it was said and under what authority it was given becomes, suddenly and inconveniently, very different from yours.

At that point, you are not in a relationship. You are in a dispute. And in a dispute, what matters is not what was said, but what can be proved.

Under every standard form of construction contract operating in the UK market, an instruction that cannot be evidenced in writing is an instruction that is extremely difficult to enforce. The legal standard is unambiguous. Construction adjudicators - who are typically experienced practitioners with detailed knowledge of how projects actually operate - are well-disposed to contemporaneous documentary evidence and considerably less disposed to competing witness statements about what was said on site six months ago.

"We trust them" is not a contractual mechanism. "We trust them" does not appear in JCT clause 3.14 or NEC4 clause 61.1. The contract, which governs the dispute when the relationship fails, says nothing about trust. It says a great deal about written instructions, contractual notices and time bars.

What the Contracts Actually Say

This is not an area of legal ambiguity or contested interpretation. The standard forms are clear, consistently applied and well understood by anyone who has sat through a construction adjudication.

JCT - Verbal Instructions and the CVI Mechanism

Under JCT Standard Building Contract, clause 3.14 provides that all instructions from the Architect or Contract Administrator must be issued in writing to be effective. If a verbal instruction is given on site, the contractor is not without remedy - but the remedy requires action. The contractor can confirm the verbal instruction in writing to the Architect. If the Architect does not dissent from that confirmation within two working days of receipt, the instruction is deemed to have been given in writing at the time of the verbal communication.

This is the Confirmation of Verbal Instruction (CVI) mechanism, and it is one of the most commercially valuable and consistently underused tools available to contractors operating under JCT forms. It takes approximately three minutes to send an email. It creates a contractual record that is significantly harder to challenge than a verbal account. It shifts the burden - if the Architect disagrees with your confirmation, they must say so in writing within two days, or they have effectively ratified the instruction.

Most contractors do not use it. They rely on the relationship instead.

NEC4 - Compensation Events and the Time Bar

The NEC4 contract operates on a fundamentally different philosophy to JCT. It is built around active, collaborative project management with defined notification obligations and strict time bars. The commercial consequences of failing to comply with those notification obligations are severe and, importantly, contractually enforceable without the need to demonstrate prejudice.

Under NEC4 clause 61.3, if the contractor does not notify a compensation event within eight weeks of becoming aware of it, they are barred from any entitlement to change in prices, key date or completion date for that event. This is not a technicality that can be argued around. It is a hard cut-off, and it has been consistently upheld in adjudication and litigation.

The practical implication is stark. A contractor operating under an NEC4 contract who allows verbal instructions to accumulate unnotified, trusting in the relationship to resolve the financial position at final account, may find themselves time-barred from recovering legitimate entitlement - not because the work wasn't done, not because the instruction wasn't given, but because they didn't send the notice within eight weeks.

That is not bad luck. That is the foreseeable consequence of not reading the contract you are working under.

Contemporaneous Records in Adjudication

Construction adjudication operates under tight timescales - typically 28 days from referral to decision, with a possible extension to 42 days. In that compressed timeframe, adjudicators are making significant financial decisions on the basis of documentary evidence. They do not have the luxury of extended cross-examination or lengthy disclosure processes.

The practical consequence is that contemporaneous records - site emails, instructions confirmed in writing on the day, notices issued promptly, correspondence that reflects the situation as it existed at the time - carry substantially more evidential weight than witness statements prepared for the adjudication. A project manager's statement about what was verbally agreed in a site meeting in March carries far less weight when tested against a contemporaneous email from the other side saying the opposite.

This is not a theoretical point. It is the lived reality of every adjudication involving disputed verbal instructions.

The Three Tactical Plays

The newsletter that prompted this article set out three tactical responses, and they are worth expanding with the precision their importance deserves.

Play One: Avoid - No Instruction, No Work

The foundational principle is non-negotiable and must be applied without exception: if there is no written instruction, there is no work.

This is not a bureaucratic preference. It is a commercial protection standard. The moment you proceed on a verbal nod, you have accepted a risk allocation that your contract does not require you to accept, and you have done so informally and without any mechanism for recovery if the instruction is later disputed.

"No Instruction, No Work" should be stated clearly in your pre-contract mobilisation, applied consistently throughout the project and understood by everyone on site from the Commercial Manager to the site foreman. The culture of verbal instruction only persists because contractors accept it. Stop accepting it, and the culture changes - because the instructing party quickly learns that the alternative to providing written instructions is a stopped programme, which is a far more immediate inconvenience than completing a form.

The pushback you will receive is predictable: "We can't stop on site every time someone wants a change. The project would grind to a halt."

This argument misunderstands what written instruction actually requires. It does not require a formal Architect's Instruction drafted over three days. It requires an email. It requires a WhatsApp message that you screenshot and file. It requires thirty seconds of administrative discipline that protects weeks of commercial entitlement.

The projects that grind to a halt are not the ones with good contractual administration. They are the ones where verbal instructions accumulate unresolved until the relationship breaks down and nobody can reconstruct what was agreed.

Play Two: Prevent - The Two-Hour Rule

Where a verbal instruction has been given - because they will continue to be given, regardless of how clearly you state the policy - confirm it in writing within two hours of the conversation. Not at the end of the day. Not at the next site meeting. Within two hours.

The format is straightforward:

"Confirming your instruction given on site at 10.15am today to re-route the drainage run along the eastern elevation. We are proceeding on this basis. Please issue formal written instruction at your earliest convenience."

That email does three things simultaneously. It creates a contemporaneous record of the instruction. It puts the instructing party on notice that you are treating this as a formal instruction under the contract. And it invites them to dissent - under the JCT CVI mechanism, if they don't dissent within two working days, the instruction is contractually confirmed.

If they do dissent - if they respond saying "that wasn't an instruction, that was a suggestion" - you have learned something extremely valuable before you have spent a significant sum of money. You stop. You notify. You seek a formal instruction or you formally decline to proceed without one.

The two-hour rule sounds simple because it is simple. It is also consistently not followed, because it requires a cultural commitment that most commercial teams have not made.

Play Three: Remedy - Entitlement Preservation

Where instructions are being withheld - where a client or their representative is directing work verbally and refusing to follow up in writing - you have a choice between two uncomfortable positions.

You can proceed and hope the relationship sustains the financial resolution at the end.

Or you can stop, notify formally, and force the decision.

"We cannot proceed with [specific work] without written instruction. We are issuing a Notice of Delay in respect of the time lost pending receipt of that instruction. We remain ready and willing to proceed immediately upon receipt of written instruction."

This is uncomfortable. It escalates. It creates tension with the client and their team. It is also the correct commercial response, because it preserves your entitlement under the contract and it puts the cost of delay precisely where it belongs - with the party refusing to provide the instruction.

The contractor who issues that notice and stops is not being obstructive. They are applying the contract they both signed. The party refusing to provide a written instruction is the one operating outside the contractual framework.

The Adjudication Reality

It is worth being specific about what an adjudication involving disputed verbal instructions actually looks like, because the board meeting version - in which a number is announced and a new process is implemented - sanitises what is, in reality, a deeply unpleasant commercial experience.

An adjudication typically runs over 28 days of intense, compressed activity. The referring party submits a Referral document, often hundreds of pages, including all supporting evidence. The responding party has typically 14 days to produce an equally comprehensive Response. There may be a Rejoinder. The adjudicator may ask questions. Then a decision arrives.

In a disputed verbal instruction case, the adjudication reduces to a credibility contest between competing accounts of conversations that happened months or years earlier, filtered through the interests and memories of the people involved. Against that backdrop, a contemporaneous email confirming an instruction on the day it was given is almost always determinative. It is the point in time closest to the event, produced for operational rather than dispute purposes, and therefore carrying the highest evidential credibility.

The £340,000 loss described at the opening of this article was, at its core, a documentation failure. The work was done. The instruction was given. The entitlement existed. But the evidence to prove it, in the time and format that an adjudication demands, was not there. And the adjudicator decided on the basis of the evidence available.

That loss was not an adjudication problem. It was a contract administration problem that presented itself as an adjudication problem eighteen months after the decisions that caused it had been made.

Culture Change Is the Only Permanent Fix

New procedures protect against the specific failure that prompted them. Culture change protects against the next one.

The distinction matters because procedure can be circumvented when pressure builds. When the client is pushing for early start, when the relationship feels strong, when the instruction seems minor, the new procedure gets skipped "just this once." And "just this once" is how the next six-figure adjudication begins.

Culture change means that the site team understands why the two-hour rule exists, not just that it exists. It means that the commercial team has the authority and the organisational backing to stop work and issue a notice without being overridden by a Project Manager who values the relationship more than the entitlement. It means that the MD's position is not "relationships matter more than paperwork" but "strong relationships are built on commercial clarity."

That shift rarely happens as a result of a training programme or a new procedure. It happens when the consequences of the old way become visceral and traceable. It happens after a £340,000 adjudication loss.

Which is precisely the point. The lesson is being learned the most expensive way available, when it was available for free.

The Cost Comparison

The choice being made, implicitly and usually unconsciously, by every contractor who proceeds on a verbal instruction is a cost comparison. The cost of contractual discipline - time, administrative resource, occasional friction with the client team - against the cost of informality.

The cost of contractual discipline, properly embedded, is not significant. A two-hour confirmation email is not significant. A CVI mechanism that takes three minutes to execute is not significant. A notice of delay that protects your entitlement while preserving the option to proceed is not significant.

The cost of informality, when it fails, is very significant. It is the adjudication decision on the board meeting table. It is a third of the year's profit in a single line. It is the reactive process change that the MD presents as strategic leadership.

You can choose to respect the contract now, for free. Or you can respect it later, at whatever price the adjudicator sets.

If You Have Verbal Instructions on Site Right Now

If you are currently working under verbal instructions that have not been confirmed in writing - and most active contracting businesses are, at any given moment - the window for protecting that entitlement is open but not permanent.

The longer the gap between the instruction and the written record, the lower the evidential weight of the record when it matters. The closer you are to an NEC4 notification time bar, the more urgent the review. The larger the instruction, the greater the exposure.

I can review your current position, identify the instructions that carry the highest risk and help you draft the notices and confirmations that secure your entitlement before the relationship deteriorates and the evidence becomes a reconstruction exercise.

Matt Lockett

Director, Norcross Commercial Management Limited

matt.lockett@norcross.uk | 07545 533968

Norcross Commercial Management Limited provides expert commercial consultancy to main contractors and subcontractors across the UK. Project basis, fixed-term or flexible retainer - whatever your business needs, when you need it.