Fine Gael Limerick TD, Patrick O’Donovan, has called for a Project Bank Account System to be set up here, to ensure subcontractors are paid the money they are owed. A similar system is already in operation in the North.
Deputy O’Donovan has suggested it could be included as part of the Construction Contracts Bill. He raised the issue in a Parliamentary Question to the Minister for Public Expenditure and Reform, Brendan Howlin TD.
“The issue of subcontractors not getting the money they are owed has been a recurring problem since the construction industry went bust five years ago. Small subcontractors who carry out work as part of a larger project can be left seriously out of pocket if the principal contractor goes out of business and fails to pay up.
“I have called on Minister Howlin to consider setting up a Project Bank Account System, as part of the Construction Contracts Bill, which is currently passing through the Dáil and the Seanad. This would mean that all sub-contractors working on a project would be issued with a certificate for their work and would then be paid from a single ring-fenced account. This would ensure that people get the money they are owed, and it would help stamp out late payments.
“A similar payment system is in place in Northern Ireland. In the UK, Government agencies, such as the Highways Agency, are using the system and the UK Government is aiming to spend £4 billion through Project Bank Accounts by next year.
“The construction industry has undergone significant downsizing over the last few years, with tens of thousands of jobs being lost. For those firms that are still in business, we need to ensure that the industry is fit for purpose, and that sufficient checks and balances are in place.
“While Minister Howlin said Project Bank Accounts have been omitted from the Construction Contracts Bill to cut down on the administrative costs to small businesses, he said the system is being considered by the Government in the context of public works contracts. I am encouraged by this response and I would urge the Minister to seriously consider adopting the system for Government construction contracts.”
DÁIL QUESTION: NO 142
To ask the Minister for Public Expenditure and Reform if he will consider, as part of the Construction Contracts Bill, a Project Bank Account System, which was previously proposed by this Deputy and which has recently been progressed in Northern Ireland to ensure that only payments owing to subcontractors and individuals relating to particular projects can be made from specific bank accounts; and if he will make a statement on the matter.
– Patrick O’Donovan.
* For WRITTEN answer on Wednesday, 20th February, 2013.
Ref No: 9199/13
REPLY
Minister for Public Expenditure and Reform ( Mr Howlin) :
The key objective of the Construction Contracts Bill is to ensure that cash flows down the supply chain on all construction contracts. This is achieved by providing a statutory schedule of payments, prohibiting the use of ‘pay when paid’ clauses in construction contracts and, most importantly, it provides the means for subcontractors to enforce these rights; by suspending their labour and the provision of statutory adjudication. Given these provisions the requirement for security of payment reduces since the exposure of a subcontractor to non-payment is greatly reduced.
A range of security of payment options, including Project Bank Accounts were considered in the initial drafts of the Construction Contracts Bill and provision was made for devices such as bonds as part of the first draft of the Bill that was introduced to the Seanad by Senator Feargal Quinn. However such mechanisms were omitted from the current draft of the Bill in order to reduce the administrative and cost burden to the small businesses that make up a large proportion of our construction industry.
Policy in relation to public works contracts is reviewed on a regular basis by the Government Contracts Committee for Construction and the introduction of Project Bank Accounts is under consideration at present.