Project bank accounts adopted on HS2

Construction trade bodies have applauded the decision of HS2 Ltd to implement the use of project bank accounts (PBAs) for payments across existing and future contracts.

Project bank accounts adopted on HS2

Currently the biggest infrastructure project in Europe, HS2 will engage an estimated 10,000 companies in total, with more than 2,000 companies having already delivered work the project. Around 95% of HS2 contracts have gone to UK-based businesses – 60% of those are SMEs.

PBAs enable payments to be made directly to firms in the supply chain without them having to cascade through the different layers of contracting. Payments can be discharged within 15 days and a measure of protection is provided against insolvencies upstream of the supply chain. £20 billion worth of work from Highways England will have been paid through PBAs by the end of this year and the Environment Agency has currently almost 120 projects which are using PBAs.

Following a trial of PBAs on two enabling works contracts, HS2 Ltd is now working with its construction contractors to implement these across other contracts.

The Specialist Engineering Contractors’ Group (SEC Group), which represents the largest sector by value in UK construction, said that with thousands of contract opportunities generated on HS2, the assurance of prompt and secure payment will have a significant impact across the sector not least for SMEs.

SEC Group chairman, Trevor Hursthouse, said: “For over 10 years SEC Group has been campaigning to encourage public bodies to use PBAs. I’m delighted with HS2’s stance. The HS2 team is passionate about driving a collaborative and transparent approach to procurement and delivery across the whole supply chain.

“Using project bank accounts will safeguard prompt payment and furthermore guarantee security of payment across the supply chain which is particularly important during these times.”

Rudi Klein, CEO of SEC Group, added: “As the lead campaigner for using PBAs, SEC Group applauds the decision of HS2 to use them (alongside other measures such as the abolition of retentions). In recent years we have having a dialogue with HS2 on promoting improved payment security for HS2 supply chains.

“Implementing PBAs now will be a massive boost to construction SMEs struggling to make ends meet as we emerge from the current crisis. HS2 will also benefit since PBAs will encourage more collaborative working and help reduce construction costs. Given HS2’s decision there’s no longer any excuse for contracting authorities not to use PBAs.”

Andy Cross, rail systems procurement director, added: “I am thrilled that we have taken this crucial step to further strengthen our fair payment policies and in so doing, support companies at all levels of the supply chain through the use of PBAs. HS2 will play a critical role in the recovery of the UK’s economy as we emerge from the pandemic, supporting and creating jobs across the construction industry.

“This announcement means that companies, big or small, working with us will feel confident and supported as we work together to build Britain’s new low carbon high speed railway.”

The decision has also been welcomed by the Scotland and Northern Ireland’s Plumbing Employers’ Federation (SNIPEF).

Fiona Hodgson, chief executive of SNIPEF, said: “This is excellent news and something that the construction industry in Scotland has been calling for over many years. It is especially welcome since the HS2 project will generate an estimated 400,000 contracts across its supply chain and that two thirds of these will be with SMEs.

“It is our hope that the acceptance of PBAs by such a flagship project will act as an exemplar for all construction projects, major and minor, in future.

“The announcement is also, I believe, an acknowledgement of the hard work done by the Specialist Engineering Contractors Group, of which SNIPEF is a member, which has been lobbying for PBAs over recent years.”

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