Research carried out by the Specialist Engineering Contractors’ (SEC) Group and Constructing Excellence has revealed that Project Bank Accounts (PBAs) are gaining traction across the whole of UK construction.
Following the publication of the Government’s Construction Playbook, which will be the best practice manual for public sector construction, both organisations believe that this amounts to a significant booster to improving supply chain performance and promoting building safety.
UK Government policy since 2010 has been all government departments/agencies and non-departmental bodies must use PBAs unless there are ‘compelling reasons’ not to do so.
Scottish Government (SG) mandated the use of PBAs for all SG bodies (those funded by SG) as from September 2016. The project threshold for using PBAs was £4m for building works but subsequently this was reduced to £2m.
The most prolific user is Highways England. By using PBAs Highways England are able to ensure that sub-contractors are paid within 18 days; sub-contractors on highways works did not lose out when Carillion went into insolvency because their monies were ring-fenced. By 2025 over £17 billion of highways works will have been paid through PBAs.
Speaking on behalf of Highways England, Lloyd Biddell said that PBAs are the most effective method for secure and regular cash flow: “Using them…..ultimately helps us to deliver our programme to improve our road network, and besides efficiencies, they’re also helping us to do the right thing for our suppliers.”
In 2012 East Riding of Yorkshire Council became the first local authority to use PBAs. Speaking for the Council, Steve Baker said: “Due to this success [of the first PBA] we now use PBAs for all projects over £5m and with the experience gained are reviewing lowering this to £2m.”
Payment abuse has been seen as a factor influencing building safety. In her report on building safety published in May 2018, Dame Judith Hackitt said: “Payment terms within contracts (for example, retentions) can drive poor behaviours, by putting financial strain into the supply chain…..non-payment can cause subcontractors to substitute materials purely on price rather than value for money or suitability for purpose.”
SEC Group’s CEO, Professor Rudi Klein, and Head of Constructing Excellence, Alison Nicholl, jointly issued a statement praising all those public sector clients either regularly using them or proposing to use them: “We have come a long way since PBAs were first mooted almost 20 years ago as an effective method for curbing payment abuse. Our research shows that PBAs have entered the mainstream as far as public sector construction is concerned; we now encourage private sector clients to follow suit. A major benefit of PBAs is that they encourage collaborative working since the supply chain does not have the distraction about whether or not they will be paid.”