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Payment breakthrough

Project bank accounts and single insurance policies for schemes promise to revolutionise road contracts

HIGHWAYS Agency chiefs are planning to revolutionise how road jobs are run by introducing project bank accounts and insurance.

A single insurance policy will cover every part of a scheme, while project bank accounts mean cash is held in a single pot that cannot be withheld by the main contractor. Expert advisers will work with the agency over coming months to draw up firm proposals to go to consultation with contractors later in the year.

The agency set out its latest reforms in its second major review of procurement strategy last week.Highways chiefs will also extend early contractor involvement along the supply chain and plan to team up with local authorities to spread best practice.

Steve Rowsell, HA procurement director, hopes to be ready to pilot project insurance on a framework contract and a major project in the next financial year.

Project accounts, expected to prove more controversial with big civils firms, are likely to be rolled out later in 2006.

He said: 'We are committed to building fully integrated and incentivised supply chain teams.

'Establishing a more effective insurance environment and fairer payment right down the supply chain are two clear challenges for us.'

The agency believes project insurance will bring big benefits to all firms involved in road jobs. It will strip out duplication of costs from overlapping policies and avoid the need to chase claims.

Mr Rowsell said Sir Michael Latham's review and interest from the Office of Government Commerce had prompted the agency to look at establishing project accounts for its jobs.

He said: 'We want to get the message out that we seriously support fair payment.'

Specialist subcontractors welcomed the move. One said: 'Any attempt to ensure prompt payment and cut insurance payments is very welcome.

'But big civils contractors will probably fight project accounts because it will dent cashflow.'