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School spending faces legal hurdles

Partnerships set up by contractors and councils specifically to build schools could face obstacles to winning work under the government’s centrally procured £2 billion programme.

The details of the government’s Priority School Building Programme are yet to be decided, but the preference for central control of procurement would be at odds with the exclusivity granted to contractors under local education partnerships formed during Building Schools for the Future’s existence.

Lawyers have highlighted the incompatibility of LEPs and a central procurement body as a legal sticking point that the government, which announced the privately financed building programme on 19 July, has not addressed so far.

Partner at law firm Dundas & Wilson William Simmons said the government had not accounted for exclusive LEP arrangements. “One of the things, as far as I can see, that is not covered is how you deal with the partnering agreement between a LEP and the local authority, which gives the LEP 10 year exclusivity [on building schools] procured by the authority in the local area.

“Using existing LEPs doesn’t easily fit with the government’s drive for a smaller, more efficient programme, but unwinding them is going to be difficult,” said Mr Simmons.

Senior associate at Nabarro Janet Lewis agreed that it would be difficult for existing LEPs to fit in with a centralised model.

“For local authorities having given exclusivity to a particular contractor it’s going to be hard [to access funding],” she said.

“Because the government has come out with an announcement that it will be PFI and batched projects that does narrow down the type of contractor [able to do the job]. It will just be the big players.”

The top 10 LEPs have created a pipeline of about £8bn in work, but contractors investing in them may now be at no greater advantage than those outside the partnerships if government moves to central procurement.

One Whitehall source told CN: “It’s not yet determined but procurement is very likely to be highly centralised and there just isn’t any clarity yet beyond what has been publicly said.”

The source said that while some of the LEP deals only granted contractors exclusivity for jobs over a certain value threshold, the majority of the priority programme would be new-build and therefore above that threshold.

The government is consulting on the full response to the James Review but it is understood that, given constraints on public spending, it is unlikely to announce any further school building programmes before 2014.

A Frequently Asked Questions document published by Partnerships for Schools about the priority programme last week stated that “procurement will be handled centrally” and that individual school projects would be batched.

Several contractors told CN that while they needed more clarity, a shift to central procurement would affect all those working in the sector.

A senior figure at one contractor said that LEPs with exclusive arrangements may experience difficulties with central procurement

Other LEPs - established after education secretary Michael Gove announced the scrapping of BSF last year - did not have exclusivity, he said.

“[They] may be left disappointed but wouldn’t have been able to claim exclusive rights to work.

“A centralised procurement model will cause problems with local authorities’ autonomy but we would hope that they could put in a good word for us,” he said.

Another contractor source said: “Central procurement does not seem like the recipe for speed. It’s the biggest problem they have got and I understand it’s the most contentious issue.”

The source added that without potential legal problems, LEPs would be best geared up to take on the proposed privately financed model as well as the fast response government is looking for.

“They have the teams, the financiers and they are geared up around PFI. For them to turn around a response they are probably in a prime position.”

Ms Lewis said that, despite potential problems with gaining funding, the scheme would prove extremely popular. “Every single local authority I know is considering applying because it’s the only game in town.”

A Department for Education spokesman said he did not have anything to add to the published consultation documents.


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