The Government this week abandoned the £55 billion Building Schools for the Future programme, leaving hundreds of projects on the scrapheap.
Education Secretary Michael Gove told the House of Commons on Tuesday evening that no more money would be spent on the “massively flawed” programme.
About £7.5bn of capital investment already pledged will be withdrawn, leaving contractors at various stages of the costly bid process without work to pursue.
A future pipeline running to tens of billions of pounds more has been put on ice while a taskforce works out a cheaper way of building schools.
Procurement through the £4bn academies ‘super-framework’ was also put on hold while the review takes place.
The announcement was by far the most significant moment yet in the coalition government’s austerity drive.
A total of 715 schools will no longer be rebuilt or refurbished through BSF, of which nearly 180 schools were projected to be new build, 319 to be remodelled or refurbished, 63 to be ICT-only and 153 had unconfirmed plans.
Twelve academy projects were scrapped, and 115 subjected to the review.
Several contractors that had won lengthy procurement battles will now only get to build the schemes in the phase of contract they had reached financial close on.
Skanska will only get to work on one wave of the £1bn Essex deal; Balfour Beatty probably only the sample schools on the £300m Ealing scheme.
BSF contracts abandoned at shortlist stage include the £325m Coventry scheme, expected to choose between Bam and Laing O’Rourke later this summer.
Wates and Skanska were competing for the £200m Southampton scheme, which has been scrapped.
Mr Gove said: “The BSF scheme has been responsible for about one-third of all this department’s capital spending.
“But throughout its life it has been characterised by massive overspends, tragic delays, botched construction projects and needless bureaucracy.”
He said it could take three years to procure a building firm through BSF.
“Given the massively flawed way in which it was designed and led, BSF failed to meet any of its targets.
“BSF schools cost three times what it costs to procure buildings in the commercial world and twice what it costs to build a school in Ireland.”
Mr Gove also criticised the pace of the programme, delivered by non-departmental body Partnerships for Schools.
“The last Government was supposed to have built 200 wholly new schools by the end of 2008. It had only rebuilt 35 and refurbished 13.”
Since the coalition was elected, contractors had expected BSF cuts. But the decision to freeze so many projects - including several that were nearing preferred bidder stage after two or more years of bidding - was a shock.
Jeremy Eavis, managing director of Apollo Education, said: “It is difficult for the industry, which has relied heavily on BSF for the last few years. Whether it was inefficient or not, it was the only show in town.”
Shadow Secretary Ed Balls said it was a “black day” for the country’s schools.
The review team will be led by former Oxford University vice-chancellor John Hood. It will include Sir John Egan, former chief executive of BAA and Jaguar, and architect of the 1998 Rethinking construction report. Other members include Sebastian James, group operations director of Dixons Store Group; Kevin Grace, Tesco’s director of property services; and Barry Quirk, chief executive of Lewisham Council.
They will look at departmental capital spending to come up with a plan to “drive down costs, get buildings more quickly and have a higher proportion of money going direct to the frontline”.
The review will guide decisions at the comprehensive spending review on 20 October, which will set out spending plans for 2011/12, 2012/13, 2013/14 and 2014/15.
The Department for Education also announced this week that it would cut £1bn from its spending through the End Year Flexibility fund. This will include £169.5m savings from capital budgets.
PfS insisted it remained at the heart of the Government’s schools capital plans. Chief executive Tim Byles said: “The review of schools capital will help ensure that the way in which future spending on school buildings and facilities is delivered matches the new Government’s priorities.
“We look forward to working with Sebastian James and the wider review team alongside the Department for Education to ensure that the future shape of schools capital investment ensures that the schools that need it most get the funding first and that those investments represent excellent value for money to the public purse.”