project bank accounts - wa · project bank accounts. contract award. how a pba is set up. contract...
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Project Bank Accounts
April 2019
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Agenda
• What are PBAs• Tender process• Contract award• Payment process• Other information
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Project Bank AccountsAn overview
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A PBA is…
• A project specific bank account set up by thehead contractor.
• An account operated consistent with the trustagreement.
• A step in the payment process, not a pre-fundedbank account.
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PBAs can…
• Speed up the payment process for the next tierin the supply chain
• Provide a degree of insolvency protection• Increase transparency and accountability in the
payment process.
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PBAs do not…
• Alter the contractual rights and responsibilities ofcontractors to:− Select subcontractors and manage their performance
− Retain retentions from subcontractors (which are held inthe trust account)
− Withhold payment when obligations are not satisfied
− Seek adjudication or commence legal action when indispute (also applies to subcontractors)
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About PBAs
PBA
General Sub-Account
Retention Sub-Account
Receives and distributes funds
Holds subcontractor retention money as required
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About PBAs
• One PBA per contract
• General account must have a zero balanceat close of business
• Must not have an overdraft facility
• Fees, charges and accrued interest mustbe directed to a non-PBA account.
PBA
General Sub-Account
Retention Sub-Account
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BMW Payment Process – step by step
Subcontractor #1
Subcontractor #2
Subcontractor #3
Subcontractor #4
Supplier #1
Head Contractor
Super’s Rep
BMW
BANK (PBA provider)
General Sub-Account
RetentionSub-Account
Opt-In Supplier #2
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1. Subcontractors Claim Payment from Head Contractor
Subcontractor #1
Subcontractor #2
Subcontractor #3
Subcontractor #4
Supplier #1
Head Contractor
Super’s Rep
BMW
BANK (PBA provider)
General Sub-Account
RetentionSub-Account
Opt-In Supplier #2
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2. Head Contractor Submits the Payment Claim to the Superintendent’s Representative
Subcontractor #1
Subcontractor #2
Subcontractor #3
Subcontractor #4
Supplier #1
Head Contractor
Super’s Rep
BMW
BANK (PBA provider)
General Sub-Account
RetentionSub-Account
Opt-In Supplier #2
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3. Superintendent’s Representative Assesses Claim and Issues Payment Certificate to Head Contractor and BMW
Subcontractor #1
Subcontractor #2
Subcontractor #3
Subcontractor #4
Supplier #1
Head Contractor
Super’s Rep
BMW
BANK (PBA provider)
General Sub-Account
RetentionSub-Account
Opt-In Supplier #2
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4. Head Contractor submits payment instruction, Statutory Declaration and Payment Report to BMW
Subcontractor #1
Subcontractor #2
Subcontractor #3
Subcontractor #4
Supplier #1
Head Contractor
Super’s Rep
BMW
BANK (PBA provider)
General Sub-Account
RetentionSub-Account
Opt-In Supplier #2
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5. BMW Deposits Payment into General Project Bank Account
Subcontractor #1
Subcontractor #2
Subcontractor #3
Subcontractor #4
Supplier #1
Head Contractor
Super’s Rep
BMW
BANK (PBA provider)
General Sub-Account
RetentionSub-Account
Opt-In Supplier #2
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6. Bank (simultaneously) Pays Head Contractor, Subcontractors, and Retention Account as per payment instruction
Subcontractor #1
Subcontractor #2
Subcontractor #3
Subcontractor #4
Supplier #1
Head Contractor
Super’s Rep
BMW
BANK (PBA provider)
General Sub-Account
RetentionSub-Account
Opt-In Supplier #2
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Commonwealth Bank of Australia
• PBA structure should not affect:− General security agreement− Charge over receivables− Floating charge
• Structure does not impact security over funds due tothe contractor
• Speak with your financial institution to discusspotential impact on management working capital.
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Project Bank AccountsTender process
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PBAs apply…
• Construction contracts where the contract valueexceeds $1.5 million (inc. GST)
• Principal may elect to apply a PBA to contractsoutside this price range
• Subcontractors are being used on the contract.
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PBA tender documentation
PBA contract
BMW PBA preliminaries
PBA contract amendments
PBA Pack:PBA Trust DeedPBA Agreement
Deed of Release or Priority Deed
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The PBA Pack
• PBA Trust Deed− Establishes the terms of the trust
− Describes how the trust will operate
• PBA Agreement− Outlines duties and obligations of the bank
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The PBA Pack
• Deed of Release− Creditors agree to release the account and all money in
the account from any security interests they hold
• Priority Deed− Creditors agree that beneficiaries to the PBA trust have
priority should an insolvency event occur
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Tender Process – Contractors requirements
• Tenders must include the costs of administeringPBAs where the submitted price is more than$1.5 million− If the tendered price is less than $1.5 million, no need to
build in these costs
• Must inform subcontractors that the contract willuse a PBA
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Project Bank AccountsContract Award
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How a PBA is set up
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Contract award
• The contractor will be provided with the followingdocuments at contract award:− Electronic copy of the PBA pack
− Bank information pack
− PBA Guideline for Contractors
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PBA establishment
• Account creation must start immediately
• Subcontractor contracts will need to be updated to includePBAs
• Completed documents should be provided to authorisedsignatories for signing by week 3.
• BMW will be the last to sign and date all documents
• Contractor should provide subcontractors with a copy of thePBA Trust Deed.
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Activating the accounts
• A $1 test payment must be made to thecontractor within 10 business days of the TrustDeed being executed.
• The test payment:− Establishes the trust
− Tests the payment process
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Test payment process
Bank disburses funds as per the payment instruction
Finance makes payment into the account on the date for payment listed on the payment instructions
Project manager checks the payment instruction to make sure the details are correct
Contractor creates payment instruction in CommBiz for $1
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Project Bank AccountsPayment Process
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Finance PBA progress payments
Contractor submits payment
claim
SR issues payment certificate
BMW assesses monthly payment
docs
BMW deposits funds to
general sub-account
Bank disburses funds to
contractor, joined subbies and retention
account
Payment InstructionPayment ReportStatutory Declaration
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Progress Payment Instructions (PPI)
• Instructs the bank how and when to disbursefunds
• Total amount to be paid must equal the amountcertified
• Can submit:− a single instruction for all payments
OR− up to three instructions – one for each payment type
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PBA Payment Report
• Explains why an amount that was certified to bepaid is not reflected in the payment instruction.
• Details include:− Amounts paid outside the monthly payment process
− Total paid in retention to date
− Disputes
− Rights set off
− Amounts the subcontractor failed to claim
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PBA Statutory Declaration (subcontractors)
• Along with the PPI and the payment report, thecontractor must supply a declaration that as atthe date of the PPI:− the PPI is true and accurate
− The contractor has no outstanding liabilities
− There have been no changes to existing or new securityinterests
− The Payment Report is accurate.
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The monthly payment process - timeframes
DAY 28DAY 14 DAY 19 DAY 23
Within 14 calendar daysSR certifies payment
Within 19 calendar daysContractor submits payment
documents & advises Subcontractors
Within 28 calendar daysFinance reviews and pays
Payment claim received
DAY 0
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Other payments
• Payments may occur through the PBA butoutside the monthly payment cycle:− Payment to subcontractors
− Payment into the retention sub-account
− Release of subcontractor retention
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Payment InstructionExample
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17 41
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For more information on PBAs, check out our videos available at
www.finance.wa.gov.au/cms/pbavideos/