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<p>The Building Schools for the Future (BSF) programme is coming to a close, with
the final schemes moving in to construction. The Government's main programme to address
the condition needs of the school estate is the Priority Schools Building Programme
(PSBP) and the majority of work will be procured using the Education Funding Agency's
(EFA) Contractors' Framework, which commenced in November 2013.</p><p>All PSBP procurements
carried out by the EFA through this Framework will require the use of project bank
accounts (PBAs)</p><p>PBAs differ from traditional construction industry payment arrangements
whereby the procuring party under the building contract makes payment to the main
contractor, who in turn makes payment down his supply chain. This can lead to delay
and cashflow problems for small and medium sized businesses, who typically make up
a significant proportion of the supply chain.</p><p>Instead, the procuring party will
make payment into a trust account established specifically for the project. The majority
of members of the supply chain are nominated as beneficiaries of that trust account,
and the building contract requires that payment must be made from the PBA to the supply
chain as soon as possible after the PBA is placed in funds, typically within three
to four working days (although varying slightly depending on the specific banking
arrangements).</p><p>There are a small number of PSBP projects being procured through
a private finance route. For these projects, the project agreement does not deal with
construction payments as no payment is made until the project is operational. Before
that, payments for construction works are made by the single-purpose company (SPC)
set up to carry out the project, to its subcontractors, and then down the contractual
chain. The SPC's solvency is, in its contracts with first-tier subcontractors, protected
by industry-standard provisions with which PBAs are not compatible. We are considering
whether more can be done to encourage prompt payment further down the contractual
chain.</p>
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