construction contract and commercial consultants

A Practical Guide to Project Bank Accounts

Project Bank Accounts, often abbreviated to ‘PBAs’, are ring-fenced accounts whose only purpose is to channel payments, for construction projects, to Contractors and certain Subcontractors and Suppliers. This has the effect of both ensuring payment is made on time to those beneficiaries of the account and ensuring that beneficiaries are protected in the event of the insolvency of their payer.

The PBA is set up either by the Employer or the Contractor, depending on the contractual arrangements, and is either in the single name of the Employer or in joint names of the Employer and Contractor, and held on trust by them for the beneficiaries.

In the event the account is held on trust, participating beneficiaries join the trust by execution of a trust deed.

In operation, the Employer will provide funds to the PBA in advance and based upon a frequently updated cash flow forecast. For each payment period, the Contractor and the Subcontractors/Suppliers that are part of the PBA arrangement, make their applications for payment. The amount due to each of the beneficiaries is assessed by the Employer or his agent and an interim certificate is issued.

As soon as the specified payment date is reached, each beneficiary has access to the PBA and can withdraw its certified sums without having to wait for payment to trickle through the supply chain.

The advantages of this arrangement are clear: payments are made speedily and, at the very least, on time; cash flow is maintained and the beneficiaries’ payment are secure even in the event of insolvency. For Subcontractors, the amount due is assessed by the Employer or his agent rather than the Contractor, which may result in a fairer evaluation.

By better cash flow and more effective payments, it has been estimated that proper implementation of PBAs can save between 1% and 2.5% of construction costs.

It sounds too good to be true…..and it may be, as there are disadvantages.

Only those organisations who are beneficiaries will benefit from the operation of the PBA; guidance produced by the UK government suggests that the benefits of a PBA should extend to at least Tier 3 and at least 80% of the subcontracted works.

In contrast, the current plan of the Queensland government is that PBAs will only be for the benefit of the Contractor and the first layer of Subcontractors.

Accordingly, organisations below those tiers will remain unprotected by the existence of PBAs. For any given project, the further down the supply chain tiers one travels, the greater number of organisations will be at that tier. A single Contractor may engage 30 or so subcontractors; each of those may engage 10-20 subsubcontractors, each of those may engage more subsubsubcontractors. At the bottom, will be the individual gangs of carpenters, bricklayers, electricians etc. It is those that should be protected the most as they are least able to afford to engage lawyers to resolve payment disputes. However, they receive no protection from the PBA.

For any given project, many more organisation in the supply chain will be unprotected than protected.

For those that are protected, payment disputes will still exist. Most disputes between a Subcontractor and a Contractor will be for payment of money that the Contractor is unable to recover from the Employer. Those will fall outside the scope of the PBA and beyond the competency of the Employer’s certifier to assess. Payment of those sums will need to be arranged directly between the Contractor and the Subcontractor as separate to the PBA and which will suffer from the usual underassessment and late payment that the implementation of the PBA is seeking to remedy.

Finally, rightly or wrongly (and probably wrongly), a Contractor will often use its positive cash flow to help fund its business. Removing that facility from a Contractor may, at best, increase its costs and lead to increases in tender prices (and there is evidence that this is the case) or at worse, place it in a precarious financial position, possibly leading to insolvency.

It is the opinion of the author that, whilst they have their uses, PBAs are less effective at resolving payment disputes than they first appear to be. Most effective would be proper, accessible, competent, expeditious and cost-effective dispute resolution procedures.

Any comments regarding the above can be directed to Steven Evans at

This article is for general information purposes only and should not be relied upon in any specific situation without appropriate legal advice. If you require that advice or wish to discuss any of the issues raised in this article, please contact us.