Trade body calls for use of project bank accounts on new housing framework
A Scottish trade body has urged Scotland Excel to insist on the use of project bank accounts (PBAs) for its new £1.5 billion social housing construction framework.
Speaking after Scotland Excel’s recent Glasgow conference, Fiona Hodgson, CEO of the Scottish and Northern Ireland Plumbing Employers’ Federation (SNIPEF), which represents over 760 plumbing and heating businesses ranging from sole traders and SMEs to large companies, said that many of her member firms would be engaged as sub-contractors on the new framework.
She added: “We hope that all the contracts let under the framework would be using PBAs to ensure that all supply chain firms would receive their payments well within 20 days and be protected from upstream insolvencies.”
Scotland Excel said that while its residential framework makes provision for the use of PBAs, it would not be appropriate to make their use mandatory due to the wide range of developments involved.
PBAs enable all firms delivering construction-related activities to be paid from the same ‘pot’ which is ring-fenced against insolvencies upstream of the supply chain.
The New Build Residential Construction framework was launched by Scotland Excel at the end of August 2019. The framework is available to all 32 councils in Scotland and also housing associations; it implements part of the Scottish Government’s policy to build 50,000 new and affordable homes by 2021.
Ms Hodgson recently met the Royal Bank of Scotland which has worked closely with the Scottish Government in recent years to develop a methodology for opening and operating PBAs in line with government policy.
David Rennie, relationship director at RBS, who spoke at the Scotland Excel conference, said that the bank was ready to support Scotland Excel and its member councils in setting up PBAs: “We now have an expert team ready to assist every public body in Scotland wishing to use PBAs. To date, the experience of PBAs in Scotland has been very positive in ensuring cashflow security for small firms in the supply chain.”
As a member of the Specialist Engineering Contractors’ (SEC) Group Scotland, which represents the largest sector (by value) in Scotland’s construction industry, SNIPEF has been campaigning for improved payment security in the wake of Carillion’s collapse and the increasing fragility of the finances of the UK’s largest contractors.
A spokesperson for Scotland Excel told Scottish Construction Now: “Our new build residential framework makes provision for the use of project bank accounts within its terms and conditions, and we are actively encouraging contracting organisations to consider implementing these when placing work packages against the framework.
“As the framework incorporates the flexibility for a wide range of new build residential requirements, from a single dwelling to developments of more than forty homes, it would not be appropriate to mandate the use of project bank accounts at a framework level.
“Implementing a project bank account would be a decision for councils or housing associations to make at the point of contracting with one of the framework’s 19 suppliers.”