Welsh Procurement Policy Note (WPPN) 010: Project bank accounts

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• A prosperous Wales
• A resilient Wales
• A globally responsible Wales

• This Welsh Procurement Policy Note (WPPN) is effective from the date of commencement of the Procurement Act 2023 and the Procurement (Wales) Regulations 2024. For procurements started prior to this date (24 February 2025), please refer to WPPN 03/21.
• It has been updated to reflect changes introduced by the Procurement Act 2023 and the Procurement Regulations 2024, such as new terminology. It does not constitute a change in policy.
• Any policy should be read in conjunction with the Wales Procurement Policy Statement, the Procurement Act 2023, the Procurement (Wales) Regulations 2024 and the Social Partnership & Public Procurement (Wales) Act 2023.
• It should not be treated as legal advice and is not intended to be exhaustive – contracting parties should seek their own independent advice as appropriate. Please also note that the law is subject to constant change and advice should be sought in individual cases.
• The note assumes a certain level of knowledge of public procurement. It is available via the Welsh Government website GOV.WALES and any queries should be directed to CommercialPolicy@gov.wales or via the Welsh Governments’ customer services.
• References to the ‘Procurement Act 2023 and the Procurement (Wales) Regulations 2024’ will be expressed herein as “the Procurement Regime”.

1.1 This Welsh Procurement Policy Note (WPPN) encourages use of Project Bank Accounts (PBAs) as a means of addressing poor payment practices in public sector supply chains by facilitating fair and prompt payment.

1.2 The use of PBAs supports the Wellbeing of Future Generation (Wales) Act 2015 wellbeing goals of ‘A Prosperous Wales’, ‘A Healthier Wales’ and a ‘Resilient Wales’ in their positive impact on the economy and mental wellbeing, by ensuring prompt and fair payment terms that relieve cash flow pressures particularly on small and medium sized enterprises (SMEs).

1.3 The WPPN sets out Welsh Government’s Policy on PBAs for Welsh Government departments required to apply PBAs unless there are compelling reasons not to do so and to promote the use of PBAs as best practice to Devolved Welsh Authorities (DWAs).

2.1 The Welsh Government is committed to using procurement as a lever for driving economic, social and environmental benefits and supporting jobs and growth. Public procurement should help promote Wales as a good place for doing business and should provide mechanisms that allow suppliers of all sizes to flourish. PBAs are a mechanism that supports this ethos.

2.2 PBAs represent best practice in ensuring fair and prompt payment in the supply-chain. It is important to ensure cash flow through supply chains to reduce the risk of supply chain failure for Welsh businesses and enable more rapid circulation of money through the economy and local communities.

2.3 Although PBAs have been developed in response to poor supply chain payment practices that persist in the construction industry, they can also be applied in any contract that relies on sub-contractors.

2.4 Welsh Government’s PBA Policy has been informed by the experience of PBA implementation by UK government departments (Highways England), the Northern Ireland Executive and Scottish Government supplemented by a series of pilot projects in Wales between 2015 and 2017.

3.1 SMEs play critical roles in the delivery of public sector projects through sub-contracting arrangements. Access to finance and cash flow are vital to any business and no more so than smaller businesses with limited resources. It is therefore essential that public sector clients ensure fair and prompt payment, not only to our tier 1 contractors but throughout their supply chains when delivering public contracts.

3.2 PBAs are ring-fenced bank accounts with trust status that act solely as a mechanism for making payments. PBAs replace the traditional multi-layered payment terms between subsequent tiers in the supply chain with simultaneous payments to the lead contractor and supply chain partners. Traditional payment methods have resulted in sub-contractors commonly having to manage 60-90 day, or longer payment terms in some instances, whereas payments via a PBA typically take between 3-5 days from the deposit of money into the account following certification of the payment schedule.

3.3 PBAs have the added benefit of streamlining payment processes for clients, contractors and sub-contractors. Sub-contractors further benefit from PBAs as they alleviate the time and cost burden of chasing late payments and dispute resolution proceedings by ensuring timeliness and certainty of payment.

3.4 Under the Procurement Act 2023 there are implied payments terms in public contracts, which also applies to sub-contracts and regulated below-threshold contracts, where any sum to be paid under a public or regulated below-threshold contract by a DWA must be paid within 30 days. DWAs should also be aware that there are some exceptions to this implied term (see sections 68, 73 and 88 of the Procurement Regime. DWAs should consider whether a PBA could be used in the contract to help achieve this 30 day payment term, since the intention of a PBA is to help ensure prompt payment not just to main contractors, but down the supply chain. PBAs may also safeguard DWAs from legal action under the Late Payment of Commercial Debts (Interest) Act 1998 that allows businesses of any size to claim statutory interest on late payment of undisputed invoices within 30 days.

3.5 In addition to providing security and certainty of payment to the supply chain, PBAs can also deliver efficiency savings. A cost benefits analysis undertaken for the Queensland Department of Housing and Public Works (Delloitte 2017) indicated the benefits of introducing PBAs to both the contracting organisation and supply chain, largely through the reduction in and the overheads relating to debt chasing and administration outweighed the costs.

3.6 More stable cash-flow and increased liquidity as a result of shorter payment timescales have the potential to increase productivity and create employment and training opportunities in our supply chains.

4.1 Appropriate contracts / projects will largely depend on the value and duration of the project and the extent to which the contract will be delivered by sub-contractors. As general guidance, the following criteria may be used to identify ‘appropriate contracts / projects’:

1. Any contracts that use a significant sub-contracting supply chain
2. Of over 6 months duration and
3. Valued at over £2 million ‘net’*

* £2 million net value - The primary purpose of a PBA is to safeguard sub-contractors who may be exposed to cash flow risk, hence the focus on the value of the construction element of projects as this is where the main risk to sub-contractors arises.

4.2 Exemptions to the £2 million net threshold

1. Projects valued at less than £2 million net*
2. shorter than 6 months duration
3. Where a main contractor gives a firm undertaking to self-deliver over 75% of the contract.

* £2 million net value - The primary purpose of a PBA is to safeguard sub-contractors who may be exposed to cash flow risk, hence the focus on the value of the construction element of projects as this is where the main risk to sub-contractors arises. Clients may therefore exclude preliminary / design stage costs when assessing whether a project / contract meets the £2 million threshold e.g. VAT, insurance and other costs / overheads that do not affect the supply chain.

4.3 Supply chain coverage

To maximise their impact, it is recommended that 80% of those businesses engaged in the supply chain of appropriate projects be paid through the PBA. It is also recommended in all cases where a PBA is applied that sub-contractors who account for 1% or more of the main contract award value must be invited to join the PBA, and that requests from those who account for less than 1% should be considered by the client and main contractor.

5.1 This WPPN is directly applicable to all Welsh Government construction and infrastructure contracts and any other ‘appropriate contracts’ valued at £2 million or more (see section 4) which are delivered directly on behalf of Welsh Government departments that require a PBA be applied unless there are compelling reasons not to do so. Where such compelling reason are identified a decision report detailing those reasons must be completed and filed to allow for audit.

5.2 Construction and infrastructure projects and any other appropriate contracts valued at £2 million or more (see section 4) which are fully, part or grant funded by Welsh Government that require a PBA be applied unless there are compelling reasons not to do so.

5.3 This WPPN is also recommended to all DWAs as fair payment good practice and should be read in conjunction WPPN 011 and be circulated (for information) within your organisation, particularly drawing it to the attention of those with a commissioning, procurement planning and contract management role or those involved in the delivery of construction and infrastructure projects.

6.1 DWAs are advised to apply PBA policy as fair payment best practice in the delivery of self-funded construction and infrastructure projects where appropriate.

6.2 Where existing contracts or frameworks do not have a PBA option, these should be incorporated into the specification of ‘appropriate’ contracts and frameworks when they are re-tendered.
 

• The Procurement Act 2023
• The Procurement (Wales) Regulations 2024
• Social Partnership & Public Procurement (Wales) Act 2023
• The Well-being of Future Generations (Wales) Act 2015

8.1 This WPPN applies to procurements commenced under the Procurement Regime and is therefore effective from the commencement of the Procurement Act 2023 and the Procurement (Wales) Regulations 2024 until it is superseded or cancelled.

9.1 Use of PBAs supports implementation of the WPPS 2021 (which sets the strategic vision for public sector procurement in Wales), specifically Principle 5. Principle 5 promotes support for ‘…Welsh Government policy objectives relating to progressive procurement, such as the Foundational and Circular Economy, through collaborative, place-based (whether national, regional or local) procurement activity which nurtures resilient local supply chains’.

9.2 PBAs in this context support quick and efficient payment of all sub-contractors within a supply chain, including those who may be local businesses in Wales. Paying local supply chains on time helps these businesses to grow and maintain their business, which in turn supports the local economy with stable jobs and future opportunities for employment.

10.1 WPPN 011 ‘Guidelines for Deploying Welsh Government PBA Policy’ to support implementation of this Policy is available via the Welsh Government’s website Gov.Wales

10.2 The ‘Guidelines for Deploying Welsh Government PBA Policy’ guidance outlines the minimum requirements at Annex 1 for a Project Bank Account, how to implement PBAs, the roles and responsibilities of the organisations involved and sample documents.

10.3 An eLearning module Project Bank Accounts (PBA) is available via the NHS Wales Shared Service Partnership Learning@Wales portal.

10.4 From January 2025, Barclays, Lloyds and NatWest have been appointed as Nominated Service Providers. Contractors using these banks can be assured to receive a high level of support and expertise when setting up their PBAs. Full details of this agreement can be found in WPPN 011 ‘Guidelines for Deploying Welsh Government PBA Policy’.

Enquiries linked to this WPPN should be directed to CommercialPolicy@gov.wales

12.1 Welsh Government is pleased to acknowledge that it has drawn upon the following publications and organisations to supplement its own research to produce this note:

• UK Fair Payment Group
• Scottish Government
• Northern Ireland Executive
• Highways England
• Environment Agency

References

• “A Guide to best Fair Payment practices” The Office of Government Commerce (OGC) 2007
• Project Bank Accounts - Briefing document (Cabinet Office 10 February 2012
• A Guide to the implementation of Project Bank Accounts (PBAs) in construction for government clients. (Cabinet Office 03 July 2012)
• Analysis of security of payment reform for the building and construction industry – addendum report - Queensland Department of Housing and Public Works (Delloitte July 2017)