HSBC considers project banking

The Specialist Engineering Contractors’ (SEC) Group is in talks with HSBC about setting up a project bank account model for the whole industry to use.

Although discussions are in the early stages, if successful the groundbreaking move could spell an end to payment abuse throughout the supply chain.

A decision by HSBC is expected in the next few weeks.

CJ understands HSBC is very keen on setting up a project bank account framework, which will work with all members of the project team using one bank account to manage the project – an idea used only once before with success on Defence Estates’ Andover prime contract pilot project.

Last year the Highways Agency mooted the idea of using project bank accounts on future road schemes (CJ 6 July 2005), although progress on this seems to have slowed.

The beauty of the model is that payment is released to members of the project team when milestones have been reached on a contract, thereby avoiding retentions. This would be covered by paying a fee to a bank to manage the relevant payments.

"If successful this will be major news for the industry," said SEC Group executive secretary John Nelson. "A lot has been said about the use of project bank accounts, but nothing has been taken forward. We want to be pro-active with this and make a difference. I think the banks will show a keen interest if HSBC gives it the green light. This will spark a snowballing effect for the rest of the banking community."

He added: "Once we get the framework in place, the whole industry will be able to use it and we hope that government will come to demand its use on all public sector contracts, especially as its use was endorsed by the recent National Audit Office report into procurement.

"Alternatively, if a contractor can go to a client with the project bank account framework already in place, ready to use off the shelf with the support of the banks, it will result in a very strong tender submission. Clients need to know that retentions cost the industry £2bn a year."