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Scottish government reduces project bank account cost threshold

Previous commitment requiring project bank accounts to be used on public works in Scotland valued at over £4.1m will now apply to £2m rated contracts as part of ongoing push for payment reforms

The Scottish Government has announced it has more than halved the threshold for mandatory use of project bank accounts in public works projects to £2m.

The announcement will see the devolved authority pushing through changes to a policy introduced in October 2016. The change comes as the UK Parliament prepares to begin discussing similar payments reforms for construction and building services projects on a national scale.

Holyrood has now committed from March 19 to require public bodies to make use of project bank accounts for any public works contracts that are valued at or above £2m. The threshold was previously £4.1m. The figure is set at £5m for civil engineering projects.

The Scottish branch of the Specialist Engineering Contractors’ (SEC) Group praised the announcement following its own campaigning in the country for such a reduction.

Alan Wilson, national executive officer of SEC Group Scotland, said, “Clearly the Scottish Government has been listening and industry SMEs will be the prime beneficiaries of this lowering of the threshold.”

The organisation also noted that the Scottish Government would also be pressing for a wider uptake of project bank account use across public sector procurement.

UK-wide reforms

It was revealed in January that MP Debbie Abrahams was seeking to introduce potential legislation to the UK parliament that would make it a requirement for central government projects to all use project bank accounts. The proposed changes will be introduced via the Ten-Minute Rule Bill mechanism.

Although a Ten-Minute Rule Bill is not guaranteed to move towards a formal vote unless picked up by a government as policy, Ms Abrahams intervention reflects a growing push to reform payment practices in the public sector and beyond to protect industry from late or lost funds.

The same parliamentary mechanism was also used by MP Peter Aldous in 2018 to introduce a bill that seeks to make it a legal requirement to hold cash retentions in a third-party deposit scheme.

A second reading of the planned retentions bill is set to be heard on March 8 after a series of delays over the course of 2018.

However, with the current political landscape focused strongly on a failure to define how the country should leave the EU at the end of March, concerns remain about parliament’s ability at present to tackle vital industry issues such as payment reform.

Rudi Klein, chief executive of the SEC Group, has warned that efforts to introduce regulatory reform on issues such as project bank accounts – an issue that the association has been campaigning for and working with politicians on – had effectively been side-lined as Westminster remains divided over Brexit.

Mr Klein told RAC Magazine that in this current environment, devolved governments in Scotland and Wales were presently better able to introduce new legislation and regulations in areas such as payment reform that can be followed at a UK level in parliament at a later date.

A range of trade bodies such as BESA have also argued that Brexit was now distracting from vital work to reform the building services and construction sector in areas such as payment reform and standard enforcement.

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