Survey shows that project bank accounts would cut costs across construction

Published:  18 March, 2007

Significant cost savings across construction could be achieved by setting up project bank accounts, according to a survey of companies operating in the specialist engineering sector.

The research was carried out by the Specialist Engineering Contractors’ (SEC) Group and audited by Davis Langdon. It shows that two-thirds of firms responding believe their costs would be reduced by such bank accounts.

Of the 123 respondents, 77% felt that project bank accounts would reduce their costs by up to 5%, with 15% believing that costs could be reduced by as much as 10%.

Lord O’Neill of Clackmannan, president of SEC Group, said that these findings reinforced the decision of the Public Sector Construction Clients’ Forum to back the use of project bank accounts. ‘These figures show that current payment arrangements in the industry, which lend themselves to abuse and manipulation, are adding unnecessarily to the industry’s costs.

‘When companies seek to boost their own margins by unfairly holding on to cash, this not only increases the overheads of firms downstream but it also damages the trust that is essential if we are to move towards a more integrated and collaborative industry.’

Trevor Hursthouse, chairman of SEC group, believes the industry could deliver better value, and so enhance its profitability, if companies improved services rather than relying on their ability to manage cash flow at the expense of others in the supply chain.

SEC Group has made the findings available to the Office of Government Commerce, which is preparing guidance to help public-sector clients set up project bank accounts.

Such accounts were recommended by the National Audit Office in its 2005 report ‘Improving public services through better construction’ and in the construction-commitments charter published by the Strategic Forum for Construction for projects undertaken in connection with the 2012 London Olympics. The Defence Estates Organisation was the first public-sector client to set up a project bank account some seven years ago when work began on the Defence Logistics headquarters at Andover.



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