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Doing business in education: A contractual overview

BSF offers a Local Education Authority a partnering framework with the private sector, under which individual schemes use either PFI or traditional procurement.

Under the latter, design and build / facilities management contracts are let directly by the LEA to an special purpose vehicle (the local education partnership), which then subcontracts to its supply chain.

Where PFI is used, a further SPV (with the LEP as shareholder) will enter into both the project agreement with the LEA and separate “pass-down” subcontracts for construction and FM.

Extensive standard forms have been developed by PfS to expedite procurement. With the advent of competitive dialogue, only genuinely project-specific amendments, or those that demonstrate value for money, are permitted (and considerable time and effort can be required to get PfS approval).

While subcontract documentation is not itself subject to PfS standardisation, the flow-down of risk required by funders and sponsors has a similar effect. Construction risks include:

  • A narrow scope for additional cost or extensions of time, in line with standard PFI.
  • Failure to complete as planned may delay handover until the next school term (which can substantially increase liquidated damages).
  • In non-PFI schemes, completion requires ICT infrastructure to be not only installed (by the design and build contractor) but also ready for use (which needs ICT contractor input), leading to complicated interface arrangements and liabilities.
  • Current funding uncertainty has created corresponding uncertainty in required security packages (with requests for on-demand bonds in certain cases).

Robert Meakin, Partner, Shadbolt LLP


Striking up a good relationship with local authority partners is vital in winning and delivering contracts under the BSF programme. So says Carillion – a firm currently helping deliver projects in Nottingham, Tameside, South Tyneside and Gateshead.

The company is also in the race for six more around the country. The firm’s director of education Robert Holt says local authority partners do pose challenges “because they are working with you for the next 10 years”. “They have been clear about their expectations and clear about how they wanted to work with us throughout the process,” he says.

For Mr Holt, council views on issues like the Children’s Plan - the government initiative to coordinate schools and community resources such as health centres to improve children’s lives – was crucial to which contracts it targeted.

“We tried to ensure that their values matched ours and that they were genuinely looking to transform education within their areas,” he says. He said the authorities challenged Carillion in terms of expectations particularly in areas such as design, the sub-contractors and suppliers the firm brought in as well and particularly its Information Communications Technology partner.

The firm’s ability to design secure, flexible and welcoming learning spaces has also been vital.  For example its contract with South Tyneside Council for several schools features a design for St Wilfrid’s – a school that specialises in Maths and ICT - that allows the wider community access to its ICT equipment.

But the design includes measures to segregate areas to ensure valuable ICT equipment, such as computers, are not stolen. Mr Holt adds: “To be honest, most of the authorities that we work with don’t see this as a building programme – they see it as an educational transformation to raise education attainment and aspiration.”

Top tips for companies looking to win work with main contractors:

  • Attend main contractor’s open day events with subcontractors and suppliers.
  • Understand the Local Education Partnership’s (the body that runs the project) criteria to be part of the supply chain. This includes areas such as use of local materials, workforce and apprentices.
  • A demonstrable understanding of the need to hit schedules to avoid disrupting school term times.
  • A commitment to sustainability issues where the design of the school includes measures such as solar power and rainwater harvesting that could support learning within the National Curriculum.