National Highways and its predecessor bodies have been using project bank accounts (PBAs) since 2012 to ensure monies are held in trust to protect the supply chain in the event of the lead contractor going bust. National Highways payments are made down to tier 2 level in 18 days on average, it says, which is ahead of construction industry norms.
However, until now contractors and subcontractors have had to opt in. Now they will be included automatically.
Lloyd Biddell, head of cost intelligence at National Highways, explained: “We have been using project bank accounts for over a decade and they have proven a great benefit to many of our suppliers. The current opt-in process can make the process daunting or confusing for our smallest suppliers, who are often the ones most likely to benefit from them. We are now making it even easier by automatically including them on project bank accounts unless they choose to opt out. This is a significant and game changing development and we believe could even be a world first for project bank accounts.”
Leading payment campaigner Professor Rudi Klein, former chief executive of the Specialist Engineering Contractors’ (SEC) Group, welcomed the move. He said: “PBAs are the most effective mechanism for improving payment security. National Highways’ achievement in ensuring 18-days payments to its supply chains is now providing a massive boost for SMEs current facing unprecedented cost pressures. If you’re involved in a public sector contract and not using PBAs, what’s stopping you?”
Historically around 80% of tier 2 contractors have signed up, with more than 2,000 applications processed by National Highways each year and more than 50 such accounts active at any one time.
The remaining 20% are usually small suppliers that provide limited supply or are unsure of the benefits. Under the new plans, they will be signed up unless they specifically request to opt out. This will make the signing up process easier and better protect suppliers against further lead contractor insolvencies.