Despite opposition from certain major contractors, the use of project bank accounts (PBA) was mandated in the much-vaunted Construction Playbook, published by government last year to set down best practice in procurement.
Project bank accounts 鈥� a ring-fenced account from which payments are made directly and simultaneously to all members of a supply chain 鈥� are a way of protecting suppliers from the abuse of retention monies and the insolvency of Tier 1 contractors.
However, to what extent they are being used, no one in government seems to know.
Debbie Abrahams, Labour MP for Oldham East and Saddleworth, is a seasoned campaigner on construction payment issues. She submitted the question to several government departments: What information is held on the use of Project Bank Accounts by the department and its agencies and the non-departmental bodies for which the department is responsible?
The responses, in the form of official parliamentary written answers, are revealing.
The Cabinet Office, in charge of public procurement, didn鈥檛 know.
The Ministry of Housing Communities & Local Government (MHCLG) didn鈥檛 know.
The Department of Transport, in charge of a massive road building programme, didn鈥檛 know.
The Department of Education isn鈥檛 even using project bank accounts at all, it said.
Eddie Hughes, parliamentary under-secretary at the MHCLG, said: 鈥淲e do not hold data on PBAs if we have assessed it is not practical, efficient and cost effective to use them on our current construction projects. Along with all government departments, and as set out in the Construction Playbook, we have committed to use PBAs on our construction projects unless there are compelling reasons not to.鈥�
Transport minister Chris Heaton-Harris replied: 鈥淧roject Bank Accounts are used to ensure fair payment terms on government construction contracts. As these are specific to construction projects, they are not used by the Department for Transport nor its agencies. However, the department鈥檚 large non-departmental bodies engaged in construction works do use them to improve cash flow, mitigate risk of payment delay and to reduce the risk of supply chain failure. Use of these provide transparency and assurance over payments to suppliers lower down the supply chain in particular.鈥�
Schools minister Nick Gibb revealed: 鈥淒fE has considered the use of PBAs for school construction projects delivered through the DfE Construction Frameworks. However due to the specific nature, size and volume of DfE鈥檚 school construction projects, the DfE has assessed that it is not practical, efficient and cost effective to use them on our construction projects. Therefore, there are compelling reasons not to deploy PBAs on DfE projects. Accordingly, the DfE does not hold any information on the use of PBAs for its school construction projects as the DfE does not currently use PBAs.鈥�
That is perhaps fair enough. Received wisdom is that PBAs are not so appropriate or necessary for the sort of smaller contracts that the Department for Education usually has.
The Cabinet Office, publisher of the Construction Playbook, used to monitor usage of PBAs but gave up several years ago, it transpires.
Julia Lopez, parliamentary secretary at the Cabinet Office, said: 鈥淭his Department does not hold specific information on the use of Project Bank Accounts. However, as the PBA policy lead we do engage with departments and their ALBs [arm鈥檚 length bodies] about their PBA usage, including indicative spend.
鈥淲hilst the use of PBAs was being established we collected data on the value of government contracts making use of PBAs. During that period (2011-2015) over 拢10bn was spent on a wide range of construction projects using PBAs.鈥�
Management guru Peter Drucker coined the maxim: "If you can鈥檛 measure it, you can鈥檛 improve it." The use of PBAs can easily be measured, so can be improved, would that the government decide to do so.
Last month, in an appearance on the Re:Construction podcast, Rudi Klein, former chief executive of the Specialist Engineering Contractors鈥� (SEC) Group, revealed that major contractors had fought against the inclusion of project bank accounts in the Construction Playbook. [See our previous report here.] This might explain why the government鈥檚 commitment to PBAs remains less than whole-hearted.
Debbie Abrahams, MP for Oldham East and Saddleworth, told us: 鈥淭he answers seem to show that the government鈥檚 project bank accounts policy is only for show with nothing in place to force implementation.聽 The use of project bank accounts can be easily measured, indeed the government collected data between 2011-2015, but are currently refusing to do so.聽 I will continue to press ministers on this issue and explore opportunities in the forthcoming Building Safety Bill to tackle the scourge of late payments throughout the supply chain.鈥�
Got a story? Email news@theconstructionindex.co.uk
