1. Review of capital investment in the education
sector
On Friday 8 April 2011 the Department for Education (the
"DfE") published a report setting out
the findings and recommendations from its comprehensive review of
all capital investment funded by the DfE led by Sebastian James
(the "Review"). The Government is yet to
issue a detailed response.
Whilst the drivers of capital investment remain the same: raise
standards, decrease disadvantage, address building condition and
meet the required school places resulting from an increased birth
rate, the Review's recommendations are made in the backdrop of
the Government's aim to decrease the structural deficit.
2. The recommendations
The Review highlights a need for strategic reform throughout the
current system and encourages a "philosophical shift" by
the DfE away from providing Local Authorities (and other
Responsible Bodies) with funding to procure buildings, towards
providing them with the building itself.
The previous subjective goal of educational transformation is
replaced with a clearer more objective goal of providing buildings
that are fit for purpose and efficient to run. Investment will also
be prioritised on the more objective criteria of the condition of
the local education estate and the need for pupil places, as
opposed to the deprivation of the local area or exam results which
were the criteria applied under the heavily criticised BSF
programme. The aim being that capital investment is directed
towards the educational facilitates most in need more quickly and
efficiently. Effective maintenance, including lifecycle, is another
clear recommendation of the Review to provide a safe and
sustainable school environment.
To drive forwards towards these goals, the Review proposes that
procurement is centrally managed by a "strong, expert,
intelligent client" through a small number of new national
procurement contracts and a centrally standardised design. This
Central Body would have a much wider remit than the current
Partnerships for Schools and would be responsible for procuring all
major capital projects in the education sector.
To aid the prioritisation of investment, the Review suggests that a
central database on the condition of all schools is set up and
proposes that a building condition survey is carried out with 20%
of the school estate being surveyed each year over a rolling five
year period.
3. Is localism encouraged through central
procurement?
The Review asserts that the proposed reform does not conflict
with the Government's localism strategy and acknowledges that
Local Authorities are best placed to prioritise need at a local
level. To give effect to this, each Local Authority would be
allocated a single, flexible capital budget avoiding the need for
multiple funding streams. The Local Authority would then set out a
local investment plan identifying how they would allocate that
budget in order to reconcile local priorities in line with the
available capital budget and national requirements. The Review
suggests that flexibility is retained for groups of Local
Authorities to come together to create a single investment plan
"if this would deliver the most strategic response to
pressures".
This part of the Review seems to be inconsistent with its overall
and clear steer towards a centrally controlled and driven
procurement strategy to provide and maintain facilities that are
fit for purpose. This inconsistency is highlighted in the following
areas:
The Review refers to the Local Authority's capital budget as a
"notional" budget which may only be used to fund the
design and construction of centrally designed schools in accordance
with centrally defined priorities. In fact the Review clearly
places ultimate responsibility for managing the capital budget with
the Central Body stating that the incentive to minimise costs could
"be lost by devolving a set budget for a project to a local
area".
The Review states that the responsibility for using and managing
new and improved facilities would be wholly devolved, but
encourages the DfE to include contracts for routine and small-scale
maintenance as part of the scope of centrally procured frameworks,
which the Local Authority would then call-off locally on an annual
basis.
The Review acknowledges the Government's desire for parents to
have a real choice of schools for their children and refers to a
capital investment programme requiring sufficient flexibility to
allow for providing oversupply where appropriate, as well as
demand-led facilities (including Free Schools). However, the
recommendation of the Review is that funding for new demand-led
policy programmes should be held centrally.
The Review suggests that a simpler approach to procurement will
allow smaller local contractors (including SMEs) to have access to
capital projects work provided they agree to the terms of the
national standardised contract. However, the Review does
acknowledge the concern that only a few larger companies may
dominate the national tender process giving them a competitive
advantage.
The Review acknowledges that small-scale local operators, alongside
leading industry facilities maintenance companies, currently
deliver a range of maintenance and lifecycle services for schools.
But it suggests that this results in Local Authorities failing to
capitalise on economies of scale and other efficiency savings that
could be realised through a more strategic and centralised approach
to the procurement of these services.
The Review proposes that individual bodies could earn the ability
to procure capital projects autonomously if they are able to prove
their delivery capability based on cost, quality and delivery to
time. However, this would only be the case where the Central Body
approved it and the individual body would be required to adopt the
centrally standardised design and procurement process. In the event
of failure the Central Body would have the right to step-in.
4. The BSF legacy
The current BSF and Academies "pipeline" of projects
may also be impacted by the outcome of the Review, with the Review
suggesting that existing pipeline projects be subject to its
recommendations, especially given the review team's perceived
success with its pilot project at Campsmount Technology College in
Doncaster.
Even when the pipeline of projects has been developed, the role of
the 30 Local Education Partnerships (LEPs) in existence remains
unclear. The Review acknowledges that LEPs may have
"exclusivity to deliver substantial secondary school projects
where the funding is received by the relevant Local Authority"
but does not go into any further detail in relation to the scope of
this exclusivity.
5. So, what does this mean for the private
sector?
Importantly, the Review acknowledges that "the vast bulk of
schools will require investment" and therefore there is still
likely to be a large scope for private sector involvement in
capital investment projects in the education sector in the
future.
However, capital investment in education is forecast to peak in
2010 to 2011 at £7.6 billion and the Review estimates that up
to 30% cost savings are achievable, which the private sector will
be expected to deliver.
The Review suggests that this cost saving could be supported by the
DfE through: (i) further planned standardisation in the DfE
procurement process, including the rationalisation in the variety
of standardised contracts and the possibility of introducing a
single process for the pre-qualification of all contractors; (ii)
the creation of a standardised design for school buildings which
would be continuously reviewed and improved to improve quality,
establish best practice and reduce the likelihood of delays through
planning; and (iii) clarification on the standardised quality and
responsibilities relating to maintenance of education
facilities.
Even though the Review goes into some detail on the possible
cost-saving methods, there is little reference to the sources of
capital funding for future projects and whether this will include
PFI. There is, however, reference to the many different funding
streams for capital investment that were in place prior to the
spending review period, including BSF, the primary capital
programme and Academies, which the Review refers to as each being
"flawed".
Clearly, changes will not be possible overnight and it will take
time to establish a new central procurement body and process.
Therefore, whilst the Review identifies a new philosophy for the
DfE's capital investment strategy, the detail remains to be
developed and as the scale of the pipeline of future projects will
be determined by the DfE, we await the Government's response to
the Review.
For further details, please click
here to see the Review report.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 13/04/2011.
