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The great classroom experiment
Supply Management – 27 May 2004

The government has launched a radical procurement model to rebuild and renovate all of England's secondary schools. Mark Smulian reports

It promises to be the biggest school building programme since the 1960s. In the next 15 years, every secondary school in England will be rebuilt or renovated. Thousands of schools, millions of children, and billions of pounds will be involved.

Prime minister Tony Blair hailed "Building Schools for the Future" (BSF) as a "massive investment in our nation's future". It will be, he said, "the greatest school renewal programme in British history".

That's the good news. The more worrying news is that the procurement process devised to deliver it is so complex that even some of those who will be running it are unsure how it will work. The project's timetable, how it will be funded, how it will be accountable to the public who will pay for it, and whether the private sector can cope are all key questions raised by those who will be expected to make the project happen.

The project is certain to be at the heart of Labour's longer-term electoral prospects, and marks a new milestone in thinking about the procurement of public assets.

At the moment, schools in England are largely the responsibility of education authorities. These are, in effect, the education departments of local authorities. Under the new reforms, there will be a new organisation in each local authority area - the "local education partnership" (LEP).

Each LEP will be led by a private-sector project manager, that will have an 80 per cent shareholding.

Partnership for Schools, (PfS), the quango in charge of the programme, will hold 10 per cent, as will the relevant local council. LEPs will run for 10-or-so years and be responsible for rebuilding or refurbishing schools as the council decides.

Rebuilt schools will operate in a similar way to the private finance initiative (PFI). The partnership will build the school, maintain it and operate the building until its contract with the council ends. But when schools are refurbished, conventional funding will normally be used.

This means that while the LEP will be responsible for ensuring the school is maintained, the money to make this happen must come from the resources of the council.

How exactly this will happen is one of several unanswered questions that worry the people who must make BSF work. In the past, cash-strapped councils have not had the money to maintain schools, so they have steadily got worse. But it is still not certain how an LEP would be able to secure enough money from a council to maintain refurbished schools.

"The financial and contractual arrangements to do this are just not clear yet," says Martin Lipson, director of schools and leisure at local government partnerships agency 4Ps, one of the key organisations involved.

"Complexity and intelligibility of the different routes and models are the big issues," he says.

"There is also concern among local authorities about whether the model allows them to maintain accountability to their voters - do they have proper control over a project for that?"

Issues of timing, influence, practicality and, as Lipton says, accountability abound, but all concerned can see an unprecedented opportunity. The rationale of the LEP model is that all three partners will have their "economic interest aligned to a single corporate objective - successful delivery of the local investment programme", according to PfS.

LEPs are intended to create a procurement framework to ensure the money spent creates schools of lasting value. They will have exclusive rights to the work involved, which is proving appealing to the private sector.

But it will not be a matter of a private-sector company bidding on its own account. In what is probably the most innovative and challenging aspect of the project, firms that want to lead LEPs will be required to assemble a complete supply chain in advance and bid with this in tow. The chain will have to include specialists in IT, construction, facilities management and possibly education, although most councils will prefer to provide the latter themselves.

"There is a lot of talking going on and alliances being built for BSF," says Graham Kean, director of property and housing at Mouchel Parkman, one of the consultancies likely to be vying for a lead role in LEPs.

When it comes to building new schools, PfS has a set of "exemplar designs" available to keep costs down and avoid reinventing the wheel. These are generic school types that have been approved by the government, and LEPs will be encouraged but not obliged to use them.

The programme will be delivered in "waves", the first of which, where work will start in the next few months, has already been announced. Authorities have been allocated to their wave on the basis of poor GCSE results and take-up of free school meals, both indicators of poverty among pupils.

Ironically, perhaps, that means a council may find itself in an early wave even though its school buildings are in relatively good condition. Councils will develop strategic business cases for their secondary school estates and decide how and when investment should be made, and will then go to tender with a more detailed outline business case to seek a company that will form an LEP.

The schools initiative heralds a departure from the traditional local authority model established in the political consensus after the second world war. In this, school buildings and maintenance in the public sector was solely in the hands of local education authorities, funded by a combination of government grant and the council's own resources.

Under PFI, which became the standard model in the 1990s, private companies became partners in the building of schools alongside other public buildings including hospitals and prisons. According to the supporters of BSF, it aims to foster the long-term commitment of all parties to ensuring schools are fit for their purpose.

The last time anyone attempted a massive schools building programme was in the 1960s and 70s when schools were built using innovative construction methods. Many have failed the test of time, rather like the era's tower blocks, leaving councils with massive maintenance bills that they cannot meet.

BSF has at its heart a determination to avoid a repetition of this fiasco by locking in councils, project managers, contractors and facilities managers from the start.

One of the people who must make sense of BSF is Martin Lipson.

He is unsure whether it is yet in a form that will deliver the goods. He is grappling with responses to PfS's notably brief consultation on its 400-page document on the intricacies of the LEP model.

PfS has published its "frequently asked questions", of which it has so far found 41. Some of them refer to information that is yet to be published.

Among the private-sector responses, complexity and costs were the main issues flagged. Lipson says: "The private sector liked the idea of the degree of exclusivity offered by the LEP model, but on the public-sector side that same exclusivity causes concern."

Although explanatory documents due over the next few months may clarify matters, Lipson says BSF has "a very complex procurement process and some people will feel it is not easily understandable, which is a bad thing in principle".

While he thinks the aim of BSF is "splendid", he wonders whether it will deliver schools any faster than earlier procurement models did.

Procurement specialists in education authorities see an unrivalled opportunity to improve their schools, but the harder they look, the more loose ends and unanswered questions present themselves.

Christine Bragg, client services manager for procurement at Essex County Council, is yet to be formally told which wave of schools Essex will be in, but she suspects it will be the second or third wave, starting in 2006-07 or the following year.

Notification was expected this spring but this has slipped to the autumn, creating uncertainty in the county's planning.

Bragg says: "We have a lot of experience in PFI so this is not the daunting process I imagine others would find it. But we are still seeking clarity. It is not just a case of which wave but of how many LEPs we will have; it could be anything from one to five."

Essex has 80 secondary schools and 20 specialist schools, and its programme will be worth 750 million-1 billion over a decade. It put forward a proposal for four geographical LEPs and a further one for the specialist schools.

One concern for all councils is what their 10 per cent shareholding will prove to be 10 per cent of, and indeed whether all councils can find the money to make such an investment in the first place.

Gordon Powell, Essex's senior development manager for public-private partnerships, says: "We would prefer one LEP because we would not want to have to meet four or five sets of procurement costs.

"Our councillors would want to be convinced that investing in the LEP model offers good value, given that BSF is always going to be at risk from future public spending decisions."

It is possible to choose a non-LEP route if a council can convince PfS that this offers comparable value for money, but what would be acceptable and how this would be judged remain among the numerous unanswered questions. This is because of the uncertainty around the future maintenance and operating costs of schools.

"It is not quite clear where finance would come from and it could put a significant financial risk onto the local authority for the maintenance and operation elements," says Powell. "The costs are unknown."

Lipson explains the problem that councils face. "Refurbishment will probably be dealt with through conventional construction funding, and there is a risk that local authorities will not have the revenue to support those projects in the long term".

This is what happened with the earlier generation of new schools. Councils simply ran out of money to maintain them adequately, which is why PFI was invented to create a funding stream for projects. With BFS, government grants will be used initially while councils have to dip into their own pockets for running costs.

Powell is also concerned about whether the private sector has the capacity to handle BFS. With a tempting array of other PFI projects around, plus a housing boom and continued investment in infrastructure, will there be enough people to do the building work?

"Capacity is there in the private sector for PFIs of all kinds, not just schools, and it looks at all the opportunities in the market," he says. "It will be interested in pilots and the first wave, but in later waves will the private sector have the capacity to do all of this? If not, would the government make resources available?"

Solihull Metropolitan Borough Council is in the first wave. Liz Welton, head of procurement, would go back in time if she could, as she "would probably have started last year" to meet the target of having the eight schools concerned open for 2006.

"My concern is timescale," she says. "It is very tight. We cannot go ahead until we have been through all the hoops."

Solihull plans to deal with eight of its 80 schools in the first year, and has chosen those in the deprived north of the borough. The rest will follow in later stages.

"With all of the procedures, like planning, to take into account, we are going to have to be innovative to meet the timescale," says Welton.

The LEP structure resembles that chosen for the masterplan to regenerate northern Solihull, but the council's voting share in that is far higher than 10 per cent, and Welton is concerned about how much influence an LEP share will command.

Akshay Kaul, standardisation manager at PfS, thinks concerns about influence and capacity are misplaced, and shareholding is the wrong way to decide how much influence a council will have on its LEP. Councils will enforce their requirements on the LEP in their role as a client, rather than as a shareholder.

Kaul says: "Their influence comes through partnering, not shareholding. The share is there to add value to the process and to tie in the local authority."

The basic model seeks to ensure that "capital investment will be achieved in an effective value-for-money way in a sequence of planned programmes on a single pathway to delivery", he explains.

"We are trying to do this through a planned process of procurement and strategic planning with due diligence to indicate risks, showing these up so they can be priced in."

Kaul hopes this will lead to price certainty because all risks will have been identified and accepted, or subjected to further work. This will eventually lead to everything being priced at the outset.

"The model, to the fullest extent possible seeks price certainty before contracts start, so the public sector fixes its liability," he says.

This should, he says, meet the concerns of councils such as Essex about being hit with unquantifiable costs in future.

PfS has scrutinised the capacity in the building trade, and is cautiously confident that the industry can deliver what schools need without costs rocketing from scarcity of labour or materials.

"Capacity will be stretched but it is there," says Kaul. "Sequential planning should mean the work comes in phases so the industry is not overloaded and there is not too much price inflation. LEPs will monitor regional capacity issues and phase work to respond to capacity."

Mouchel Parkman, like most of its rivals for LEP leadership, was originally a engineering consultancy, but through its PFI work has mutated into part of a generalist breed that so far lacks a generic name. Graham Kean says the main issue will be to ensure that specifications are driven by the needs of the classroom.

This might sound altruistic, but as he explains: "Consultancies have built up a range of skills over recent years in taking the curriculum and converting that into a building brief and learning how that can improve educational performance.

"There is a lot of work to getting the specification right so that the building has a positive impact on educational attainment."

He is another person who fears that BFS is too complex at present, and notes, "the problem with complexity is that it comes with a price tag, and the simpler the process is the better the response of the market will be".

Arriving at a building that helps children to learn is matter of addressing flexible space and accessible IT, as well as producing a design that can anticipate curriculum changes.

BSF is complex and challenging, but as Kean says: "The main thing is that it is fantastic opportunity to do something to improve children's life chances."

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