Rudi Klein, chief executive of the Specialist Engineering Contractors (SEC) Group and president of the NEC Users’ Group, sets out the benefits of MP Debbie Abrahams Private Members’ Bill calling for the introduction of project bank accounts.
Amid all the hullabaloo around the Brexit debate in Parliament, the Public Sector Supply Chains (Project Bank Accounts) Bill has been introduced.
This was a Private Member’s Bill laid by Debbie Abrahams MP who has been a long-standing parliamentary campaigner for fair payment.
Rudi Klein
The Bill will mandate the use of project bank accounts (PBAs) in the public sector for all tier one contracts over £500,000. It acknowledges that there is a disparity in insolvency protection as between tier one contractors and other contractors in the supply chain.
Public bodies don’t go bust, meaning that tier one contractors’ monies are protected. This protection is not, of course, available along the supply chain.
The Bill will require that the following are deposited or kept in a PBA:
- progress payments;
- disputed amounts as between a tier one contractor and subcontractor beneficiaries;
- supply chain retention monies (if deducted by the tier one contractor).
Once a contracting authority has authorised payments they will have to be deposited in a PBA where the monies have trust status. This means that a tier one contractor’s insolvency practitioner will not be able to have access to the funds in the PBA.
Both contracting authority and contractor will be trustees of the monies and either the authority or contractor will be account holders. Instructions will be issued to the bank to release the monies simultaneously to the tier one contractor and subcontractor beneficiaries.
Whether or not a subcontractor is a beneficiary will be dependent upon the value of the subcontract; the aim is to include within the PBA as many subcontractors as possible. A subcontractor will then be able to receive payments within as little as three days once the monies are in the PBA.
The Bill will extend to the whole of the UK. It is expected that there will be widespread support from the industry for the Bill. It was no accident that the Bill was introduced in Parliament on the date, a year ago, that Carillion went bust.
If PBAs had been in place on all Carillion’s public sector projects the losses incurred by firms on those projects would have been far less.
Messages in support of the Bill should be sent to Debbie Abrahams.
A second reading of the Bill is due on 1 March, having been heard in Parliament on 15 January
