Project Bank Accounts - pcpd.scot.nhs.uk · Colin Judge FRICS Scottish Procurement Construction...

Colin Judge FRICS

Scottish Procurement

Construction Policy Unit

Capital Investment Network

Victoria Quay, Edinburgh

15 January 2016

Project Bank Accounts Google - “Scottish Project Bank Accounts”

• Why is the Scottish Government trialling

PBAs?

• Construction Procurement Review – DFM

• Late and extended payment terms - same effect

• What difference does prompt payment

make? • Solvency and investment

• Diversity and competitiveness - VFM

• Spending - multiplier effect

• Cost avoidance - state benefits; tax; capacity/capability

• Independence - corporate and personal

The four trial projects and their current status

A96 Inveramsay Bridge (c£10.17m)

• Transport Scotland

• PBA a condition of tender in amended TS bespoke Design & Build Contract

• on site now, completion due Spring 2016 - PBA payments underway

• Initial lessons learned on PBA set up/implementation gathered and being evaluated

• Another iteration scheduled early 2016 for PBA operation

Transport Interchange, Galashiels (c£5.2m)

• Scottish Borders Council via South East Hubco

• PBA retrofitted into bespoke conditions of contract

• work on site completed August 2015

• Feedback/lessons on PBA being gathered and evaluated

Two separate maintenance work packages at Monklands Hospital (total c£1.4m)

• NHS Lanarkshire via National Services Scotland

• PBA retrofitted into Framework Scotland 2 via NEC3 2005 ‘Z’ clause

• work on site completed September 2014

• Feedback/lessons learned gathered on PBA

• How long is the trial period and what

happens next?

• What is Scottish Government doing? • Website (Google - “Scottish Project Bank Accounts”)

• Lessons Learned Programme

• Frequently Asked Questions and documents

• Policy Leads’ Forum

• PBA banking processes

• Corporate governance and compliance

What is Scottish Government doing

(continued)? • Liaison and reporting within Construction Review

Implementation Programme

• CRDG

• Stakeholder engagement and consultation

• CS - PIG

• Mailbox (ProjectBankAccount@gov.scot)

• Our key suppliers

• Trade Federations

What is Scottish Government doing

(continued)?

• Trend analysis - follow the money

• Public Contracts Scotland

• Procurement Information Hub

• Broader PBA community

• UK home nations

• Australian states

What are the principal lessons learned - so

far? • PBAs result in prompt and protected payments to

subcontractors

• They are a collaborative endeavour requiring purposeful

action

• The banking sector is the critical enabler

• Our PBA operating model

What are the principal lessons learned - so

far (continued)?

• PBA users need to own the implementation

• Commitment

• Capability

• Complement

• Corporate inertia

• Challenge

• Confidence

• Credibility

• Communication

Traditional

Main

Contractor

(Beneficiary)

Public Body

Project Bank Account

Public Body

Main

Contractor Bank

Account

Sub

Contractor 1

Sub

Contractor 1

(Beneficiary)

Sub

Contractor 2

Sub

Contractor 2

(Beneficiary)

Sub

Contractor 4

Sub

Contractor 3

Typically 1-3 days

Sub

Contractor 3 Non-

Beneficiary

Sub

Contractor 4 Non-

Beneficiary

Project Bank Account

Can be 120 days

Construction Supply Chain Payment Trail

How do PBAs achieve prompt payment?

“Business as Usual”

• Main contractor values his subcontractors’ work.

• Main contractor adds his amount and submits to the public body.

• Public body prepares the interim payment certificate

PBA-Specific

• Main contractor splits into payments due to PBA beneficiaries -

mandate

• Public body deposits money into the PBA - discharge

• Main contractor instructs bank to authorise payment

• Public body then also instructs - only then are beneficiaries paid

• Main contractor still values work but does not control payment

timing

• Beneficiaries receive payment 1 - 3 days after authorisation

What else does a PBA achieve? • the trust deed ring fences money in the account from

insolvency practitioners

What things can a PBA not achieve,

address or change? • deals with “how and when” not “why and what”

• can’t resolve disputes

• payment still in arrears

• tax responsibilities unchanged

What are the essential elements of a PBA in

Scottish Government?

• PBA set up in joint names of public body and main

contractor

• Both named as trustees in the trust agreement

• Jointly instruct the bank to pay beneficiaries from the

account

What is “trust status” in a PBA?

• Main contractor and trustee and beneficiary

• Money is a ring-fenced trust asset while in the PBA

• Trustee role is separate from works contract

• Trustees must control the trust asset (money) - joint

instruction

Which projects are suitable for PBA

application?

• Most projects

• Single contract or call-off

• Multiple payment cycles

• Independent subcontractors

• Not low value

Do PBAs favour larger rather than smaller

main contractors?

• Depends on their business model

• Can price into tender

PBA services by RBS - Scottish Government’s Banking

Services Framework provider

Google “Scottish Procurement Banking”

• Golden Jubilee Hospital (National

Waiting Times Centre Board)

• NHS 24

• NHS Ayrshire and Arran

• NHS Borders

• NHS Dumfries and Galloway

• NHS Education for Scotland

• NHS Fife

• NHS Forth Valley

• NHS Grampian

• NHS Greater Glasgow and Clyde

• NHS Health Scotland

• NHS Highland

• NHS Lanarkshire

• NHS Lothian

• NHS Orkney

• Healthcare Improvement Scotland

• NHS Shetland

• NHS Tayside

• NHS Western Isles

• Scottish Ambulance Service

• The Common Services Agency for

the Scottish Health Service

• The State Hospital for Scotland

What does the bank do?

• The PBA functions as per agreed mandate

• Responds to account holder instructions

• No claim or control of trust asset in PBA

• Won’t intervene in supply chain matters

Must the public body authorise payment

through the banking system?

• Yes!

• Joint instruction - consecutive not concurrent process

• No payment if only instructed by one trustee

How do subcontractors join a PBA?

• Sign the trust documents

• Give bank account details to main contractor

• Join Bankline (RBS’s internet banking platform)

• Bankline “administrator” role needs to be allocated

• No KYC/KYB or direct engagement with bank

What about implementing the PBA

down the supply chain?

• aligning payment cycles

• template payment timeline

• project-specific, not generic

Thank you for listening

• Visit the websites

PBAs - Google “Scottish Project Bank Account”

Framework - Google “Scottish Procurement Banking”

• Drop us a line

ProjectBankAccount@gov.scot