Pictured: RLB's Brian Kilgallon and supporters of Project Bank Account at the Scottish Parliament Conference including from left to right Richard Peart from Defence Estates, Mike Barlow from MacRoberts, Newell McGuiness MD of Scottish firm equivalent of SECG, Stuart Lyon from CASEC, Rudi Klein CE of SECG and Euan Murray from Barclays.
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Support for PBA's grows as a means of delivering the Governments 10 day payment commitment
By RLB's PBA specialist Brian Kilgallon
A major conference was held in the Scottish Parliament building on Monday 19th January to formally launch Project Bank Accounts north of the Boarder. Speakers and delegates from all sides of industry attended the event chaired by Lord O'Neill of Clackmannan. These included representatives from the Scottish Government, Defence Estates, Barclays Bank, Rider Levett Bucknall and Public and Private sector clients, contractors and sub contractors.
It was very evident that cross industry support for PBAs has grown significantly since the launch of the OGC 'Guide to Best Fair Payment practices' some 15 months ago. The deepening economic crisis and government moves to ensure payment of suppliers within 10 days have focused attention on PBAs as a very practical means of achieving this.
Lord O'Neill who chaired the conference, said:
"Against a background of rising insolvencies, bad debt, lack of availability of borrowing facilities and credit insurance, PBAs will ensure that the cash is safe for the whole project delivery team. The Governments at Westminster and in Edinburgh have announced their intention to pay suppliers within ten days. As always the problem is to ensure that this is implemented along the supply chain. PBAs will help to deliver this policy aim".
Lord O'Neill added:
"Furthermore, PBAs will enable the team to work closely together to focus on the delivery of best value instead of being distracted over conflict and disputes arising from poor payment practices".
Defence Estates used the conference to inform attendees that they are looking to use Project Bank Accounts on all their future stand alone Prime Contracts going forward and are also considering their use on the next generation Estate Contracts to replace current Regional Primes. Although some technical issues were identified where DE need to seek assurance, it was felt that none were considered insurmountable.
Representatives of the Scottish Government at the conference indicated that they would look closely at introducing PBAs as part of their security of payment agenda and would follow this up with those represented at the conference.
The conservative SMP Gavin Jones pledged to raise the issue of project bank accounts in the Scottish Parliament. The Scottish Government has stated that it will pay suppliers within 10 days he believed that PBA's would deliver this policy aim throughout the supply chain. In view of this he questioned whether project bank accounts should become the standard payment mechanism for Scottish public sector construction.
Rider Levett Bucknall, who developed the Project Bank Account concept, explained to the conference the ease with which PBA's can be set up and used and how despite the falling base rate, these accounts earn sufficient interest to cover the modest charges they incur on all but the smallest of projects.
RLB said most significant benefit of PBA's however is their Trust status which provides financial protection to the supply chain by ring fencing all monies paid into the account. This ensures the money is safe guarded in the event of an up stream financial failure by contractor or client. This is particularly important in today's tough economic conditions as it helps mitigate the risk of supply chain failure due to cash flow problems.
In another significant development, Specialist Engineering Contractors Group - which represents the largest sector (by value) in UK construction - issued a statement on behalf of 60,000 firms in the engineering sector. The statement pledges the support of the sector to client organisations putting PBA's in place and confirms that such accounts should lead to savings compared to traditional payment practices. They further commit to working with clients and government to identify these savings and to mirror these new fast track payment arrangements within their internal supply chains.
This is a major step forward as there had been concern amongst many clients that the supply chain may not deliver on promises made in connection with PBA's. It had been felt in certain quarters that PBA's would not overcome bad payment practices but would in reality merely move the problem down the supply chain.
At the conference Barclays Bank also announced the launch of a project bank account product to meet the requirement of the legal system in Scotland.