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Government poised to extend PBAs to FM contracts

The government is considering rolling out project bank accounts across its £3 billion-worth of facilities management services, Construction News can reveal.

The Cabinet Office is exploring using the payment method - which is unpopular with some major contractors - for facilities management contracts in central government, meaning all areas covered by the FM strategy board.

The sector was worth an estimated £3bn in 2010/11.

PBAs are ringfenced electronic bank accounts, from which payments are made directly and simultaneously by a client to its supply chain.

The government has already earmarked £500 million of construction projects that will use the accounts. This is due to be extended to a further £4bn of work by 2014.

A Cabinet Office spokesperson told CN: “Small companies waste time and incur costs when they have to chase payments.

“This government is extending the use of project bank accounts to support small businesses. While the work is still in its early stages, facilities management is one area we are looking at right now.”

Cabinet Office officials have claimed the accounts can shave 2.75 per cent off project costs.

Crossrail and the Highways Agency are advocates of the method and, from next year, the Ministry of Defence is to set up PBAs for its housing, training estate, and regional facilities management contracts. However, some contractors see them as unnecessary.

Interserve Construction commercial director Roy Bloom said it was a “well-intentioned aspiration” to reduce the cost of financing to public sector clients and to support SMEs from risk of non or late payment.

But he added: “The possibility of PBAs being extended to FM contracts is something of a surprise, given that PBAs have not yet been proven to save money.

BAM Nuttall chief executive Steve Fox told CN: “We have a very good payment record and it’s a shame that people impose these things that can affect a company’s cash management position.”

 

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