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Mon November 18 2019

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Project bank accounts please Northern Ireland’s supply chain

18 Jan Northern Ireland has been muddling on without a government for two years now but public procurement of construction is working out just fine, it seems.

In fact, SME firms in Northern Ireland’s construction industry have heaped praise on the region’s procurement authority, Construction & Procurement Delivery (CPD), for the success of its project bank account initiative.

Project bank accounts 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 project bank account (PBA).  The total value of these contracts is approximately £1.3bn.  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 four days.

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Firms that have received their payments from a PBA report that the system is working well.  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, executive officer for the Specialist Engineering Contractors’ (SEC) Group in Northern Ireland, said: “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 £133m 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.”

CPD 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 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.”

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