SME firms in Northern Ireland’s construction industry have heaped praise on 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.
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.
This award-winning initiative has received plaudits from firms which have received their payments from a PBA. 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.”
Alfie Watterson, the Executive Officer for the Specialist Engineering Contractors’ (SEC) Group in Northern Ireland (representing the largest sector, by value, in Northern Ireland’s construction industry) added that SEC Group had been working very closely with CPD to promote this initiative across the industry:
“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.”
Speaking on behalf of CPD, its Chief Executive, Des Armstrong said:
“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. CPD’s PBA initiative has been developed in collaboration with the Construction Industry Forum for Northern Ireland. I am pleased that CPD’s approach has been recognised, not just by Scotland and Wales, who have broadly replicated CPD’s model but also by jurisdictions as far away as South Korea, the Czech Republic and Australia where those administrations have also sought advice from CPD on the implementation of PBAs.”
Notes for Editors
- The SEC Group Northern Ireland comprises the construction industry’s premier trade associations: British Constructional Steelwork Association, Building Engineering Services Association, ECA -Electrotechnical and engineering services trade body, Lift and Escalator Industry Association, Scottish & Northern Ireland Plumbing Employers Federation and Scaffolding Association.
- PBAs were initially piloted by CPD in 2013. They are required to be used by contracting authorities (included within CPD’s remit) for projects exceeding £2 million.
- Debbie Abrahams MP has just introduced a Private Member’s Bill to mandate the use of PBAs on public sector works. Northern Ireland will be included in the Bill.
- Further information can be obtained from Alfie Watterson: Email: Alfie.Watterson@eca.co.uk, Mobile: 07971 141 911.