National Highways makes project bank accounts automatic for all NEC suppliers

National Highways makes project bank accounts automatic for all NEC suppliers
NEC Users’ Group platinum member National Highways has made NEC option Y(UK)1 on project bank accounts automatically include all tier 2 subcontractors and suppliers on contracts let from January this year. Previously they could choose whether or not to be paid through a project bank account.

According to Lloyd Biddell, head of cost intelligence at National Highways, ‘We have been using project bank accounts for over a decade and they have proven a great benefit to many of our suppliers. The current opt-in process can make the process daunting or confusing for our smallest suppliers, who are often the ones most likely to benefit from them. We are now making it even easier by automatically including them on project bank accounts unless they choose to opt out.’

Payment in 18 days

England’s motorways and major roads manager says around 80% of tier 2 firms have already signed up to its Y(UK)1 project bank accounts, with over 50 project bank accounts active at any one time. The remaining 20%, typically very small suppliers, will also now be signed up unless they specifically request to opt out. Payments are currently made to tier 2 subcontractors in 18 days on average, well ahead of construction industry norms.

NEC Users’ Group president Rudi Klein say project bank accounts are the most effective mechanism for improving payment security. National Highway's achievement in ensuring 18 days payments to its supply chains is a massive boost for small to medium enterprises currently facing unprecedented cost pressures.

More needs to be done

He says NEC option Y(UK)1 is already widely used in Wales, Scotland and Northern Ireland, where the use of project bank accounts is mandated for projects over £2 million. ‘It is also used in England where the government’s policy is that they must be used unless there are “compelling reasons” not to do so. Unfortunately this policy has not been fully enforced.’

Klein says the government’s business secretary Grant Shapps is currently reviewing payment practices. ‘Most NEC users will already be aware that NEC has been promoting a solution for over 10 years to improving payment practices through the use of the project bank account option. But public sector procurers – the majority of which now use NEC − need to be more insistent on using Y(UK)1. As we all know, enhancing cash flow security enhances the collaborative culture underpinning NEC.’

Retentions and disputes

Klein points out that there are two matters to consider when using project bank accounts. ‘If option X16 on retentions is used, the retention monies can remain in the project bank account until release. Secondly, where monies are disputed, they can be kept in the project bank account until the dispute is resolved. This tends to concentrate minds since neither party has access to the retained or disputed cash.’ 

 

 

 

 

 

 

 

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