Project Bank Accounts (PBAs) are a payment mechanism through which payments from a principal are made directly and simultaneously to the head contractor and participating subcontractors. Typically PBAs are used on larger scale construction projects.
The fundamental difference between a PBA and a normal bank account is that the PBA has trust status providing additional protections for subcontractor moneys.
PBAs can have a number of benefits such as:
- higher level of protection for project moneys in the event of the insolvency of the head contractor or from funds being used for other purposes,
- faster payment processes, and
- increased transparency and accountability in the payment process.
Agencies can utilise the PBA model trust deed and a modified standard government construction contract GC21 (edition 2), which includes all necessary references to obligations relating to the trust deed and PBA.
Where an agency decides to require the use of a PBA on a construction project it should ensure that:
- an appropriate level of industry engagement is undertaken to explain the purpose and operation of PBAs prior to tendering the project
- the head contractor engaged under a construction contract establishes a bank account that has trust status for all payments made by the principal (the PBA)
- a trust deed setting out the obligations of the parties relating to the PBA is executed with the head contractor named as the trustee
- all relevant subcontractors and suppliers engaged by the head contractor are named as beneficiaries under the trust deed.
NSW Government trial
In response to the recommendations of the Report of the Independent Inquiry into Insolvency in the NSW Construction Industry, in April 2013 the NSW Government committed to a PBA trial on selected NSW Government construction projects.
NSW PBA trial is now complete
The Procurement Board trialled the use of PBAs on ten construction projects from November 2013 to December 2015 under Board Direction 2013-02. In July 2015 it published an interim report which confirmed that PBAs were an option to use where an agency considered it supported the delivery of the project.
The trial is now complete and the NSW policy position is for the use of PBAs to continue on a case by case decision for agencies to determine.
Please view the fact sheets below for more information: