Construction SMEs in Northern Ireland praise success of payment initiative
SME firms in Northern Ireland’s construction industry have heaped praise on the country’s project bank account (PBA) initiative.
Driven by Construction and Procurement Delivery (CPD), the procurement authority in Northern Ireland, the PBAs lead to shorter payment times and ensure that payments lodged in the account for firms in construction supply chains are secure in the event of upstream insolvencies.
According to CPD figures, 32 public sector contracts have been awarded since January 2013 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 four days.
The 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, added that SEC Group had been working very closely with CPD to promote this initiative across the industry.
He 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 £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.”
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.”