Cabinet Office withdraws project bank account guidance

The Cabinet Office has withdrawn its official guidance on project bank accounts (PBAs), 13 years after it was first published.

The guidance is still online, but a prominent note has been added by the department, saying that it is “now out of date” and that “a replacement is being prepared”.

The Cabinet Office developed PBAs in 2012 to protect subcontractors from losing retention money when the main contractors that owe it go under.

PBAs grew in importance following tier-one contractor Carillion’s collapse in 2018, which caused £2bn worth of damage to the supply chain.

The Cabinet Office then institutionalised PBAs in its 2020 Construction Playbook guidance on the procurement and delivery of publicly funded projects.

Construction News asked the Cabinet Office why it had withdrawn the advice on PBAs and when it would publish updated guidance, but had not heard back by the time of publication.

PBAs work by earmarking funds due to subcontractors in separate bank accounts, so that the main contractors cannot access the money.

The government guidance lists several benefits of PBAs, including “effective mitigation to the risk of payment delay and cost associated with it and avoidable supply chain failure”.

PBAs are “intended to allow payment to named suppliers to continue in the event of the insolvency of the contractor”, the guidance added.

Cabinet Office procurement rules say PBAs should be used unless there are “compelling reasons” not to do so.

Iain McIlwee, chief executive of the Finishes and Interiors Sector, said the PBA guidance “clearly does need to be reviewed”.

“The important thing is to understand where and how administrative issues have failed those that should benefit from PBAs,” he added.

“This means having a clear plan for how the PBA should be managed in the event of a failure,” McIlwee said, pointing to Scotland, where all PBAs need more than one trustee so that clients can step in and manage payments into the PBA.

“Hopefully the withdrawal is part of a holistic review of PBAs and the wider digital payment environment.”

Rob Driscoll, director of legal and business at the Electrical Contractors’ Association, said: “We’re confident that [the] Cabinet Office will want to update their previous guidance – along with the Construction Playbook – to evolve into project-wide digitisation of payment and pave the way for modern technology-based solutions that will include digital project wallets.

“Upgraded guidance and a playbook should be ready to go by now in this area so there’s no reason to delay.”

In 2023, CN revealed that government departments were failing to regularly use PBAs on large construction projects, despite the guidance in the Construction Playbook.