BSF cuts: the legal implications

Monday’s announcement of the halt to the Building Schools for the Future programme has created a mire of legal and contractual uncertainties for all parties involved in the development, construction and running of new schools. 

The Department for Education (DfE) indicated that it was looking to “set out a clear way forward for prudent capital investment in education”, but in the short-term at least, local authorities and bidders alike have been provided with a range of questions that need to be addressed. 

A review of the affected schools listed out indicates the scale of the problem. The DfE has identified over 1400 schools, in over 140 different localities: dashed expectations (at least in the short to medium term) for teachers, pupils and communities alike, as well as raising questions for an important workstream for the UK construction industry in this difficult market. 

In respect of all BSF schools, DfE has distinguished between “open”, “stopped”, “unaffected” or “subject to review” schools.  These all give rise to a range to differing issues.

Stopped schools

Some of these schools will include sample schemes which were at the point of closing dialogue, or preferred bidder announcement, many after long and expensive competitive dialogue.  Bidders and their prospective supply chains (and possibly, local authorities too) will be wanting to understand what rights may exist in terms of recovering their wasted costs, as well as facing the prospect of substantial claims for payment from others. 

At all tiers, millions of pounds worth of costs and work will undoubtedly have been invested in respect of design development and planning for schools that may never now see the light of day. 

This is a notoriously difficult legal area where surprises over the entitlements which a court may be prepared to recognise are commonplace.  Much may depend on the individual projects and the dealings between the parties, as well possibly as the parties’ legitimate expectations in being awarded contracts.    

In the absence of applicable contractual arrangements, for example, do sufficient grounds exist for recovery through so-called quantum meruitclaims?

Unaffected schools

What does “unaffected” mean?  A cornerstone of BSF (and major source of criticism for its complexity) was the creation of a private/public joint venture, the local education partnership or LEP.  It was the LEP’s role to map out the development of future schemes for local schools over the 10 years following its creation. 

If these future schools are “unaffected”, can the LEP and its’ preferred suppliers be confident that it will retain responsibility for the development of those schools?  Does the DfE’s announcement mean that the timing for availability and funding in respect of these schools will have to change? 

The strategic partnering agreement (“SPA”) entered into by LEPs with authorities contain provisions for LEPs to recover start up costs and interim funding in certain circumstances – it may be time to blow the dust off those provisions. Where applicable, step down framework agreements may also be worthy of close scrutiny.

Schools subject to review 

Schools under the Academy framework appear to be subject to review on a case by case basis.  It remains to be seen what this means in practice, given the DfE’s stated ambition to reduce bureaucracy and red-tape.  For other schools, the position of the LEP is also important and raises possible questions of procurement law. 

The DfE suggests these will be determined “in recognition of local need”.  Coincidentally, these also appear to be schools which are at “preferred bidder” stage – that is to say: a local need has already been clearly identified by the local authority and a private sector partner has been selected to form a LEP.    

If the private sector partner is now only going to be entitled (effectively) to develop one or two schools in a sample scheme, then what role can a LEP play?  Indeed, is the project  even the same as that which was first advertised?  This may be an important issue, given the disproportionate cost that the local authority and private sector will have been required to incur, relative to the number of schools which will finally be developed. 

There will also be the question of those other disappointed organisations who may have decided not to bid the project, given the demands of complex 10 year workstreams under an SPA, but who would have bid for the development of one or two schools.  

The hiatus whilst reviews are completed also has to be managed.  The idea of the private sector simply sitting in wait indefinitely is perhaps overly optimistic.  Participants may simply not have flexibility to require this of their prospective supply chains without exposing themselves to claims, particularly if ultimately the project does not proceed.  Even if achievable, anything more than a short suspension is likely to add to the costs of those involved should the scheme then proceed. 

Competitive dialogue proscess

The impact of yesterday’s announcement on all those who have been involved in BSF over the last few years cannot be underestimated.  There has been a general consensus in positive comments about the need to remove the red-tape and box-ticking of which BSF was often accused.  This is obviously to be welcomed.  Even so, the desire to heap opprobrium on BSF should not overlook that many of the aspects of the length and expense of bidding are as a consequence of the requirements of the competitive dialogue process itself under the Procurement Directives.  These have been felt far more widely than in just the education sector, and it will be interesting to see how the major review that has been announced by the DfE will address them. 

More worryingly still, the announcement from DfE has created a vacuum in place of BSF.  Any school science teacher can tell the class that nature abhors a vacuum:  whilst the desire for the major review being implemented by DfE is entirely understandable, to pull down one model of procurement without having a clear understanding of what is to replace it is in danger of having a very harmful effect – and should be addressed rapidly