Construction News

Sat June 19 2021

Related Information

Project bank account usage not being monitored by government

19 May The government is failing to monitor the use of project bank accounts, despite having mandated their use on all public sector projects where appropriate.

Debbie Abraham MP, asking awkward questions
Debbie Abraham MP, asking awkward questions

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 – a ring-fenced account from which payments are made directly and simultaneously to all members of a supply chain – 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’t know.

The Ministry of Housing Communities & Local Government (MHCLG) didn’t know.

The Department of Transport, in charge of a massive road building programme, didn’t know.

The Department of Education isn’t even using project bank accounts at all, it said.

Eddie Hughes, parliamentary under-secretary at the MHCLG, said: “We 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.”

Related Information

Transport minister Chris Heaton-Harris replied: “Project 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’s 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.”

Schools minister Nick Gibb revealed: “DfE 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’s 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.”

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: “This 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’s length bodies] about their PBA usage, including indicative spend.

“Whilst 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 £10bn was spent on a wide range of construction projects using PBAs.”

Management guru Peter Drucker coined the maxim: "If you can’t measure it, you can’t 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’ (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’s commitment to PBAs remains less than whole-hearted.

Debbie Abrahams, MP for Oldham East and Saddleworth, told us: “The answers seem to show that the government’s project bank accounts policy is only for show with nothing in place to force implementation.  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.  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.”

Got a story? Email news@theconstructionindex.co.uk

MPU

Click here to view more construction news »