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BSF approvals see off legal challenge

The threat of legal action from contractors helped convince the government to approve scores of secondary school projects last week, Construction News understands.

In a series of tough negotiations, a body of companies made it clear they were willing to go through the courts to secure compensation for bid costs on scrapped schemes.

Education secretary Michael Gove last week approved all 33 sample schemes under review since the Building Schools for the Future programme was axed, along with 44 projects that were suspended through the academies framework.

One source said: “Conversations were going on in the industry and it was made quite clear to the government how far back their arm would be twisted. Some contractors were quite bullish behind the scenes.”

Another said: “This will calm people as it will allow them to recover much of the costs they have invested. The pressure for compensation will now fall away.”

A government spokesman confirmed that legal advice was a part of the decision: “Most of these sample and academy projects were very close to financial close so clearly legal advice was something we looked at carefully.”

Balfour Beatty benefited the most from the BSF announcement, with nine sample schools rescued across the Derby City, Ealing, Hartlepool and Oldham schemes. At a rough average of £10m to £20m per school, this would be worth up to £180m to the firm.

The contractor is also in with a chance of building three more samples for Hertfordshire, where it was shortlisted against Sir Robert McAlpine. Final bids have been submitted for what was originally £1 billion of work in the county, and the council will continue to evaluate them and chose a winner solely for the three sample projects.

Balfour is also up against Kier for the sample school at Bournemouth.

Bam Construct saw six schools rescued, at Camden and Somerset, thought to be worth about £120m to the contractor.

Willmott Dixon said it had about £130m of work approved when the government pushed through 44 academy projects, won under the previous framework and placed on hold last month.

The Department for Education will work with the sponsors of the other 75 academy schemes under review to slash their costs. They will be given funding allocations at the comprehensive spending review in October.

Stephen Ratcliffe, director at the UK Contractors Group, said: “This announcement will maintain a pipeline of work, with much of it virtually started on site already. It is vital as it will keep teams together.

“We now turn our focus on helping the capital review team come up with a new procurement system that can help everybody.”

The leader of the taskforce charged with finding a system to replace BSF last week called from evidence from contractors.

Sebastian James, group operations director at DSG International, said: “The views we can harvest from this call for evidence will be extremely helpful in shaping the thinking for the future. I hope that we will see a strong response from a wide range of people.”

The Capital Review Team will report to ministers in mid-September, and produce a plan for capital investment over the next spending review period by the end of this year.

The government said it had already begun working with the construction industry to help reduce building costs across the board. A spokesman for the Department for Education said that although full funding had been allocated for all 33 sample schools, the industry would be encouraged to find savings where possible.

  • The call for evidence runs until 17 September 2010 and can be accessed at www.education.gov.uk/consultations