Project bank accounts raise hopes of better payment in NI
Construction SME firms in Northern Ireland’s have praised the project bank account (PBA) initiative which has been driven by Construction and Procurement Delivery (CPD), the procurement authority in Northern Ireland.
PBAs ensure that payments lodged in the account for firms in construction supply chains are secure in the event of upstream insolvencies and that there are shorter payment times.
Alfie Watterson, executive officer for the Specialist Engineering Contractors’ (SEC) Group in Northern Ireland (representing the largest sector by value in Northern Ireland’s construction industry) says that SEC Group has worked with CPD to promote this initiative:
“This is the modern approach to paying subcontractors in construction. Everybody is paid from the same pot instead of monies having to cascade through different contracting layers. If a PBA had been in place when Carillion Energy Services took on the £133 million contract to upgrade energy systems in Northern Ireland’s housing, the losses from its collapse would have been far less. I must take this opportunity to give tremendous credit to CPD which has pioneered this work and, in doing so, has supported many SMEs across Northern Ireland.”
Since January 2013, according to CPD figures, 32 public sector contracts have been awarded which include a PBA. The total value of these contracts is approximately £1.3 billion. Over the same period 100 subcontractors have been paid directly from a PBA. Once the funds have been lodged within the PBA by a public sector procurer, subcontractors have been paid within 4 days.
According to a director of one mechanical and electrical business PBAs have made a significant difference to his cashflow: “The improved cashflow greatly assisted our overall project performance, allowing us to focus on delivering the work rather than chasing payments. We would welcome any project that is to be managed using a project bank account and would add that lowering the financial ceiling to £1m would greatly assist the cashflow of all SME’s involved in like projects.”
CPD chief executive, Des Armstrong says: “CPD remains committed to the promotion of fair and prompt payment for Government construction supply chains. We recognise the importance of this to the solvency of construction SMEs and their performance on Government construction contracts. Project Bank Accounts (PBAs) represent a significant step forward in ensuring that subcontractors receive the benefit of prompt payment.
In related news, cross-party parliamentary support for retentions reform (via the Aldous Bill) is now at over 270 MPs. BESA and the ECA have also won the support of 15 select committee chairs from the four largest political parties. These include the Rt Hon Nicky Morgan, chair of the Treasury Committee and the Rt Hon Frank Field, chair of the Work and Pensions Committee.
The second reading of the Bill is now expected to be held on Friday 8 March 2019. Retentions reform is also supported by an industry coalition of around 85 trade associations and professional bodies.