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Department of Finance
May 2017
Project Bank Accounts (PBAs)
Building Management and Works
Agenda
What are PBAs
Tender process
Contract award
Payment process
Other information
2
Building Management and Works
Project Bank Accounts:
An Overview
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Building Management and Works
A PBA is…
A project specific bank account set up by the head contractor
An account operated consistent with the trust agreement
A step in the payment process, not a pre-funded bank account
4
Building Management and Works
PBAs will…
Speed up the payment process for the next tier in the supply chain
Provide a degree of insolvency protection
Increase transparency and accountability in the payment process
5
Building Management and Works
PBAs don’t…
Alter the contractual rights and responsibilities of contractors to:
o select subcontractors and manage their performance
o withhold payments when obligations are not satisfied
o seek adjudication or commence legal action when in dispute (also applies to subcontractors)
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Building Management and Works
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
Consists of two sub-accounts
One PBA per contract
General account must have a zero balance at close of business
Must not have an overdraft facility
Fees, charges and accrued interest must be
directed to a non-PBA account8
PBA
General Sub-Account
Retention Sub-Account
Building Management and Works
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 Account
Retention Account
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Building Management and Works
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
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unjoined suppliers and subcontractors are paid as normal
Building Management and Works
2. Head Contractor Submits Payment Claim to 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
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Building Management and Works
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
Within 14 days of payment claim
being received
Super’s Rep
BMW
BANK (PBA provider)
General Sub-Account
RetentionSub-Account
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Building Management and Works
4. Head Contractor submits Progress Payment Instruction and a
modified Statutory Declaration and Payment Report to BMW
Subcontractor #1
Subcontractor #2
Subcontractor #3
Subcontractor #4
Supplier #1
Head Contractor
Within 19 days of payment claim being
received
Super’s Rep
BMW
BANK (PBA provider)
General Sub-Account
RetentionSub-Account
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informs subcontractors of the amount they will be paid
Building Management and Works
BANK (PBA provider)
5. BMW Deposits Payment into General Project Bank Account –
Unless there are Anomalies with the Statutory Declaration
Subcontractor #1
Subcontractor #2
Subcontractor #3
Subcontractor #4
Supplier #1
Head Contractor
Super’s Rep
BMW
General Sub-Account
RetentionSub-Account
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Building Management and Works
BANK (PBA provider)
General Sub-Account
RetentionSub-Account
6. Bank (Simultaneously) Pays Head Contractor, Subcontractors,
and Retention Account as Specified in Payment Instruction
Subcontractor #1
Subcontractor #2
Subcontractor #3
Subcontractor #4
Supplier #1
Head Contractor
Within 28 days of payment claim
being received
Super’s Rep
BMW
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Commonwealth Bank of Australia
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PBA structure should not affect:
o general security agreement
o charge over receivables
o floating charge
Structure does not impact security over funds due to the
contractor
Speak with your financial institution to discuss potential
impact on management of working capital
Building Management and Works
Tender process
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PBAs will apply…
Majority of contruction contracts where the contract value is expected to be between $1.5 and $100 million (inc. GST)
Subcontractors are being used on the contract
Principal may elect to apply a PBA to contracts outside this price range
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PBA Tender Documentation
PBA contract
BMW PBA preliminaries
PBAcontract
amendments PBA pack
PBA Trust Deed
PBA 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
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PBA Agreement
Outlines duties and obligations of the bank
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 administering PBAs where the tender price submitted is more than $1.5 million
o if tendered price is less than $1.5 million, no need to build in these costs
Must inform subcontractors the contract will use a PBA
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Building Management and Works
Contract Award
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How a PBA is set up
Within 10 business days of Trust Deed being signed
Test payment of $1 made through PBA to contractor.
Within 28 calendar days of award
Trust Deed executed by contractor and BMW
PBA Agreement signed by contractor, BMW & Bank
Deed of Release or Priority Deed provided
Contract Award (Day 0)
Letter of award sent to contractor
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Contract Award
Documentation for the contractor at initiation
BMW Project Manager should provide the contractor with:
o electronic copy of the PBA pack
o a bank information pack
o PBA Guideline for Contractors
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PBA Establishment
Account creation must start immediately
Subcontractor contracts will need to be updated to include
PBAs
By week 3, the contractor should provide the completed
documents to authorised signatories for signing
BMW will be the last to sign and date all documents
Contractor should provide subcontractors with a copy of the
Trust Deed
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Building Management and Works
Test Payment
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Activating the Accounts
Within 10 days of Trust Deed being signed
Test payment of $1 made through PBA to contractor.
Within 28 days of award
Trust Deed executed by contractor and BMW
PBA Agreement signed by contractor, BMW & Bank
Deed of Release or Priority Deed provided
Contract Award (Day 0)
Letter of award sent to contractor
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Activating the Accounts
A $1 test payment must be made to the contractor within 10
business days of the Trust Deed being executed
The test payment:
o establishes the trust
o tests the payment process
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Test Payment Process
PM checks the payment instruction to make sure the details are correct
Contractor creates payment instruction in CommBiz for $1
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Test Payment Process
Bank disburses funds as per payment instruction
BMW makes payment into the account on the date for payment
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Building Management and Works
Monthly Payment Process
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Current Progress Payments
Contractorsubmits
payment claim
SR issues payment
certificate
BMW pays contractor
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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
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Payment Instruction
Payment Report
Statutory Declaration
Progress Payment Instructions (PPI)
Instructs the bank how and when to disburse funds
Can submit a single instruction (for all payments)
Or
Up to three instructions – one for each payment type
Total amount to be paid must equal the amount certified
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PBA Payment Report
Explains why an amount that was certified to be paid is not
reflected in the payment instruction
Details include:
o amounts paid outside the monthly payment process
o total paid in retention to date
o outstanding disputes
o any rights of set off
o amounts the subcontractor failed to claim
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PBA Statutory Declaration (subcontractors)
Along with the PPI, the contractor must supply a declaration
that as at the date of the PPI:
o the PPI is true and accurate
o no unjoined subcontractors
o the contractor has no outstanding liabilities
o there have been no changes to existing or new security interests.
o Payment Report is accurate
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The monthly payment process
Day 28Day 14 Day 19 Day 22
Within 14 calendar daysSR certifies payment
Within 19 calendar daysHC submits payment
documents
Within 28 calendar daysBMW reviews and pays
Payment claim received
Day 0
HC advises subcontractors
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Other payments
Payments may occur through the PBA but outside the monthly payment cycle:
o payment to subcontractor and retention sub-account
o release of subcontractor retention
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Building Management and Works
For more information on PBAs, check out our videos
available at
www.finance.wa.gov.au/cms/pbavideos/
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