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FAQs - priority school building programme

12 June 2013

I’ve heard that the Programme has been cut. If so, how many schools are left and what’s the split between public and private funding?

Yes, you heard correctly. On 10 May 2013, the Government announced that around £1bn would be slashed from the privately financed element of the PSBP and that the affected schools, some 146 in total, would now be capital funded, subject to the outcome of the Government’s June Spending Review.

Out of the 261 schools originally included on the prioritised list in May 2012, only 46 schools in five batches will now be delivered using private finance. These schools have a notional capital value of £530m (with a total funding requirement of £700m).

The 215 remaining schools will be delivered using capital grant funding. However, for 137 of these schools, grant funding is subject to the Government’s next Spending Review.

Why has the PSBP taken so long to get going?

Since its announcement in October 2011, the PSBP has been beset by delays due largely to the Government’s review of PFI – the previous mechanism for using private finance in the procurement of public infrastructure. In light of this review, the Government then issued new guidance in relation to a revamped private finance model, PF2. The Government announced 46 schools within five batches using the PF2 process.

There has also been talk of a lack of appetite within the financial markets for providing long term debt to fund this type of social infrastructure.

Whatever the truth is, the plight of the financial markets in recent years certainly hasn’t helped!

Are any new school buildings under way yet?

Yes, construction work actually started at Whitmore Park Primary School, Coventry on 24 May 2013 and on 1 May 2014 the school opened to welcome its pupils into their newly built school.

Contracts for eight capital funded school batches comprising 51 schools have now been placed with construction companies selected from the Contractor’s National Framework, an existing panel of contractors which fulfils the necessary requirements for undertaking such work in terms of their experience, capacity and financial standing.

The existence of the Framework avoids the need for a further lengthy procurement process. Four further capital batches have been launched. The first eight batches involved grant funding of £330m, the next four involve funding of around £212m.

When will procurement of the privately financed batches start?

The first batch of seven schools in Hertfordshire, Luton & Reading (HLR) went out to bidders on 28 May 2013. HLR has a notional capex requirement of £122m.

The Bidders’ Day was held at Kings Langley School, Hertfordshire on 28 May 2013 and was extremely well attended.

A further four batches – North East (£94m), North West (£93m), Yorkshire (£97m) and West Midlands (£122m) are expected to go to the market in the following 12 months.

How long will the procurement take?

The procurement timetable would appear rather lengthy – 68 weeks from issue of OJEU to financial close – but there is a lot to get through.

Following the Government’s review of PFI, the Education Funding Agency (EFA) will be responsible for procuring each batch centrally in order to ensure consistency of approach. The need for central procurement was one of the key messages contained in the outcome of the review. In addition, this approach will also relieve school management teams from the hours and hours they would have spent negotiating these deals under PFI and Building Schools for the Future (BSF) and let them get on with their core purpose of teaching. Schools will still, of course, need to have their say and the EFA will provide for this in the timeline of meetings with bidders and the selected bidder.

When will we see new schools in place?

Whitmore Park Primary School is now an open and running school and the first to open under the PSBP project, with others to follow soon.

How are these privately financed batches going to be funded?

That’s a good question and one that has stymied the EFA and its financial advisors for some time.

However, a solution has now been identified. In view of the difficulties in financing these projects through conventional long-term bank lending (as was predominantly the case with PFI projects), a new approach has been devised whereby the total debt requirement for all five batches has been rolled up into one and finance to cover this requirement will firstly be raised and then lent on to each batch by one central fund known as “The Aggregator”.

The concept of the Aggregator involves a financial institution setting up a fund to raise finance from a variety of sources – short-term commercial debt, long-term capital bonds and from its own resources – and running this fund exclusively to finance the first and subsequent PSBP batches. The rational behind this concept is that by aggregating the debt requirements of each batch and by pooling individual project risks, the Aggregator will be able to secure funds in the debt and capital markets at more competitive rates, hence, providing better value for money for the public purse.

The entity that will be charged with setting up and running the Aggregator will be procured by the EFA using the competitive dialogue approach and is now in place to be used.

What sort of school will we get?

You won’t get the sort of school you would have got under BSF but that is only to be expected. The PSBP is seeking to reduce school building costs by about a third and to limit costs to £1,465 per square metre. The EFA has produced Baseline Designs to assist bidders and guide them in the sort of designs they are expected to produce and has also issued Control Options for each of the schools in the first batch in order to demonstrate how the Baseline Designs can be applied in practice.

Additionally, the EFA has produced facilities and services output specifications as general guidance to fit with the reducation in building costs. Schools under the PSBP are still intended to be entirely functional and to meet the curriculum requirements of each school in every respect.

I’m a Governor. What will I be expected to do?

You will have been working very closely with the EFA legal, commercial and technical teams and will have seen, if not already entered into, a Memorandum of Understanding to indicate your commitment in principle to the project intended for your school and to give you an indication of the likely project risks you will be expected to bear as Governors.

These risks will be flowed down to Governing Bodies through back-to-back agreements with the EFA and are expected to reflect much of the risk allocation set out in the PSBP Project Agreement which the EFA will in turn be entering into with the successful bidders.

Many of these risks are likely to be fairly complex and you would be well advised to take professional advice at the earliest opportunity.

What are the issues for Schools and Governors?

The key issues in relation to the back-to-back agreements which Schools and Governors will need to consider relate to such things are warranting title information to the site, being responsible for interface between soft facilities management services such as cleaning, catering, portering, security etc (which will remain the responsibility of the School) and hard FM (building and exterior maintenance) which will be provided by the PSBP Contractor.

The School will also have to enter into risk sharing arrangements in respect of the consumption of utilities and will need to understand how the payment arrangements under the Project Agreement between the EFA and the Contractor actually work in order to ascertain how the contribution it pays for services is likely to be adjusted over the course of time.

In addition, Schools will be expected to buy new furniture and equipment themselves or take as much “legacy” equipment as they can into the new school building. Since the Contractor will only be providing ICT infrastructure in terms of ducting and cabling, Schools will be responsible for providing the hardware, either new or existing (legacy). Integrating legacy equipment with infrastructure in the new build may well be problematic in some cases.

We applied for PSBP funding a couple of years ago but failed to get it. Will there be another round of applications anytime soon?

Yes, during the PF2 second round of applications.

However, last summer, in order to inform future capital funding decisions, they did introduce a scheme intended to ascertain the building condition needs of the entire remaining school estate – the Property Data Survey Programme (PDSP). If the Survey has not yet been carried out at your school, then you would be well advised to ensure that the surveyor is made fully aware of items of concern so that these are clearly identified in the survey as requiring remedial action.

Local Authorities should still have a limited pot of monies available in certain cases for the most urgent school building needs but that in itself is open to interpretation. In the case of academies, the EFA has for the last few years also invited applications twice yearly for funding from the Academies Capital Maintenance Fund (ACMF) in order to provide funding for academies with urgent building condition or expansion needs.

Details of the ACMF application rounds are contained on the DfE website.

The next election is soon. Will that have any effect on the PSBP?

It is not possible to answer this question categorically, but in terms of the Government’s stated position, it is envisaged that the procurement of the first five privately financed batches will go ahead but the capital funded schools (whose funding is subject to the next Spending Review) will be eagerly awaiting the outcome of that Review which is due to be announced.

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