Why has the take up for Project Bank Accounts been so slow?

Question

Steven Dawson · Accepted Answer

There has been a slow take up in the public sector over the last 20+ years, although current Government departments and projects using PBAs include:-

Highways England
Environmental Agency
Network Rail, Cross Rail, HS2

Some scepticism and perceived disadvantages include:

For Employers, a PBA can reduce the control it has over a project: if money is tied up in a PBA it may not be able to be used for other purposes
Cost to set up the Project Bank Account
Could restrict cash flow for Main Contractors
Main Contractors may consider raising their margins when bidding for Projects to operate PBAs

However, potential advantages include:

JCT and NEC now provide a contract supplement, making PBAs easier to incorporate
Would provide some protection to Sub-Contractors and Suppliers if Main Contractor goes insolvent
Suppliers’ retentions protected in ring-fenced deposit schemes
Will streamline payment process; all parties are paid for what they do simultaneously … removes the hierarchy of Tier 1 Contractor being paid, who then pays the Tier 2 Contractor who then pays the Tier 3 Contractor … payment cycle could be within 18 days
Subcontractors no longer having to borrow against what they are owed – and thus their savings are filtered up the supply chain
Allows the supply chain to focus on best for project outcomes without the distraction of payment insecurity
PBAs might encourage subcontractors to submit lower bids and thus reduce construction costs; in the knowledge they should receive prompt payment and protection against insolvency

It will be interesting to see if another Bill is read in Parliament which considers making PBAs mandatory on all public sector projects.

Attached are some articles for further reference

Why has the take up for Project Bank Accounts been so slow?

Project-Bank-Accounts

Project-Bank-Accounts

project

Tom Spilsted

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