The landmark decision leads a new era in the use of the fair payment system on all Government spending programmes.

Project bank accounts will come into force from 2013 when work starts using the Next Generation Estate Contracts.

The system to pay subcontractors, main contractors and the rest of the supply chain directly has been successfully trialled on the redevelopment of RAF Wyton, the Midlands Medical Accommodation project in Lichfield.

Last November the Government said project bank accounts would be a requirement on main department funded construction projects and it is pressing other public bodies to do the same.

DE expects to spend around £500m a year with its incoming prime contractors for housing, training estate, and regional facilities management, and with lead contractors on individual construction projects, under the new regional and national capital works frameworks.

Diane Rampling, DE Head of Commercial policy, said: “Defence Estates’ top priority is to support our Armed Forces. We must also deliver value for money and fair payment makes a proven contribution towards this goal by helping to minimise finance charges.”

“Our recent project bank account experience has shown clearly the benefits for main contractors, supply chains, and the MOD.

“Using these accounts prevents late or delayed payment and provides greater certainty on payment in the supply chain.”

Mark Grant, head of NGEC Contract Development, added:  “It is vital to the efficiency of our future commercial arrangements that all suppliers, irrespective of size or specialisation, are confident of being paid promptly.

“Project bank accounts will promote a culture of collaboration and trust across our industry partners.”