Schools minister David Miliband's 'Building Schools for the Future' initiative has raised some concerns but the response from most contractors has been encouraging, writes Jon Fletcher
IN 1996 the British Government spent £683 million on school buildings. In 2005, this figure is set to reach £5 billion. Even taking into account the effect of inflation and rising building costs, education is now a massive construction cash cow.
But despite all this extra money, there remains a certain ambivalence about the education sector among contractors and in particular, about the use of the Private Finance Initiative. Contractors cite numerous issues as cause for concern including bid costs, the lack of scope for continuous improvement through long-term relationships and the need to tender for every scheme separately.As one manager said: 'There's a huge amount of waste in the PFI sector.That has to change.'And change it may.
In March 2003 schools minister David Miliband launched 'Building Schools for the Future'.Beneath the grandiose title are equally grand aspirations - to rebuild or refurbish every single one of England's 3,500 secondary schools over a 15-year period. Of the overall £5 billion spending on the schools estate planned for 2005/6, a massive £2.2 billion will be channelled through BSF.
While contractors welcomed the extra spending, what has really caught their attention is the way BSF will be run. Plans being drawn up by Partnerships for Schools, the body that will have overarching responsibility for BSF, bring to mind a hybrid between Procure21, Local Improvement Finance Trusts and traditional forms of procurement.
As NHS Trusts do under LIFT, councils will form partnerships with private consortia for up to 10 years. The equity stakes are likely to be greater for the private sector in these arrangements than in LIFT - a 20:80 split rather than the health sector's 40:60 ratio.
These groupings, known as Local Education Partnerships (LEPs), will have the ability to select the most appropriate form of procurement for a given work stream. David Goldstone, acting chief executive of Partnerships for Schools, explained: 'We are committed to using PFI or conventional procurement to achieve the best value for money, rather than using one or other across the board.We've developed contracts to be delivered through either approach.'
BSF will also build on recent trends that have seen information and communications technologies (ICT) incorporated into schools deals.Mr Goldstone said: 'The third form of contract is for ICT to be installed, managed and maintained alongside the investment in the schools.'
Some contractors, faced with a vision of three contracts in one, have raised concerns about potential confusion. One bid manager said: 'The potential complexity of partnering arrangements will be a sticking point.'
Others believe a degree of complexity is vital if the initiative is to work.
An insider at services group Interserve said: 'We're not that uncomfortable with the different contract models.They are complex, but if you're delivering a £300-400 million scheme, it's worth it.'
The inclusion of ICT also raises questions about the extent of the services that would be contracted out to the private sector under BSF. Initial consultation documents suggested that LEPs would take on some responsibility for educational services. Aside from the potential political mud slinging about privatisation by the back door, this raises major issues for contractors unused to operating in this way.
One source argued: 'The idea that the private sector could walk in and take on all these services straight away is crazy.'The point seems to have been taken on board.The same source added: 'The latest version of the proposals has damped down the emphasis on education services a great deal.'
But he was reluctant to dismiss the idea for the future: 'We need to take things one at a time, but it's an opportunity. LIFT started off as a property development deal but the next wave will involve clinical services.The same could easily happen with BSF - who knows?'
Contractors are also concerned about how well the concept of contract exclusivity will sit with local authorities.One insider said: 'We're not sure where it comes from but there's definitely a reluctance among some local authorities to sign up to exclusive arrangements with private sector partners.Prisons, Procure21, MoD prime contracts - all have exclusive contracts. Local education authorities need to get over their paranoia.'
Mr Goldstone hopes this won't be a problem.He said: 'I am confident about the exclusivity provisions, as they are not 'absolute'.
'The value for money, deliverability and affordability of individual solutions will need to be demonstrated before schemes go ahead.'
This may not comfort firms worried about losing out to competitors despite a successful bid for the overarching BSF contract.
'We've got to lay out clear rules of engagement, ' said one senior source.
'The gateway approval process has to be rigorous to make sure that firms don't come close to financial close for a particular deal and then have the plug pulled so it can go to market.'
An Amec manager added: 'Everyone has this concern.Partnerships UK will do what they can but they can't control the local authorities if they don't want to be controlled.'
At the end of the day, he said, contractors will do as they always have: 'We'll examine each one as it comes out and get to know the client. As with anything, you have to pick and choose.'
The final major question mark is when BSF will finally get off the ground.
David Goldstone said at the beginning of May that four pathfinder schemes would be advertised 'by early summer'Only a month later, things have slipped: 'There are some issues regarding the funding that are still being resolved, but we expect the first schemes to come to the market later this summer.'
Six months ago construction bosses attending a BSF conference were frustrated by the lack of certainty about timing and one contractor said the latest slippage was 'disappointing'But Mr Goldstone shouldn't mistake this disappointment for disillusionment.
Limited concerns aside, most contractors seem very positive about BSF.
They applaud the streamlining of the procurement process through partnering, which should reduce bid costs and allow relationships to develop between client and private sector partners.And they have responded positively to Partnership for Schools'promise to ensure local authorities are equipped with the necessary expertise to manage deals of such complexity and magnitude.
A source from Wates enthused: 'The ability to recycle bid investments is extremely attractive, 'while an Interserve insider was equally encouraging: 'Overall we're very supportive of the process.'And in a moment of effusiveness rare among hardened contractors, one Amec boss gushed: 'It's very exciting the way they're going to structure it.'
Mr Goldstone can rest assured that, if contractors are moaning about the timing, it is simply a reflection of how keen they are to get cracking.
Dorset first to advertise BSF deal
DORSET County Council has caused confusion among contractors by placing the first advert for a Building Schools for the Future deal, despite not having Government approval.
One contractor fumed: 'As far as we know Dorset hasn't even been awarded any credits for BSF. There seems to be a disjoint between what the Department for Education and Skills wants and what the LEAs are doing.'
Partnerships for Schools acting chief executive David Goldstone was unable to shed any light.
He said: 'As you say, Dorset isn't one of the areas that has been prioritised under BSF, so I can't really comment - it's not one that I am familiar with.'
Yet Nick Young, contracts manager with Dorset Council, said local education officials had been in regular discussions with the DfES.
He said: 'We're in discussion with various Government departments and they're keeping an eye on how things go.'
Mr Young said the move follows an unsuccessful bid for funding in the first wave of BSF.
He said: 'We already have a £70 million backlog.We're setting up the framework now and hopefully we'll be successful in the next round.'
The council is asking schools to delegate their budgets to the LEA for distribution through the new partnering agreement and Mr Young said there should be sufficient cash for the deal to be viable even before BSF funding is agreed.
But Mr Young does not expect the Dorset scheme to be as flexible as BSF in terms of contracts.
He said: 'We won't be using PFI forms of contract. This will be a standard NEC partnering framework.'
Despite the differences, he claimed the deal could offer many of the benefits of Building Schools for the Future.
'Once the partners are in place, we can almost do away with tendering - I'm almost doing myself out of a job, ' he said.