On 23 November 2016, the Queensland Government announced a plan
to introduce an array of new measures to ensure security of payment
for subcontractors.1 The plan anticipates that by 1
January 2019, every construction project in Queensland over $1
million will be required to operate a Project Bank Account
(PBA). To get the ball rolling, the Queensland
Government plans to introduce PBA's on all government projects
between $1 million and $10 million from the beginning of 2018.
For participants in the industry, two key questions arise:
what is a PBA?; and
how will PBA's impact my business?
PBA's – What are they?
The Deloitte report, which informed the proposed changes,
describes a PBA as a trust account into which the principal pays
progress payments, with head contractors and subcontractors as
named beneficiaries.2 Essentially, the machinery of
PBA's will operate as follows:
subcontractors submit their payment claims in the usual way to
the head contractor;
head contractors submit payment claims in the usual way to the
principals then verify the claims and make the payment into the
once the bank has received authority from both principals and
head contractors, it will disperse the funds in the PBA such that
subcontractors and head contractors are paid simultaneously.
The crux of the plan is to, ensure subcontractor payments are
secured (i.e. held on trust) in the event of a head contractor
insolvency, and otherwise to remove the need for subcontractor
payments to first pass through the hands of the head
PBA's – the likely impact?
For Principal's, PBA's will likely increase the
administration required for managing construction projects,
particularly by navigating bank requirements for setting up and
Head contractors can expect to see decreased cash flow and a
higher financial risk being placed on them, which may mean
increased demand to provide greater contractual security.
Because subcontractors are likely to benefit most from PBA's
(i.e. improved cash flow and reduced debt recovery costs), they may
see the potential to reduce quote prices.
The Queensland Government also looks set to incorporate other
reforms to BCIPA. The other reforms considered are:
removing a requirement to state that a payment claim is made
under BCIPA; and
extending time frames for adjudication
Significant industry discussion will no doubt take place before
either of these BCIPA reforms progress. Consultation on the
Queensland Government's plans for reform will be open until
April 2017, with more information available through
1 Deloitte, 8 November 2016, "Analysis of
security of payment reform for the building and construction
industry." To access,
2 Queensland Government, 30 November 2016,
"Project bank account to secure payments for
subcontractors." To access,
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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