HS2 approves implementation of Project Bank Accounts across Phase One
By approving the use of PBAs, HS2 is restoring confidence in small and medium enterprises amidst drastic economic uncertainty due to COVID-19.
Credit: HS2 Ltd
HS2 Ltd has taken a further step to support companies in its supply chain by approving the use of Project Bank Accounts (PBAs) across key contracts on Phase One, a measure that has been welcomed by the construction sector. The use of PBAs provides greater transparency of payments and offers speedier payments for companies at all levels of the supply chain as payments are made out of one pot and do not have to cascade through multiple tiers of contractors.
Following a successful trial of PBAs on two Enabling Works Contracts, HS2 Ltd is now working with its construction contractors to implement these across existing and future contracts. PBAs have been shown to provide an element of protection against insolvencies upstream in the supply chain. Given that HS2 will generate an estimated 400,000 contracts across its supply chain, and that two-thirds of these will be won by small to medium sized enterprises (SMEs), this is a significant boost of confidence for the sector.
At a time of economic uncertainty as a result of the COVID-19 pandemic, this is a further step HS2 is taking to provide certainty and assurance for companies in, and aligned to, the construction industry. This follows HS2’s announcement in May 2020 that it was implementing faster payments at all levels of the supply chain in response to the pandemic.
Rail Systems Procurement Director at HS2 Ltd, Andy Cross, said: “I am thrilled that we have taken this crucial step to further strengthen our fair payment policies and, in so doing, support companies at all levels of the supply chain through the use of PBAs. HS2 will play a critical role in the recovery of the UK’s economy as we emerge from the pandemic, supporting and creating jobs across the construction industry. This announcement means that companies, big or small, working with us will feel confident and supported as we work together to build Britain’s new low carbon high-speed railway.”
Rudi Klein, CEO of the Specialist Engineering Contractors (SEC) Group, said: “As the lead campaigner for using PBAs, SEC Group applauds the decision of HS2 to use them (alongside other measures, such as the abolition of retentions). In recent years, we have had a dialogue with HS2 on promoting improved payment security for HS2 supply chains. Implementing PBAs now will be a massive boost to construction SMEs that are struggling to make ends meet as we emerge from the current crisis. HS2 will also benefit, since PBAs will encourage more collaborative working and help reduce construction costs. Given HS2’s decision, there’s no longer any excuse for contracting authorities not to use PBAs.”
National Chairman of the Federation of Small Businesses, Mike Cherry, said: “HS2 is a major, multi-million-pound government project, and it’s absolutely crucial that small businesses have the chance to win work and build it. Today’s announcement is an important moment to involve UK small businesses in such a flagship public procurement programme. We have called for the adoption of project bank accounts in major projects as it brings confidence to small firms to bid for work. For many small businesses, the fear of being part of a project where late payments leave them out of pocket is a very real, very harsh reality. PBAs allow them to get involved safe in the knowledge that no matter what happens, they will be paid – and paid on time. It’s good to see HS2 leading by example. We hope to see other major projects following suit.”
Government approval for the next stage of the HS2 project was given in April 2020 and has meant that HS2 contractors now have the go-ahead to start building the new low carbon, high-speed railway. As the Main Works Civils Contractors begin to move into construction and detailed design, a huge amount of new contract opportunities are being made available.