Project bank accounts
December 09, 2019
An independent report was delivered to the government back in March 2019 about how Project Bank Accounts (PBA) were being implemented on the few government jobs that were PBA projects. At that stage 100 PBA projects were in operation and 12 had reached practical completion. The report, titled ‘Building Fairness: An Evaluation of Queensland’s Building Industry Fairness Reforms’ makes 20 recommendations to change the PBA model.
The government has accepted all 20 recommendations of the report. Read full report along with the government’s response to each recommendation.
There were three key themes of the report including:
- Managing the financial transition - to provide the best chance of minimising financial stress as the sector transitions to improved financial viability
- Simplifying the framework - and in doing so improve the balance between the administrative costs to comply and the need for transparency over the movement of project funds
- Improving protections - by expanding the obligation to hold retentions on trust to all parts of the contracting chain and creating new mechanisms to secure funds in dispute to all claimants.
Timeframe for PBA roll-out
The Report recommended and the government accepted that there needs to be a further staged roll-out of PBAs. The following has been provided by government as their intended roll-out:
- Currently: Government work between $1-$10 million
- 1 July 2020: Government building projects above $1 million, including Health and Hospital Services
- 1 July 2021: PBA apply to private sector and local government contractors over $10 million
- 1 January 2022: PBAs apply private sector jobs over $3 million
- 1 July 2022: PBAs apply private sector jobs over $1 million
Note: PBAs will not apply where the contract is for the construction of less than 3 living units (regardless of value). This exemption will cover many HIA members who are only building a single detached dwelling or a duplex.
A number of common-sense recommendations were made and the government has accepted them. For example the definition of ‘building work’ has aligned to that under the QBCC Act, the removal of the disputed funds account from the PBA model and removal of the oversight role of clients/principals (amongst others).
The report also recommend that there be a removal of project-specific retention trust account. Instead a contractor would have to establish one trust account for retention monies for all projects and all retention monies withheld for any PBA project.
Instead of the originally designed three trust accounts for each project there will only be one trust account for each project with the changes recommend by the Panel.
The government will be putting forward legislation to give effect to the recommendations of the panel. HIA will be involved with the Department of Housing and Public Works and other stakeholders regarding the legislation.
Administration cost/data analysed/feedback PBA contractors
The report contains insightful information regarding the cost that has been incurred by the few contractors who have had to operate PBAs to date. Here are some of the key figures that can be found in the report:
- Between 1 March 2018 and 28 February 2019, the Government awarded 100 PBA projects totalling a tender value sum of almost $405 million.
- Of the 100 contracts commenced, 12 had reached practical completion by the end of February 2019.
- 41 unique contractors (to 28 February 2019) have operated PBAs as part of government work.
- Administration costs:
- Contracts Administrator 1 – 1.5 additional days per month dedicated to PBAs + 1 additional day for each set up
- 20-30 additional hours per month, per project
- Estimate 1.2-1.6% of project cost
- Additional 10-14 hours per PBA project administration + 25% accounting FTE weighted heavily to end of month
- 50% increase on accounts administrator work
- One Contract Administrator ($60K) so far 50% dedicated to PBAs, time equating to $100/project/month for bank reconciliations, $900/project/month for reporting, $1,700/project to prepare notices, $600 in time to open accounts for 1 PBA project
- 40-60% more administration (per project) than a non-PBA project
- 15-20 hours per project, per month
- 10% increase work for Contract Administrators
- 1-2 hrs/week per project (estimate a day for every 5 projects)
- $20K-30K for 1 project
- Doubled time for administration across 5 PBAs
- 1 FTE for every 8 projects
- Banking costs
- $900-$1600/monthly increase on interest on overdraft
- $40 month/account plus transaction fees
- $45 month/account x 3 projects
- Number of PBA projects (prediction):
- Approximately 2200 new projects each year valued at over $1 million which would be subject to a PBA. Of those, over 1400, or 63% are valued between $1 million and $3 million.
- Approximately 29% are valued between $3 million and $10 million with the remainder valued at over $10 million.
The above is an indicative (administration) cost of the current model for large builders doing government work with administration staff. Even with a simplified model, as outlined by the recommendations, the administration costs of PBAs are going to be significant.
To keep up to date with these legislative changes please always read your HIA e-news.
Special Joint Taskforce: Investigating subcontractor non-payment in the Queensland building industry
On 28 February 2019, the Queensland Premier announced the establishment of the Special Joint Taskforce (Taskforce), comprising officers from the Queensland Police Service (QPS), Queensland Building and Construction Commission (QBCC) and the Office of the Director of Public Prosecutions (ODPP). Led by the Honourable John Byrne AO RFD, the Taskforce was to investigate complaints of fraudulent behaviour relating to subcontractor non-payment and consider the ability of government and regulators to respond to such behaviour.
There were 10 recommendations were provided to the government on 30 June 2019 and were released on 28 November 2019. The government has accepted all the recommendations. The report is available here. Come recommendations relate to licence application and other minor changes the QBCC Act.
HIA will be working with the Department and other stakeholders regarding the implementation of the report’s recommendations.If you have any questions, please contact a HIA Workplace Adviser via email@example.com