Dispute Resolution: Option W2 in the NEC4 Engineering and Construction Contract

Option W2 is to be used where the Housing Grants, Construction and Regeneration Act 1996 (as amended)^[1] ‘The Construction Act’ applies. Option W2 is drafted to comply with the requirements of the Construction Act. In this article the author provides an overview of the Construction Act, a summary of the dispute resolution process and the role of the adjudicator under Option W2.

The Construction Act and Scheme for Construction Contracts

The Construction Act provides a statutory framework for construction contracts in England, Wales and Scotland. Its key aim is to ensure fair and prompt payment and to provide a right to adjudication for resolving disputes. The Act applies to contracts for “construction operations” as defined in section 105. It requires payment provisions that allow for staged payments, a payment notice process, and the right to suspend work for non-payment. The Act also grants parties the right to refer disputes to adjudication at any time, with decisions given within a strict timetable.

The Scheme for Construction Contracts is a set of default provisions that apply when a construction contract in England, Wales or Scotland does not comply with the Construction Act. In England and Wales, it is set out in the Scheme for Construction Contracts (England and Wales) Regulations 1998. In Scotland, it is set out in the separate Scheme for Construction Contracts (Scotland) Regulations 1998. Both Schemes provide detailed rules for adjudication and payment, including the procedure for referring disputes, the timetable for decisions, and payment notice requirements. The Schemes ensure that parties retain their statutory rights even if the written contract omits or contradicts the Act’s requirements. While similar in purpose, the Scottish Scheme reflects Scots law and procedure.

Incorporating Option W2 into an NEC4 Engineering and Construction Contract ensures compliance with the statutory right to adjudication without the need for the law to impose the rules under the Scheme for Construction Contracts.

Appointment of the adjudicator

The adjudicator is either named in the contract data, or chosen from a nominating body stated in the contract data. If a dispute arises and no adjudicator has been appointed, the parties may jointly choose an adjudicator or either party may ask the nominating body to choose. If the nominating body chooses the adjudicator, they are required to do so within four days of the request from the party. ^[2] The adjudicator is appointed by the parties under the NEC dispute resolution contract.^[3]

Right to adjudicate and notice requirements

A party may refer a dispute to adjudication at any time.^[4] The process begins by giving a notice of adjudication to the other party and the adjudicator. Following the notice, the referring party must provide the referral notice to the adjudicator within seven days after the notice of adjudication is issued.^[5] The referral includes all supporting documents and details of the dispute. If the parties agree, the dispute may first be referred to the senior representatives before referral to the adjudicator. If the parties agree but the dispute is not resolved by the senior representatives, it is referred to the adjudicator.^[6] The requirement to agree to use the senior representatives preserves the right to adjudicate “at any time” as provided for by the Construction Act.

Conduct of the adjudication

The adjudicator decides the procedure and the timetable for the adjudication. This may include taking the initiative in ascertaining the facts and the law and instructing a party to take action within a stated time.^[7] Each communication between a party and the adjudicator must also be communicated to other party at the same time. ^[8] If the adjudicator is required to make an assessment of additional cost or delay to the contractor, the adjudicator must make the assessment following the rules of assessment for compensation events.^[9] The adjudicator has the authority to review and revise any action or inaction of the project Manager or supervisor relating to the dispute. However, the adjudicator is required only to decide the dispute referred^[10] and must act in accordance with the principles of natural justice, remaining impartial at all times.^[11]

Adjudicator’s decision and effect

Once the referral notice is received, the adjudicator must reach a decision within 28 days unless extended. The extended period may be up to 14 days if the adjudicator requests and both parties agree or for a longer period, only if both parties agree.^[12] The adjudicator may, within five days of giving the decision to the parties, correct the decision to remove a clerical or typographical error arising by accident or omission.^[13] This is known as the ‘slip-rule’.^[14]

The adjudicator’s decision is binding on the parties unless and until it is revised by the tribunal^[15] or agreement. Failure to comply with the adjudicator’s decision may result in enforcement through the courts under the Construction Act.^[16]

Final Resolution and legal proceedings

If either Party is dissatisfied with the adjudicator’s decision, they may refer the dispute to the tribunal stated in the contract data. This must be done within four weeks of being notified of the adjudicator’s decision.^[17] The tribunal has full power to reopen and revisit the adjudicated issues. If no tribunal is named, disputes may be referred to court proceedings or arbitration, depending on the terms of the contract and the applicable law.^[18]

Summary

Option W2 of the NEC4 Engineering and Construction Contract ensures compliance with the Construction Act, which grants parties the right to adjudicate disputes at any time. It sets out the process for appointing an adjudicator, issuing a notice of adjudication, and resolving disputes within strict time limits. The adjudicator must act impartially, follow the rules of natural justice, and give a written decision within 28 days. This decision is binding unless revised by a tribunal or agreement. If dissatisfied, a party may refer the matter to the tribunal specified in the contract, which may reopen all issues previously adjudicated.

Adjudication timeline

David Hunter
Daniel Contract Management Services Ltd

July 2025

^[1] by the Local Democracy, Economic Development and Construction Act 2009)

^[2] W2.2(5)

^[3] W2.2(3)

^[4] W2.2(1)

^[5] W2.3(2)

^[6] W2.1(1)

^[7] W2.3(4)

^[8] W2.3(6)

^[9] W2.3(7)

^[10] Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358; Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC)

^[11] Discain Project Services Ltd v Opecprime Development Ltd [2001] BLR 285; Glencot Development and Design Co Ltd v Ben Barrett & Son (Contractors) Ltd [2001] BLR 207

^[12] W2.3(8)

^[13] W2.3(12)

^[14] Bloor Construction (UK) Ltd v Bowmer & Kirkland (London) Ltd [2000] BLR 314

^[15] The tribunal should be stated in contract data e.g. arbitration or litigation (court)

^[16] W2.3(11)

^[17] W2.4(2)

^[18] W2.4(3)

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