- Project plans
- Project activities
- Legislation and standards
- Industry context
Last edited 28 May 2019
Project bank account
Project bank accounts (PBA) have emerged as a means of enabling faster payments through the construction supply chain, with payments being made as soon as 5 days from the due date. This is intended to reduce cash flow problems that can lead to supply chain members becoming insolvent, which is potentially catastrophic for projects, both in terms of money and time.
The government suggests that, ‘Historically, it is has not been unusual for lower tier supply chain members to have to wait for up to 100 days to receive payment, which damages their cash flow and can harm their business.’ Ref Cabinet Office, Project Bank Accounts – Briefing document.
In September 2009 the Government Construction Board proposed that government projects should begin to adopt project bank accounts unless there were compelling reasons not to do so. In 2011, the Government Construction Strategy set a target for £4bn of contracts to be awarded using project bank accounts by the end of 2013 to 2014.
In 2014, Francis Maude, Minister for the Cabinet Office, announced that £5.2bn worth of government construction projects were being paid through project bank accounts, including projects such as Crossrail. Maude stated, “To win the global race, we must support the smaller suppliers which are the lifeblood of our economy.” Ref Construction Enquirer, Project bank accounts in use on half government jobs.
Project bank accounts are ring-fenced accounts from which payments are made directly and simultaneously by the client to all parties in the supply chain. Funds in the account can only be paid to beneficiaries, that is, members of the supply chain named in the account (the lead contractor and supply chain members).
- Certainty of payment.
- Security of payment.
- Speed of payment.
- A reduction in the need for borrowing or financing credit.
- A reduction in the need to chase payments.
- A reduction in disputes.
A number of banks offer project bank accounts for construction projects, including Barclays and Bank of Scotland. Contracts such as NEC3, the Project Partnering Agreement (PPC2000) and the JCT contracts also provide for project bank accounts.
Project bank accounts are best suited to projects with complex supply chains, irrespective of the size of the project. They can be ‘dual authority’ or ‘single authority’ accounts depending on whether both the client and lead contractor instruct payments, or only the lead contractor. The account is held in the names of trustees (the client and lead contractor for dual authority accounts or just the lead contractor for single authority accounts). This trustee status means that in the case of insolvency amounts payable to the supply chain are secure and can only be paid to them.
Project bank accounts should extend down to at least tier 3 contractors and 80% of the value of sub-contract payments. Suppliers should only not participate if; the value of the contract is too low, or they are paid more frequently than a monthly cycle, or if they are not vulnerable suppliers and do not wish to participate.
In September 2016, the Scottish government announced that project bank accounts would be used on all of its building projects with a value of more than £4m from 31 October 2016. Stirling-based Robertson Group warned that main contractors would have to rebalance margins as a result of the move. Chairman Bill Robertson said, "... if the intended project bank account process promoted by the public sector is pursued across the industry, the additional profit element required to operate such a scheme will require a rebalancing of margins within the industry.”
In December 2017, the Welsh government announced that it would use project bank accounts on all building projects over £2m procured by government bodies from 1st January 2018. A guidance note was issued to accompany the announcement. Ref http://prp.gov.wales/toolkit/?lang=en
In January 2019, Debbie Abrahams, MP for Oldham East and Saddleworth, brought forward a ten minute rule bill to require public authorities to pay suppliers using project bank accounts. It was agreed that the bill would be read a second time on 1 March. Ref http://www.constructionmanagermagazine.com/news/second-reading-project-bank-accounts-bill/
In February 2019, the Scottish Government announced that from 19 March, its thresholds would be reduced so that public bodies would have to include project bank accounts in tender documents for building contracts worth £2m or more and civil engineering projects worth £5m or more.
 Related articles on Designing Buildings Wiki
- Cash flow.
- Construction supply chain payment charter.
- Fair payment practices.
- Government Construction Board.
- Government construction strategy.
- Housing Grants Construction and Regeneration Act.
- Integrated supply chain.
- Interim payment.
- Payment notice.
- Prompt payment code.
- Remedies for late payment.
- Scheme for construction contracts.
- Supply chain.
 External references
- The B1M, What are Project Bank Accounts? (short animation). 15 June 2016.
- Construction Enquirer, Project bank accounts in use on half government jobs. 4 July 2014.
- Cabinet office, Project Bank Accounts – Briefing document. 10th February 2012.
- Cabinet office, A Guide to the implementation of Project Bank Accounts (PBAs) in construction for government clients, 03 July 2012.
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