PBAs and DiPPAs compared

Effective date:

Executive Summary

Digital Parallel Payment Accounts (DIPPAs) offer additional benefits compared with analogue Project Bank Accounts (PBAs), enhancing efficiency, security, and transparency in financial transactions. PBAs have been instrumental in ensuring timely payments and reducing disputes in the construction industry, but DiPPAs take these benefits a step further, all while meeting UK Government requirements for a PBA.

By leveraging technological advances from FinTech and neobanking, DIPPAs provide real-time transaction tracking, reduced processing times, deeper and more accurate data collection, and enhanced fraud protection. Moreover, the flexibility of DIPPAs allows them to work seamlessly alongside traditional PBAs, offering a comprehensive solution that caters to the diverse needs of the construction industry. Saible is the leading provider of DIPPAs.

Introduction

A project bank account (PBA) is a dedicated account for a specific construction or development project. The PBA acts as a central hub where project funds are securely held and distributed in a timely manner.

PBAs originated in the public sector as a tool to address late and non-payment in the construction industry. In 1999, the first project bank account was used on a Ministry of Defence project. Since that time they have been successfully used on a number of high profile major projects, for example Crossrail.

The government has promoted the use of PBAs, and since 2010 it has mandated their use on all government projects. The government’s 2020 Construction Playbook confirms that they should be used “unless there are compelling reasons not to”.

Over time, the concept has been adopted and adapted in various countries globally, with governments recognising the potential of PBAs to enhance financial transparency, mitigate payment risks, speed up payment and foster collaboration among project stakeholders.

Despite their many benefits, PBAs do have shortcomings, and it is still rare to see them used outside the public sector. Chief among the criticisms are that they are complicated, time-consuming to set up, and expensive to operate. Some main contractors perceive them to be an unwarranted constraint on their ability to control the flow of cash to their supply chain. They tend not to cover more than two tiers of the supply chain.

Introducing the DiPPA

The new technology that underpins the FinTech revolution and challenger banks like Monzo and Starling can be used to create updated, digital parallel payment accounts (DiPPAs) that build on the PBA concept, maximising the original benefits, reducing or removing the points of criticism, and bringing additional new benefits.

Separation of payment flows from authorisation flows is key to the power of a DiPPA. Authorisation flows from top to bottom of the supply chain, reflecting the contractual relationships between organisations. This means everyone can use their normal working processes and a full payment audit trail is created. Meanwhile, the project’s payments flow in parallel, directly from the project’s bank account to the final payee. The standardised trust agreement ensures the funds are ring fenced and protected at all times.

Comparison Table

PBA	DiPPA
SLOW TO OPEN Each new account requires new “Know Your Customer” (KYC) and “Know Your Business” (KYB) checks, even if all participants are existing customers of the bank. These can take weeks or months to complete.	INSTANT OPENING Full and complete KYC and KYB checks are completed when a company or person joins the platform. These are then applicable to all future projects, so new DiPPAs can be opened instantly.
COMPLEX Each PBA requires the creation and signature of a new deed of trust, which must be printed, physically signed and witnessed in ink and then counter-signed and witnessed, with copies distributed by post.	SIMPLE The trust agreements are handled at onboarding, so they are automatically in place for every project.
MORE ADMIN A single entity (usually the main contractor, but sometimes the client), has to manage all of the payments on the project, instructing each individually for every tier of the supply chain that is being paid through the PBA.	LESS ADMIN Each tier of the supply chain manages the payments to the tier beneath it. The DiPPA handles the deduction of VAT domestic reverse charge and Construction Industry Scheme taxes and distributes funds accordingly, providing simple remittance statements for finance teams to reconcile.
REVEALED MARGINS Whoever administers the PBA (usually the main contractor) sees every single payment at every tier of the supply chain. This makes it straightforward to work out profit margins for companies at different tiers of the supply chain.	CONTROLLED TRANSPARENCY Companies know how much they are claiming from the tier above them in the supply chain, and how much they are authorising to the tier below them, but not the payments further up or further down the supply chain. This removes the opportunity to calculate other companies’ profit margins.
INCOMPLETE RECORDS PBA statements just show a list of transactions. These must still be separately reconciled to invoices and payment certificates after the event.	COMPLETE AUDIT TRAIL The DiPPA contains and maintains a complete record of who authorised what payment to whom and with what authority, with payment certificates, pay less notices, invoices etc stored alongside the payment information in a single, secure system.
NO BIG PICTURE DATA Each PBA is a separate entity, and they may be with different banks with different statement formats. Bringing together financial data across multiple projects is challenging and time consuming.	AGGREGATED DATA Organisations using DiPPAs can easily aggregate data across all of a company’s projects, making the overall position easy to see (including retentions), progress on each project, and making it easy to drill down to the detail if necessary.
PARTIAL COVERAGE Because of the administrative burden, PBAs are rarely used for more than two tiers of the supply chain. This means lower tiers, where insolvencies are most common, do not benefit from the protections and advantages of the PBA, and the project doesn’t benefit from the associated risk and cost reductions.	COMPLETE COVERAGE It is a condition of payment for each company that its suppliers must also be onboarded to the DiPPA. The simplicity of setting up a profile encourages suppliers to do so.

DiPPAs qualify as PBAs

The Government Construction Board's Fair Payment User Group agreed a set of minimum requirements with which a PBA Product should conform. The table below lists those requirements and confirms how a DiPPA meets them.

Construction Board Requirement for PBA	DiPPA
The account needs to be linked to a Trust Deed so that the money is ring-fenced and can only operate with joint agreement of both parties.	✅ Provided for all accounts and beneficiaries by the DiPPA Trust Deed
The banking service provided should not materially alter the operation of the Trust Deed or the PBA.	✅ No material alteration (except that new accounts are easier and quicker to open).
To be a beneficiary of the PBA the parties must be joined by the Deed of Adherence (Dual Authority) or Joining Deed (Single Authority).	✅ All payees are automatically beneficiaries of the DiPPA Trust Deed
Dual agreement is to be required before the payment is to be made, i.e., the lead contractor / client knows that it can only act when both parties have agreed to the payment and one party can not alter the payment without the agreement of the other party.	✅ Dual agreement is embedded throughout the entire supply chain.
The bank must be informed and acknowledge that a Trust Deed exists and that operation of the payments will be covered by this Deed.	✅ The Trust Deed is standardised across all DiPPAs.
Transactions must be easily available for the client to view from the bank report no more than one day after payment.	✅ ”View Payment Transactions” Permission. Provided as contracted.
The Lead Contractor (Tier 1) is to advise when and how much Tiers 2 and 3 have been paid (Single Authority).	✅ “View Payment Transactions” Permission. Provided as contracted.
All of the contractors and sub contractors signed up to the PBA Trust Deed should be paid at the same time and no later than the times advised in the Fair Payment Guidance published in Procurement Information Note 2/2010 (see Annex E).	✅ This is embedded in the Terms of Use of the DiPPA.
Payments from the PBA should only be able to be made to the contractor and other named supplier beneficiaries.	✅ Payees must be invited to the Project, under the ultimate authority of the Client
No cheque facility is to be made available on the account.	✅ No cheque facility is available on a DiPPA.
No overdraft facility is to be available on the account.	✅ No overdraft facility is available on a DiPPA.
Confirmation is to be obtained from the PBA bank that monies are held in Trust and that they cannot be used to offset any other contractor/supply chain liabilities.	✅ It is not possible to open a DiPPA without its associated Trust Deed.
There is an obligation on the Lead Contractor to inform the client and appropriate members of the supply chain and trustees of any changes to the PBA with respect to alteration to any terms and payment authorisations.	✅ Only the Client can make changes.

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