The whole subject of PfI-financed public buildings seems to be back in the news again – currently with a focus on hospitals , whose PfI “mortgages” are leading to serious cuts in services.
“Mortgage” is an appropriate term to use in this context – made up of two French words “mort” (meaning death) and “gage” (meaning pledge), PfI contracts feel like just that – a financial death pledge. Sadly, too many of our colleagues running schools know this experience only too well. However, it is possible to challenge, renegotiate and even in some cases terminate these contracts. This is our story….
“Shiny shed”
In September 2011, Archbishop Sentamu Academy moved into fantastic new premises built under the BSF programme. We were incredibly fortunate – five weeks after the money for Hull’s BSF programme landed in the bank, the programme was axed by Michael Gove.
Although our academy was not a full PfI-build, we were nonetheless subject to both “Hard FM” (Facilities Management) and “Lifecycle” contracts with the Local Authority, who in turn held these contracts “back to back” with Hull’s main PfI provider.
These contracts were designed to ensure that the building was well-maintained over an assumed 25-year life-span, with money available to replace equipment that wore out over the period. This was of course a great idea – but there was just one problem – they proved to be extremely expensive.
As the years progressed, the impact of these contracts became worse and worse as funding was progressively squeezed. Like many other academies, we were forced to make a series of ever-deepening cuts, which were all the more galling as we believed the costs of our contracts to be unnecessarily high.
Crunch time
Eventually, it became clear that unless we could renegotiate our two contracts, the financial future of both our academy and indeed our whole trust would be seriously jeopardised. Somewhat in desperation, I pointed this out to the Local Authority officers responsible for both holding and assistingus manage the contracts. They saw the seriousness of our situation, and agreed to help us. At this point, I would like to express my thanks to the lead officer who supported us – in my research on PfI (more of that later), I came to learn that this is not always so forthcoming.
Following my pleas, we were put in touch with a company who specialised in helping schools and academies in our situation. After an initial meeting, we drew up a “battle plan” for challenging the terms of our contracts. This involved carrying out detailed condition surveys of our academy, along with a “bottom up” benchmarking exercise to compare the maintenance costs we were being charged per square metre with those charged to other institutions. It was painstaking, detailed work, but at the end of it, we were able to demonstrate that we could quite legitimately reduce our payments without jeopardising either the maintenance or long-term condition of the building.
Partnership
Armed with this high-quality piece of analysis, we put bothour contracts out for re-tender, successfully re-contracting for a significantly lower sum. The Local Authority officer responsible for managing this work was happy to authorise the contract variation, and as a consequence, we are now saving a six-figure sum every year for the life of the contract – in our case, another 17 years. That money can now go where it should – back into frontline teaching. Crisis averted.
Reflections on the process
We finally signed our new contracts just after the start of the Summer holidays. Whilst it had been quite frustrating at times, I actually became quite fascinated by the issue. As I looked into how academies have been locked into Hard FM, Lifecycle and Soft FM contracts I discovered a really murky world in which PfI companies responsible for running the schemes often use extremely sharp practice to maximise profits, at a time when the local authority officers responsible for managing these highly complex contracts are often significantly under-resourced to deal with them. And that’s before we begin to look at other financial instruments such as “insurance gain share” and “bellows agreements” which further complicate matters and also serve to maximise profits.
Above all, it struck me that as school leaders, we have both a moral and a financial imperative to challenge PfI contractors’ charges. It simply cannot be right that some of them are making very high profits at a time where we are having to make cuts which damage young people’s life-chances. Happily, our experience has shown that this need not be the case, and that by working in partnership with the Local Authority, it is perfectly possible to re-negotiate contracts that are fair to everyone.
Andrew Chubb is the Chief Executive of the Sentamu Academy Learning Trust.
You are welcome to contact him via email on: Andrew.chubb1@gmail.com
Headteachers' Roundtable 
[…] Understand the difference between revenue and capital. In revenue, the impact of a budget-related decision multiplies down the years, whether you are spending or cutting. If you cut staffing next year by 1 FTE teacher, that saves you c.£45,000 next year, and three years on it will have reduced your balance by c.£135,000. The reverse is true if you plan to have one extra teacher next year. Capital comprises one-off payments that do not, usually, have an impact beyond the year in which the spending takes place. Unless you are in a PFI contract… […]