From 1 July 2019, WA Government Department construction projects with contracts over $1.5 million are required to have a specific bank account to facilitate payments. Before 1 July 2019, the threshold was $1m to $100m. Will 'project bank accounts' also be required in local government projects?

What is a Project Bank Account (PBA)?

A PBA is an alternative payment method for contractors (to that of a traditional invoicing and payment method) where a project-specific bank account is set-up and operated in-line with a trust arrangement. It is not a pre-funded project account, but establishes a trustee/beneficiary relationship between the principal (i.e. the government department or local government) and the contractor, to protect the contractor's right to be paid.

What is a PBA's purpose?

A project bank account has three aims:

  1. Ensure a degree of transparency in the principal / contractor payment process;
  2. Speed up the payment process on both sides;
  3. Provide some insolvency protection and peace of mind in an unpredictable economic market.

When are PBA's applicable?

PBA's are applicable to State Government construction contracts valued in excess of $1.5million (GST inclusive). However, principals may elect to have a PBA applied to projects with values below this where subcontractors are being used.

Some local governments are already adopting PBA's as a matter of contracting best practice; and there are calls (particularly since the Fiocco Report) to make project bank accounts a statutory requirement beyond State government projects.

Do you know what PBAs involve and are you aware of your obligations?

HHG Legal Group has expertise and deep industry knowledge to help you understand:

  • the potential expansion of PBA's to local governments as principals;
  • the sub-contractors' role in administering PBAs;
  • Simple, efficient and cost-effective compliance;
  • preserving potential set-off rights;
  • Techniques to ensure the contract protects local government's interests when a party becomes insolvent; and
  • Rapid adjudication of pay disputes.

Get in touch and we can get you PBA prepared and provide a bit of peace of mind on future government projects.

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.