Representatives from over half of the councils in Scotland recently attended a seminar in Stirling to hear how they can overhaul payment practices in construction procurement. There is a statutory obligation on all public bodies in Scotland with large construction spends to ensure that supply chain firms are paid within 30 days.
On behalf of Scottish Government Colin Judge encouraged the local authority representatives to consider setting up project bank accounts (PBAs). These enable all those delivering construction works to receive their payments directly from one bank account. Payments do not, then, have to pass through the different layers of the supply chain (with the result that many SMEs are waiting over 60 days to get paid). PBAs enable small firms to receive payments regularly with protection from any insolvencies at the top of the supply chain.
Hilary Cameron from Transport Scotland, which piloted one of the first PBAs in Scotland, highlighted that the trial use of a PBA had demonstrated that it was feasible for payment to PBA beneficiaries to take place well within the 30 day statutory payment.
Professor Rudi Klein, from the Specialist Engineering Contractors’ (SEC) Group, said that PBAs were the most effective method for ensuring that all in the supply chain were paid. He added that every SME in Scotland would support those public bodies setting up PBAs.
Ann O’Connell, chair of the Drafting Committee of the Scottish Building Contract Committee (SBCC) explained that SBCC was supportive of PBAs. Standard PBA documentation was available from SBCC.
Scott Culbertson from The Royal Bank of Scotland gave an overview of how RBS is able to support public bodies in setting up PBAs.