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Academies framework may squeeze subcontractors' margins

Subcontractors have been warned that the £4 billion academies framework may deliver work on extremely tight margins.

Contractors fighting for places on the ‘super-framework’ said they were coming under increasing pressure to keep costs down on academies projects.

Delivery body Partnerships for Schools last week shortlisted 22 firms for two regional academies frameworks that will be operational by the end of this year. It will be a mechanism for local authorities to procure educational buildings before they enter the Building Schools for the Future scheme.

With double the budget of the existing academies framework, and a much broader scope, contractors have seen the new framework as a shining light during dark times.

But at the New National Academies conference in Westminster last week, contractors warned that problems were emerging with the delivery of schools.

Carillion director of new projects, BSF and academies, Karen Davenport said: “There is a real tension between the budget and the expectations of the design. We keep hearing that excellent design does not need to cost money, but [it’s not always clear how].”

She added: “We are being asked to try to negotiate prices down due to the recession. Everything has changed with the recession.”

PfS has shortlisted 14 contractors for both regions, with each shortlist made up to 18 by four firms solely in the running for that region. A maximum of 12 will make each framework, with a significant number expected to be on both, and a number expected to miss out entirely. 

Contractors were understood to be picking up tender documents this week, with the competitive process focusing on the pricing of four sample jobs, legal aspects and further questioning.

Bidders said they expected to be pushed for what they could deliver within strict budgets, meaning margins for subcontractors are likely to be tight. The Government has put pressure on all departments to cut their spending after revealing huge levels of debt in April’s Budget.

Academies Policy Unit team leader at the Department for Children, Schools and Families Dustan Hadley said: “We want both individual academies that are all about what they are doing, and also value for money.”