House of Commons - Education and Skills

Select Committee on Education and Skills Seventh Report

2 The planning and procurement process

25. Capital funding for schools is delivered in three ways; through devolved funding for schools to spend how they wish on buildings and ICT; through targeted funding for local authorities which, as the DfES told us, allows "high priority building projects to be progressed which cannot be tackled through formulaic allocations, or await BSF";[21] and through the strategic approach provided by Building Schools for the Future and the primary programme.[22] Approximately 43% of capital spending is devolved funding, 13% targeted and 43% strategic.[23]

26. There are various distinctive elements to the BSF delivery process. One is that authorities are being brought in to the programme in fifteen waves, rather than all at once, and many authorities find themselves in two or more waves (Lancashire is in six).[24] Another is that local authorities are required to look at provision across their areas to make a judgement about what is needed, rather that look at schools individually. A third is that this is not just a building programme, but is intended to be a programme of educational improvement in which the learning and teaching environment plays a key role. Priority has also been given to those areas with greatest educational and social need.[25]

27. Initially there were four phases to the approval process that each local authority had to negotiate:

An Education Vision, setting out strategic plans for the future of education in its area;
A strategic business case, setting out how it will use BSF to achieve its education aims;
Outline business case, with more detailed plans for its initial phase of BSF work, which can then go forward as the authority begins to seek expressions of interest; and
Once the competition has been resolved, and a preferred bidder has been identified, a local education partnership (LEP) is created to run the project locally.

From wave 4 onwards, the education vision and strategic business case phases have been simplified and replaced by a document combining both functions, called Strategy for Change.

28. Partnerships for Schools told us:

"LEPs, which will be created for the vast majority of Local Authorities, are local delivery vehicles, partnerships between the Local Authority (10%), the successful private sector partner (80%) and PfS (10%). Each LEP has a clearly specified long term partnering contract with the LA as strategic commissioner, and then individual contracts will be agreed between the LEP and LA for individual school projects over the life of the long term partnership. The individual school contracts are either PFI or conventional, depending on which offers best value for money. The presence of the Local Authority and PfS as shareholders in the LEP ensures a degree of transparency and alignment of interests in the delivery of the long term local investment programme which has not been present in other forms of procurement. This procurement and delivery approach was specifically designed to meet the long term educational and efficiency objectives of the BSF programme."[26]

Procurement problems

29. A number of problems with the procurement process were identified to us during the inquiry, in particular regarding consultation with school staff and pupils about what was wanted from new school buildings, and the capacity of those involved at the local level to manage and deliver projects. David Kester of the Design Council told us:

"if we have a very coherent vision for what we are looking for, if a teacher actually knows how to get the most out of the design process, knows the problem that they are trying to solve, then they will get a good solution at the end. Half the problem here that we have when working on a £45 billion programme is that this is the first big capital project that most of the clients have ever run and it may be the only one they are going to run at this level. They are going to oversee perhaps a £20 million new school build and are they a design savvy client? Are they going to get the most out of that process? Are they going to understand the art of the possible? That is a big question. It is very difficult to do that and what you really need to do is make sure that all of those people involved at the decision-making end of the tree know how to manage that process very smartly and know what is possible, get the most out of it and know the questions to ask."[27]

30. Setting the vision is only the start of the process for BSF. There is a need for Heads and other staff of schools involved in redesigning their environment to systematically review almost every other aspect of what is taught, how it is taught, and how schools are run at the same time. With all the changes in train around Every Child Matters and secondary curriculum reform, for example, this adds up to a massive programme of change across localities and within individual schools. Change on this scale requires a significant and systematic investment in informing people about the proposed changes and the reasons for them if staff, parents and learners are to be brought along and support the process, but this is not a skillset that most authorities have. Knowsley Council informed us that they are spending £3-5m on this 'culture change' process over the BSF period, but this is their own choice and the restrictions on using Treasury capital money for ensuring that the BSF process is successful remains a significant problem.

31. The CBI made a similar point about the capabilities of local authorities:

"The capacity and ability of local authorities to deal with the levels of commercial sophistication needed to create the type of partnership on which the success of BSF depends is of major concern. Anecdotal evidence suggests that there is a marked disparity in procurement capacity and experience between different local authorities. There are some very good local authorities but the overall picture is of shortages of skilled and experienced procurement staff. This has added to the complexity of BSF and increased delays."[28]

32. John Sorrell of the Sorrell Foundation emphasised the need for consultation with pupils, and was concerned that often that consultation was only lip service:

"Very often what happens is the school is designed basically and then the kids are brought together for an hour, they are shown the designs of the focus group and at the end of it boxes are ticked. What I am calling for is a much, much deeper involvement of pupils in the overall client stakeholder group, and it is a big group because you have head teachers, teachers, parents, governors, local community, the LAs. It is a very, very big stakeholder group on the client side. The ones I plead for are the children because they are the ones who are likely to be left out of the discussion. It is making a big mistake if we do not involve them properly. Of course they are not designing the schools, what they are doing is helping to inform the people who are designing them and that is the whole point. If you create a great vision, a great brief and you have a great designer working with that great brief then you have a good chance of getting a good result."[29]

33. Another issue that came up regularly in evidence is that people often feel rushed into making decisions and therefore do not feel that they can become involved adequately in the process. Janet Newton of Lancashire County Council said that for a successful project "I think it is a case of making the time at the beginning, recognising the commitment and making sure that you get it right, and I would say up to 12 months as a minimum before you even get on site."[30] It is clear that in many instances in the first waves of BSF, despite the fact that timings may have slipped, many people concerned did not get 12 months to think about what they wanted, and that it could often be as little as 12 weeks. Ty Goddard of School Works said that:

"[…] the participation with stakeholders, both under Building Schools for the Future and all sorts of other capital streams is patchy at the moment and at times the frenzied 12- or 13-week process does not actually help to get views of stakeholders early enough and in fact could actually make it worse. What happens is that you duplicate processes of finding out what clients, what teachers, what pupils actually want."[31]

34. The survey conducted by Teachers' TV showed that school staff do have very clear ideas about what is important in rebuilding or refurbishing schools, which illustrates the importance of that initial phase. Teachers' TV told us:

"Our view of the key messages that surfaced from these comments is as follows:

SPACE: This was the most common concern and hope. More of it, more rooms, wider corridors, larger outdoor spaces, office space for support staff, and much, much more storage space.

"SUSTAINABILITY: The second most common theme. Many comments about energy efficiency, such as the use of solar panel, but also recycling, carbon offsetting, and school travel, in particular better facilities for cyclists.

"IMPROVED CONSULTATION: Another key theme, in particular the need for early and sustained consultation with teachers and pupils, to ensure the final designs were created with the end-users in mind.

"ICT/TECHNOLOGY: Many were keen to extol the positive potential for new technology in schools, but warned that designs need to take ICT use properly into account. For example, rooms that could be blacked-out properly for IWB use.

"TEMPERATURE CONTROL: Over-heating due to poor design, and better insulation to deal with this and winter chills, came through again and again as an issue. Concerns were raised about the tendency to have large windows/glass panels in new designs without consideration of the impact in hot, sunny summers.

"FAIRER FUNDING: Several were worried about apparent weaknesses in the funding allocation system, with some Authorities and schools not receiving what they feel is their correct share of the pot.

"SCHOOLS FOR THE COMMUNITY: 100% support for the idea of schools extending the use of their facilities to the local community, by those who suggested that new designs need to take account of this.

"FLEXIBILITY: Several raised the point that classrooms and schools need to be able to adapt quickly and easily to new requirements and ways of working, so they need to be designed with flexibility in mind."[32]

35. The participation of teachers, other school staff and pupils in the planning process is vital to the success of school redevelopment projects, and this needs to be acknowledged by all those involved. As the comments collected by Teachers' TV show, those working in schools have a clear understanding of what is needed in a building to create a positive learning environment. Involving them in the earliest stages may require time, but will help to develop robust plans which will contribute to the success of the process.

36. The evidence presents us with a rather confused picture, of missed deadlines within the programme but also of insufficient time to consult and think through issues. As the DfES acknowledged in its written evidence, most slippage occurs at the pre-procurement and planning stage,[33] and Tim Byles argued that, while giving priority to those areas with high levels of deprivation and low levels of attainment was appropriate, "local authorities with schools that meet these criteria (not surprisingly) have typically had a number of other challenging issues to tackle in their area. As a consequence, the degree to which these authorities were sufficiently prepared and resourced for BSF was not always ideal."[34]

37. The main way in which the Department and particularly Partnerships for Schools [PfS] have sought to deal with this problem is by adding a third criterion for prioritising authorities from Wave 4 onwards, namely an authority's preparedness for BSF and capacity to deliver. Precisely how this judgement is made was not made clear to us, but Tim Byles did tell us that, in addition,

"[…] the Chief Executive of the local authority must also sign a Memorandum of Understanding with Partnerships for Schools, which I personally countersign. This document sets out very clearly the roles and responsibilities of both PfS and the local authority so that expectations are clearly defined from the outset."[35]

38. Sally Brooks, Divisional Manager, Schools Capital (Policy and Delivery) at the DfES, argued that much of the delay could not have been foreseen:

"It was a very ambitious timescale, and we have slipped from that and we need to acknowledge that, but I think we got as much as we could do ready, and we did set up PFS, which was crucial in terms of giving a very hard-nosed delivery focus to the programme that was not swayed by ministerial decisions every five minutes. I think we have done okay. I think there were things we could have spotted before we started that we did not, but I do not think there were many. I think most of what we have learnt since we started are things we would only have learnt by doing."[36]

39. There clearly have been problems with the authorities in the early waves of BSF, but the fact that the project has slipped from its early targets is not necessarily significant. What does matter is whether those authorities who have suffered delays have been able to resolve problems and come up with proposals that are robust and achievable, and whether lessons have been learned for those authorities coming into the process at later stages so there is no repetition of the same delays and difficulties. Momentum is important in a long term project but, as we said earlier, rushing to complete the programme must not take precedence over the need to do the job properly. The target that the DfES must keep in mind is the successful completion of the Building Schools for the Future project, not completion of the project by an arbitrary deadline. Successful completion also requires an understanding of how to measure success, a point we will return to later in the report.

Learning the early lessons

40. There are a number of issues that have been drawn to our attention during the inquiry which, if they could be speedily resolved, would smooth the way considerably for authorities in later waves of the project. There a number of themes;

how to disseminate information so that people do not keep re-inventing the wheel;

what scope there is for economies of scale and standardisation in some aspects of the project;

giving time to allow authorities and schools to develop their ideas; and

how the roles of Partnerships for Schools and the DCSF might develop.

INFORMATION AND KNOWLEDGE MANAGEMENT

41. One of the things that has happened in the early waves is that people have been working through the planning and procurement system, and problems and difficulties have become apparent and have needed to be addressed. As we pointed out above, there were very few people with experience of building new schools in the system at the outset, so the learning and knowledge management aspects of the programme as it progresses must be key. It would be a real missed opportunity for the BSF programme if the lessons that people had learned in that process were not taken on board by others following behind.

42. We are disappointed, therefore, that neither DCSF nor PfS has established sufficient knowledge management processes which would enable local authorities and schools to share their experience and learning and to access examples of best practice as they progress. In fairness, both the Department and PfS run occasional conferences to bring stakeholders together to share and discuss issues, while developments such as offering CABE[37] enablers to help authorities with design decisions, support for authorities from 4ps on procurement and NCSL's BSF Leadership Development programme for head teachers and senior staff in schools are all positive developments. Nevertheless, we heard a number of suggestions about how to improve the sharing of knowledge across the system. In Knowsley, for example, we heard arguments in favour of a national BSF forum, to enable the different participants to understand each others' roles better and allow best practice to circulate. Equally, we make the suggestion below that all completed schools should be required to undertake and publish post-occupancy evaluations so that lessons about what works and what does not are made explicit.[38]

43. Another way of spreading knowledge would be by the secondment of individuals from an authority which has developed its BSF proposals to an authority where they are just beginning, or by involving people from an authority in an earlier wave in the initial development of proposals for an authority in a later wave. BSF is not just a matter of a few authorities building a few new schools; this is a project which will affect every secondary school in England, and if it is to be done strategically then authorities must be encouraged to engage with each other about what works, what does not and what the pitfalls are.

44. The DCSF and Partnerships for Schools should develop as a priority a knowledge management and learning strategy to support authorities, schools, contractors, suppliers and others involved in BSF to share best practice and learning as the programme develops.

ECONOMIES OF SCALE AND SCOPE FOR STANDARDISATION

45. Given the size of Building Schools for the Future and the vast amount of money that it involves, it is important that it should operate as efficiently as possible. Part of that is to avoid 're-inventing the wheel', but it is also about using the size of the project to the advantage of all in order to make cost savings. The question is, is Building Schools for the Future a market maker? That is, is the desire of companies to participate in the scheme such that there is a significant amount of leverage which authorities as clients can bring to bear to get the best possible deals? In order for this to happen, various procurement issues would have to be addressed en masse rather than by each individual project in individual areas. This would be true for example for building materials, ICT and other electrical equipment and furniture (driving down the price of longer lasting but more expensive furniture to make it more affordable).[39]

46. The argument against this way of working is that it suggests a blanket approach to projects across the country thereby taking away some of local authorities' autonomy. The decisions, however, might relate to services which do not have to be infinitely flexible. We discussed with Nick Kalisperas of Intellect and Mike Blackburn of BT Education and Local Government whether different schools needed different IT systems. Nick Kalisperas said that

"There will be an element of standardisation, a baseline, […] which every school should reach, but over and above that one size does not fit all, nor should it."[40]

47. Mike Blackburn agreed that most of the variation would be in the software that was used rather than the hardware. He also agreed that some elements of good practice, such as having integrated and flexible IT provision rather than a small number of fixed computer rooms , could be the basis for a degree of standardised provision.

48. In a similar vein, David Lloyd Jones of Studio E Architects told us that while there might not be a standard design for all school buildings, some aspects of every school were likely to be the same:

"Every school is a unique product, but the ingredients that go into it do not necessarily have to be unique. As a case in point, in Sustainable School Buildings the facade becomes very important because there is so much going on there, you want to get air in, you want to get light in, you want the views out, you are wanting to do it at different times, you want to keep the sun out at times, and so on and so forth, and so it is quite a sophisticated package, and to do that from scratch for each new school is counterproductive. If we can develop something that works under most conditions and we can apply it to a variety of schools, then obviously there is mileage to be made out of that."[41]

49. There is clearly a balance to be struck between central prescription and local autonomy, but there is a strong argument that on the basis of cost and time savings some of the choices on these nuts and bolts issues could be restricted. PfS have made some progress on this with, for example, guidance on the general principles for design of toilet blocks.[42] There needs to be a discussion about how to build on this kind of initiative to make the most of the market position of Building Schools for the Future on a whole range of procurement issues.

ICT PROCUREMENT

50. More generally on ICT, we were told that the ICT industry considered that the current procurement method would not provide the best available solutions. Nick Kalisperas said:

"[…] what we want to see is technology in this programme being used to effect real change, and that currently is not being reflected in the way procurements are being taken forward […] we are looking at developing a programme for schools for the future, therefore the procurement has to be structured in such a way to take advantage of technological development. That is not how that procurement is currently structured at the moment."[43]

51. Another significant issue with ICT is ensuring that there is provision within contracts to enable technology to be renewed. Mike Blackburn told us:

"Most of the contracts that we get involved with are ten or fifteen year contracts - a fifteen year contract will have a minimum of two refresh periods built into the finances up front so that everybody knows it is there, at year five there will be a complete refresh, at year nine there will be a complete refresh. That is already discussed and debated; what you do not know is what it is going to be refreshed with, but you do know that there comes a point where you have the funding in the contract all agreed and you can now refresh the technology."

52. We ask the DCSF to respond to the criticism of procurement of ICT, and to set out its plans for ensuring that ICT procurement within BSF does enable technological development to be properly taken into account.

TIME TO THINK AND TIME TO CHANGE THE CULTURE OF SCHOOLS

53. A regular theme in our evidence, as discussed earlier, was that people involved in BSF, particularly at the school level, did not have sufficient time to think about what it was that they wanted to do. There is a very strong argument that the initial 'visioning' phase should be lengthened. All authorities in the waves so far announced should already be addressing the issue of what they want of their schools. The difficulties faced by the earliest waves of authorities in coping with deadlines suggest that this would be time well spent. Equally, there is a strong argument for funding local authorities and supporting them to run 'culture change' programmes that will help ensure that the key stakeholders in an area understand the aims of the project and change their practices accordingly.

54. There was general agreement in evidence that for a good project maximum involvement was needed from authorities and head teachers who were well informed and knew how to be good clients and from students who were consulted and who were allowed to have a significant say in the outcome of the project. The development for all BSF projects of 'good clients' who are knowledgeable about the process should be a key aim for authorities, Partnerships for Schools and the DCSF.

LEARNING FROM ACADEMIES

55. When we began this inquiry we thought that there would be much to be learnt from the progress of the Academies programme. It is not clear how that experience has informed BSF, but it is interesting to look at the evaluation of the Academies programme being undertaken by PricewaterhouseCoopers (PwC) for comparisons. In the second evaluation report, based on fieldwork done in spring 2004, PwC found that

"[…] around two thirds of staff responding to the survey suggested that staff were not involved in the development and design of the new buildings. Similarly, only one half of staff thought that the provision of staff work areas in the new buildings was good, and two fifths indicated that teachers did not have dedicated work spaces and offices for preparation and planning […]. This feedback from staff is reflected in the clear sense from the interviewees that, whilst the 'bold statement' aspect of the new Academy buildings was important, there had perhaps been too much emphasis on this at the expense of some of the more practical requirements of modern teaching and learning spaces."[44]

56. In the third report, PwC makes recommendations for the process of implementing the Academies initiative, which obviously have a clear resonance with what is happening in BSF. It recommends 12 to 18 months lead-in time for principals of a new Academy, which could be likened to the visioning process that heads of schools in BSF are being required to undertake. It also notes that there were considerable stresses where the leadership team had to continue running the school being replaced and plan for the new school.[45]

57. There are also clear parallels with the procurement process for BSF:

"Enhancing the process and outcome of new Academy buildings; additional support and guidance should be provided by the DfES to facilitate a smoother project management of the new Academy buildings, and ensure that they are fit-for-purpose in relation to 21st century learning. Based on the research evidence, a number of specific suggestions can be made:

The contractual agreements with project managers, builders and architects, should include a post-occupation review and a clear process and date for completion of all outstanding problems identified by this;
Utilities, security and maintenance costings should be modelled as part of the design phase of all Academies;
Academies should be encouraged to consult more widely with users of the buildings, particularly staff and pupils, as the evidence suggests that this will facilitate the achievement of a fit-for-purpose, practical design; and
Related to this, architects and other stakeholders should be encouraged by the DfES to strike an appropriate balance between the 'look' and 'feel' of new Academies, and their practical and fit-for-purpose design aspects."[46]

58. The clearest message of all, therefore, from both BSF and the Academies programme is to take the time to get it right at the beginning and to maintain dialogue the users of the building. To give authorities and schools the time to think about what they want to do and the way that they want to do it is the best way to ensure that what emerges at the end is an excellent learning environment, rather than a striking building which does not meet the needs of its users as well as it should. PwC recommend 12 to 18 months lead-in time for Academy principals and something similar would clearly be of great benefit for all BSF school projects. It would allow detailed and continuing dialogue between clients, architects and developers, which is vital if the buildings are to be appropriate and fit the users' needs. The Academies capital programme is now within the remit of PfS and BSF, which ought to mean that emerging lessons are more easily identified and shared.

59. Lessons should also be learned from the CABE audit of schools built before the introduction of BSF. This study, published in summer 2006, looked at 52 completed schools, including Academies. It found that the majority of new schools were not taking the opportunity provided to address issues of educational transformation, and failed to use inspirational design to support delivery of the curriculum.[47] In support of those findings, Richard Simmons of CABE said that it was possible to be selected for a PFI scheme through a good finance package and a good maintenance and management package, but without a high quality design.[48]

THE ROLE OF THE DEPARTMENT

60. We heard informally from authorities in the early BSF waves that they had to respond to as many as 12 DfES policy teams (as they then were) in developing their BSF bids. If true generally of the BSF project it suggests a lack of co-ordination within the Department which needs to be addressed. Clear lines of communication are vital if a project as ambitious as BSF is to produce the best possible results, and we return to this issue in our general conclusions.

PFI and capital funding

61. We explored some of the issues concerning the use of the private finance initiative rather than capital funding direct from the Government. The DfES told us in evidence that all PFI funding for school buildings now comes through the BSF programme, and that half of BSF funding is now PFI credits and half conventional capital spending.[49] 4ps told us that:

"The original intention of the BSF programme was to have a clear split between new build schools which would be created and maintained under PFI contracts, and refurbished schools which would be the subject of DBOM contracts (Design, Build, Operate and Maintain—in other words PFI without the private sector investment). This would have meant that all BSF schools would be properly looked-after under long-term facilities management contracts integrated with the risk transferred to the private sector.

"The reality is that DBOM has become just 'Design and Build', with possible non-mandatory and quite separate facilities management (FM) contracts. In addition, many of the schools that were expected to be procured under PFI are now to be conventional capital projects using Design and Build contracts."[50]

62. PFI has been contentious since its inception, with proponents saying that it allows greater capital investment more quickly than could be the case with conventional capital expenditure and critics arguing that it amounts to a kind of privatisation, putting too much control in the hands of the private sector. The long-term contracts, which last for 25 to 30 years, have also been criticised for being too inflexible, and concerns have been raised about how those contracts can be renegotiated if the schools to which they relate are no longer required.

63. In the light of the comments by 4ps, we asked the DCSF how the decision was taken on whether a project should be financed through PFI or conventional capital funding. In response, Partnerships for Schools told us:

"For planning purposes the programme level working assumption for BSF is that where local authorities plan to rebuild 70% or more of the existing floor space of a school, then a PFI procurement is likely to maximise the value for money of the project. For schools with a smaller proportion of new build, a design and build (conventional capital) route is likely to achieve better value. Of course, local circumstances play a part in decision making and these are always taken into account before a final decision is reached.

Across the BSF programme, we expect about half of the gross floor area of the schools estate to be rebuilt, attracting PFI credits, with the anticipation that the other half will be remodelled or refurbished using conventional capital funding. However, this will vary from project to project and from authority to authority."[51]

We take it from this statement that authorities will therefore know from an early stage of development of projects which funding method they will be using.

64. We were also interested in the revenue costs associated with PFI and with conventional capital. PfS told us that, under PFI, authorities are reimbursed through the revenue support grant from the Department for Communities and Local Government for the initial capital costs, life cycle replacement capital and some of the private sector partner's costs relating to finance and taxation. Costs of so-called 'soft' facilities management (cleaning and security), 'hard' facilities management (building maintenance), utilities charges and buildings insurance are expected to be met by local authorities and schools. As an example, PfS told us that "we can expect total annual revenue costs for an authority awarded £100 million of PFI credits to be in the region of £8 million. Of this, over 90% will be supported by central government." In total £3.75 billion in PFI credits have been awarded to BSF for the period 2004 to 2008.

65. For projects funded by conventional capital, decisions on funding life cycle replacement lie with local authorities and schools:

"This approach does allow the authority and schools greater management flexibility over making payments but in turn increases the risk that a whole life approach might be ignored.

"PfS told us that because the risk transfer to the private sector is greater under PFI, 'the costs can be greater'."

66. We also asked about risks associated with each method of funding. The response was that the risk lay in the way the project was constructed rather than the funding method:

"The risks here are more to do with the underlying procurement decision than in respect of the funding method. The type of funding supports the procurement decision which will have been determined by a comprehensive and auditable value for money assessment."

67. While we take the point that it is the viability of the project in the first instance that is the main risk factor, it seems to us that there are risks associated with PFI as a funding method. The first is the revenue cost. PfS indicated that £100 million of PFI credits would give rise to £8 million a year in revenue costs, of which the authority would have to find approximately £800,000 from within its own resources (£20 million over the life of a 25 year contract). Given that the cost of a newly built school is in the region of £20 million, many authorities will be funding much more than £100 million of credits.

68. Secondly, there is the risk of a school becoming unviable through a fall in pupil numbers. While this is clearly the kind of problematic original procurement decision that PfS was referring to, it can be extremely expensive if it happens to a PFI school. We are aware of three instances where PFI funded schools have closed or are closing leaving the relevant authorities with continuing financial commitments: a school in Brighton, which closed after three years, leaving the authority having to pay at least £4.5 million to release itself from the PFI contract[52], a school in Clacton which is to close after five years because of falling rolls[53], and a school in Belfast which is to close this summer after five years, for which the authority is committed to paying £370,000 a year for the next 20 years.[54] We ask the DCSF to make a clear public statement on how many PFI schools have closed prematurely, what the overall cost to the public purse has been and how it monitors schools in danger.

69. On the figures given to us by PfS, the £3.75 billion in PFI credits already allocated to BSF will give rise to approximately £300 million in annual revenue payments. If half of the projected total BSF cost of £45 billion is funded under PFI that would on this basis mean total annual revenue costs of £1.8 billion pounds, of which around £180 million would have to come from authorities' own resources. We ask for confirmation that local authorities are required to set out in their BSF plans the full revenue costs of the project and details of how they plan to meet them over the full term of the contract.

70. One of our main concerns in this report was to assess whether the BSF project was giving value for money. The scale of the project mean that the costs associated with the PFI portion of the funding allocation are very large indeed and, as PfS acknowledges, the revenue costs are higher for PFI projects than for those funded by conventional capital mechanisms. The details of a PFI schools contract are crucial. There are risks associated with issues such as: the full degree of risk transfer; whether a school building designed in 2007 will continue to be appropriate in 2032;[55] and the possible need to vary the contract over time without incurring heavy cost penalties (attempting to ensure that the initial contract covers all possibilities for a 25 year period is, we believe, virtually impossible). We have already seen that some existing PFI schools have closed, with continuing cost implications for the authorities concerned. Indeed, the use of PFI as a method of funding requires local authorities to take risks on behalf of schools over which they have little control.

71. The Government needs to set out more clearly than it has done so far its assessment of the sustainability of the levels of revenue commitments across local authorities in general; how DCSF and Partnerships for Schools make judgements about how well authorities have planned to ensure that schools will be sustainable given projected future numbers of pupils; and the lessons that it has learned from those PFI funded schools which have been forced to close.

Primary schools

72. Primary schools are not included in BSF, but there is a separate programme to provide for the rebuilding, remodelling or refurbishment of 50% of primary schools over the next 15 years, which was announced in March 2006.[56] It is designed in a very different way to Building Schools for the Future. BSF has begun in areas with traditionally high levels of deprivation, while the primary programme is targeted to "address deprivation nationally and in every authority and responding to population changes".[57] However, authorities are not being brought into the programme in waves; there will be regional pilot schemes in the first year, in 2008, and after that all authorities will benefit from access to funding from 2009.[58] The DfES is encouraging authorities to use funding from as many different sources as possible—other central government agencies, local authority investment and the private sector as well other DfES capital for primary schools—in order to achieve the greatest possible effect. The money available will be £150 million in 2008-09, increasing to £500 million in 2009-10, with £7 billion planned to be available over the life of the programme.[59]

73. The DfES told us that the aspiration for the programme was that :

"[…] we would hope to rebuild or take out of use, as a minimum, at least the 5% of school buildings in the worst physical condition nationally, and to improve or take out of use the 20% of the worst condition buildings in our most-deprived communities. With strategic and joined-up planning and funding, we would hope to exceed these targets. Other schools benefiting from the programme will have substantial improvements. The programme should also contribute to other national aims such as to raise standards, improve school food or promote sport and languages."[60]

74. The Government clearly has significant ambitions for this programme as for BSF, but it is not so wide-ranging (not all schools will be affected) nor is an equivalent amount of money being made available. This may be because primary schools are much smaller than secondary schools and may not be expected to have the same specialised features as secondary schools. On the other hand, there are in the region of 20,000 primary schools, so 10,000 schools are expected to benefit, which is a very large number. A crude calculation gives a figure of £700,000 per primary school in the programme. There will clearly be a wide variation on that, with some rebuilt and some refurbished, but it is a marked contrast to the £20 million that is likely to be spent on a new secondary school.

75. Unlike the original BSF launch document, the primary document specifically refers to sustainable design.[61] Perhaps therefore a better cost comparison is to look at a new primary school built on sustainable principles that might be presumed to embody much of what the Government is trying to achieve. Green End Primary School in Manchester, which provides for 340 children, uses rainwater to flush toilets, uses natural lighting wherever possible, and is naturally ventilated. It cost £4.6 million to build.[62] While the budget will provide capacity to build many such schools, others are likely to have to make do with far less.

76. £7 billion is a great deal of money and what this programme appears to provide is a parallel system to the standard devolved capital allocation that local authorities would otherwise use for improvements to their primary estate (and which was presumably used to build Green End). It is not clear, however, what difference there is in principle between the primary and secondary estates which leads to them being treated in such different ways not in terms of investment but of approach. The Primary programme emphasises the five Every Child Matters outcomes, talks about mastering basics of literacy and numeracy and the need for children to become enthusiastic and confident learners across the curriculum. It also talks about investment in ICT. It does not however, have the same explicitly transformational aim that is part of BSF.

77. We received little evidence on the primary programme, so we are not in a position to draw detailed conclusions. The contrast in structure between BSF and the primary programme, however, is striking. One concern, therefore, is the extent to which the two are joined up. For example, the primary programme is not explicitly about educational transformation. Personalisation is put forward as central to primary education, as it is in secondary but again, as we will discuss in the next chapter, in neither primary nor secondary is the nature of personalised education sufficiently defined.

78. These challenges could be addressed more effectively if the DfES could ensure that:

all involved in delivering the primary programme have a clear view of how it interacts with BSF;
explicit national goals are set out to assist those at local level who are making hard choices, including clear guidance on what DCSF means by personalised learning in the primary context; and
as with the BSF programme there must be real clarity about how and to what extent this £7 billion programme is to contribute to transforming education.

Further Education

79. Further education is another sector which has been renovating its estate over recent years. As the Learning and Skills Council told us:

"Since incorporation [of FE colleges] in 1993, about half (3 million m2) of the projected size of the further education estate (6 million m2) has been renewed or modernised. In 1993 the condition of the FE estate was very poor with less than 5% of the estate classed as excellent. By 2004-05 this had risen to about 40% with the percentage of excellent quality floorspace rising at about 7% a year at the current rate of modernisation and renewal."[63]

It also said that it had been estimated that the cost of completing that renewal and modernisation over a five year period was estimated at £7 billion, taking into account the need for further investment to address issues arising from 14-19 reform and the Skills Strategy.[64]

80. We thought it important to look at what is happening in the FE sector for a number of reasons: to see what lessons might be learned for the BSF programme; because FE links in to the secondary education through changes to 14-19 education; and because it has its own challenges in terms of sustainability, good design and future learning needs.

LINKING BSF AND COLLEGE REDEVELOPMENT

81. One of the comments that was made forcefully to us was that there is insufficient linkage between capital funding for the different sectors. Graham Moore, Principal of Stoke-on-Trent College, told us:

"We work quite closely with our schools. The secondary heads and the two college principals, the sixth form college and ourselves, meet together regularly, once a month or so. We have good relationships. We have a lot of students from the local schools into the colleges, so that relationship works quite well. We are developing cluster ideas with the local schools. But, when we come to the building programme, we are trying to say, 'Look, if you have a cluster of schools, what vocational specialisms are you going to put in each school? How is the Building Schools for the Future going to link to that? What facilities do you need post-16 in the colleges to match that?' Then, when we talk to the local authority, who are supportive, they say, 'Well, Building Schools for the Future money is specifically Building Schools for the Future money. It cannot be used for colleges.'"[65]

82. Martin Lamb, Area Director, Hampshire and Isle of Wight for the Learning and Skills Council, when asked why it was not possible for colleges to receive a share of the funding for 14-16 year-olds, for whom many colleges make provision, said that

"[...] the answer probably is that it is because of the way the Department has designed the capital flow. We have capital funding from the Department that is for colleges and school sixth forms for 16-plus. Local authorities, through their BSF and normal capital routes, have the capital funding for pre-16s […] the current arrangement […] is that BSF money in local authorities for 14-16 year olds has to be used on school sites; it cannot be used for 14-16 facilities on college sites. That might an area where a little bit more flexibility would be helpful.[66]

83. Collaboration between different institutions in different sectors happens across the country and is something that we welcome. To take the new 14-19 Diplomas as an example, there is explicit recognition that one school on its own will be unable to provide all the 14 Diploma lines when they become available, and so there will have to be co-operation between different institutions. Graham Moore told us that in his view the FE sector was more flexible on that score than the schools sector, and we have no reason to disagree. In order to provide properly integrated secondary education in any given area, the funding systems in place should be designed to encourage working in partnership. The DfES should examine the way BSF, further education and primary capital projects are funded to ensure that partnership working designed to increase the range of learning opportunities available to students is rewarded and that there is as great a degree of flexibility as possible to help local authorities, schools and colleges to maximise the benefit for children and young people in their areas.

84. Other factors also make it difficult to link up BSF and college redevelopment. As Martin Lamb told us:

"One of the features of Building Schools for the Future is that it is in […] 15 waves and if you are at the end of the programme the money does not start to arrive until well into the 2015 area. One of the challenges […] in my previous role in Berkshire, was that none of the unitary authorities in Berkshire were in the early phases of Building Schools for the Future, so, in terms of doing a college development—and I was deeply engaged in the one at Bracknell and Wokingham for the new college on the main Bracknell site—there was no possibility of linking it to Building Schools for the Future because at that time, and still, Bracknell are well down the Building Schools for the Future. There is a critical timing issue."[67]

85. John Widdowson, Principal of New College Durham, said that where there had been college redevelopment in advance of BSF it was important that authorities took that into account:

"[…] where these new-build colleges have occurred, then it is about influencing the process under BSF with their partner schools, so not replicating facilities within schools, and that is about communication and talking at a fairly basic level about what goes into the design so that […] every school does not build a construction centre when there is a perfectly good and serviceable one capable of expansion in the college. So, it is about collaboration, it is about talking at the early stage before things start to get put into bricks and mortar or steel and concrete, and then reaching agreement at a very local level."[68]

86. These examples show how complicated it can be to achieve integrated provision from different sectors, but they also illustrate that the only way to ensure that there is effective educational provision in an area is through the co-operative efforts of those working locally. With the division of DfES into Children, Schools and Families and Innovation, Universities and Skills this level of co-operative effort will be equally important at the national level.

REDEVELOPING THE REMAINDER OF THE FURTHER EDUCATION ESTATE

87. As the LSC told us, while half of the estate has been redeveloped, it remains a substantial task to complete the job:

"[…] around 50% of the estate mostly dating from the 1950s and 1960s still requires renewal, is inefficient and hinders flexible, high quality delivery. Some of the poorest premises still support the most disadvantaged learners (for example specialist provision for learners with learning difficulties and/or disabilities)."[69]

88. We asked Martin Lamb if it had been the case that the choice of the colleges that had been redeveloped so far had been arbitrary. He agreed that the LSC "had very much been reactive to colleges". Now, however,

"I think we have got to the stage now where it must be a more planned and reactive programme by the LSC where we are discussing with every college its future building strategy because we have a window of opportunity in the current [Comprehensive Spending Review] capital time where there is funding available for colleges."[70]

He also said that he felt that renewing the remaining 50% of colleges "will be more challenging",[71] partly because the LSC is encouraging authorities to be bolder and to consider redeveloping complete sites rather than partially rebuilding.[72]

FUNDING COLLEGE REDEVELOPMENT

89. The capital funding arrangements for FE colleges are very different to those for schools. As the LSC told us:

"Projects are financed by colleges through a combination of long term borrowings, receipts from the sale of redundant property assets, contributions from reserves and grant support, principally from the LSC but also in some cases with support from other public bodies such as Regional Development Agencies."[73]

90. John Widdowson said that the redevelopment of New College Durham had cost over £35 million, and that it had been funded by a 35% grant from the LSC, the proceeds from selling one site and a similar amount from borrowing.[74] Graham Moore said that the position with Stoke was similar; "about a third, a third, a third".[75]

91. We asked if the FE sector considered itself to be an afterthought to other people's programmes. John Widdowson said that, given that the FE sector has dealt with difficult cases,

"What we have is symptomatic of that filling of the gaps, if you like, and the difficult to define role that the sector has, because it does those things that other people do not a lot of the time and it deals with those people that other parts of the education world do not deal with as well as we would all want. I think that makes it quite difficult sometimes to put us in the right position […]. None of us want to be in debt. I do not want to be in £9 million of debt from the building we have built, but it is worth it if you look at the difference it makes to the students who come in and the way it raises their aspirations."[76]

92. Graham Moore said that

"It may not appear as fair for the FE as the other two sectors, but it is the best deal that FE has ever had. I think we ought to say that very clearly. We are in a position where we can see a transformation. Yes, we might not like to bear the burdens and we see other people perhaps not having to bear the burdens that we do, but I think we are always being entrepreneurial and we will get on and do it because we understand that it is in the best interests of our students and it makes a difference."[77]

93. The most positive element of this funding arrangement is that the colleges feel in charge of what they are doing. John Widdowson told us:

"I still think that the control that the current system gives to college governing bodies, working with the LSC and others, allows us to respond in a way that a bigger system might prevent."[78]

Graham Moore agreed:

"[…] what we do get in the FE sector, whether it is for good or bad, is what we really ask for because it is for us, it is for the future, it matters to each institution. We spend a lot of time trying to get it right with our staff and our students and I think those are more individual buildings, more interesting buildings, more fit for purpose buildings."[79]

94. Given the high profile that PFI has in Building Schools for the Future, it was interesting to see that it is almost entirely absent from the FE sector. Martin Lamb told us:

"There is, I think, only one PFI project in England, which is at Newbury College in Berkshire, and it probably is that the conventional wisdom is that PFI projects are required to be of a certain size and most individual college projects do not reach the size to make PFI a useful way forward; but, as bigger projects come along, that debate might change because there are certainly now projects in the design stage that might end up at £80-100 million, and that is probably closer to the PFI size of where people believe PFI is the most useful route. Smaller projects traditionally have not been seen as good for PFI, as I understand it."[80]

95. It was very interesting to see the way that the funding arrangements that exist in the FE sector, while raising concerns about the level of debt that colleges may have to carry, do appear to give colleges a real sense of ownership of their projects. This may also be because of the way the sector is structured and the institutional controls that come through incorporation. It is possible that really large projects might be developed under PFI, but that would presumably only have an attraction if the whole project cost could be covered. Otherwise colleges could be faced with financing a long-term PFI contract, and funding borrowing, and possibly having to find funding from asset disposal, which appears too substantial a risk even for a sector which wants to be entrepreneurial. We ask the Department for Innovation, Universities and Skills to set out its policy on the appropriateness of PFI as a means of financing the redevelopment of colleges.

SUSTAINABILITY

96. Sustainability is part of the calculation made when the LSC is assessing a project. Martin Lamb told us:

"I hope we take a commonsense approach […], which is, on the one hand, we are looking to sustain the best possible value for money for the investment of public money in college buildings but at the same time that we do not reduce that to a non-creative, non-individual approach. We are just in the process, this month, of publishing new guidance on the whole capital project scene, including changed advice on sustainability, where we will now take sustainability issues that bring an upfront cost, such as the electric panels, and, if there are particular additional costs associated with sustainability, we will now bring in additional uplift to the cost parameters we use for sustainability."[81]

97. When the LSC launched its prospectus for its capital programme in February 2007,[82] it made specific commitments on the sustainability of new college buildings:

"In future, to qualify for LSC capital funds all proposals will need to address Sustainable Development by:

meeting and preferably exceeding, the requirements of Part L of Building Regulations;
ensuring that the completed development meets the criteria to achieve excellent Building Research Establishment Environmental Assessment Method (BREEAM) ratings;
maximising the use of natural lighting and ventilation by, for example, using wind and solar power to generate light and heat and by collecting rainwater to reduce water usage and;
embedding the principles of sustainability in the design of buildings and building systems; and
the LSC will allow an additional 5% of building costs to be ring fenced and used for Sustainable Development."

98. We applaud the commitment shown by the LSC in stating these principles that need to be met and providing funding to offset any additional cost (although not all sustainable features incur extra costs).[83] This checklist would be useful for anyone seeking to build sustainable educational buildings, not just Further Education colleges.

21 Ev 166 Back

22 We discuss the primary programme in more detail later in this report. Back

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