• Project bank accounts to cover more Government projects

    A package of measures to improve security of payments for subcontractors was announced by Minister for Finance, Bill Marmion and Minister for Small Business, Sean L'Estrange on 12 August 2016.

    The measures include extending the use of project bank accounts (PBAs) across most Department of Finance, Building Management and Works (BMW) construction projects valued at above $1.5 million. This initiative will apply to projects tendered under an AS2124 contract after 30 September 2016.

    Projects managed by the Department of Treasury’s Strategic Projects and Asset Sales will not be required to use project bank accounts at this time.

    Mr Marmion said Western Australia was the first state in Australia to trial PBAs, and would also be the first state to roll them out more broadly.

    'PBAs are an important measure for streamlining the payment process along the supply chain and improving transparency and accountability', he said.

    BMW recently concluded an initial trial of PBAs on seven projects and found that the use of these accounts can improve the certainty and timing of payment for subcontractors. BMW is committed to further simplifying the PBA model used in the trial and removing any unnecessary red tape involved in their administration.

    PBAs are a payment mechanism which establish a dedicated trust account (set up by the project head contractor) and facilitates the simultaneous payment of a project’s head contractor and participating subcontractors. The Government deposits project payments into the account for direct disbursement to head contractors and subcontractors.

    This provides subcontractors with improved certainty and timing of payment, particularly when a head contractor may be experiencing financial difficulty.Electrical subcontractor at workPBAs do not alter the existing contractual rights and obligations of the parties to a construction contract, and cannot prevent a head contractor from experiencing financial difficulty.

    Other security of payment measures announced include a reduction in the maximum amount of time a head contractor can take to pay a subcontractor to 30 business days, and an increase in the time allowed for parties to apply for adjudication of payment disputes to 90 business days.

    The Government will also:

    • develop a Code of Conduct for contractors working on Government projects
    • expand the role of the Small Business Commissioner in reviewing and mediating on disputes involving small businesses on Government projects
    • fund and establish a Compliance Monitoring Unit within the Department of Commerce to drive adherence to the Code of Conduct.

    Click here for more information on PBAs.

    Published date: 15 August 2016