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Benefits of a project bank account

August 2016 - Issue 84

Project Bank Accounts have made another appearance in recent legal updates and so we though a brief summary of the same might prove useful for our readership too!

Project Bank Accounts (PBAs) are ring-fenced bank accounts which act as a channel for which payments are made directly and simultaneously by a client to members of the supply chain to ensure they are paid on the contractually agreed dates.

Those lower down the supply chain on a large construction contract may find benefits in a project bank account including certainty, security and speed of payment, cash flow management, protection from insolvency and cost saving.

The Government has more recently provided PBAs to be used on central government construction contracts “where specified by the client”. Many banks are prepared to offer these and contracts provide for the use of PBAs including JCT contracts, PPC 2000 and NEC3.

PBAs have been successfully used by several major public sector employers including the Ministry of Defence and the Highways Agency. Although PBAs are not currently used by the private sector, it is predicted that it might become just as widespread in the private sector in the near future so they are certainly something of which to be aware. Do get in touch if you need to know more.

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