If you have a project funded by the Learning and Skills Council, you’re probably wondering how best to handle the delay and uncertainty. What follows should help
The Learning and Skills Council’s funding review has stalled ambitious redevelopment plans for further education colleges across the country. The delays are placing additional strain on the education and construction sector in the recession. But what can contractors and consultants that are working on these projects do to avoid disputes?
A campaign by the Association of Colleges has been gathering momentum as the extent of the funding problem has been revealed. The resignation of Mark Haysom, the LSC’s chief executive, foreshadowed the damning content of Sir Andrew Foster’s report into capital funding in the further education sector.
That report is due before parliament rises for the Easter recess. Sion Simon, the parliamentary under secretary of state for further education, wrote to college principals on 23 March acknowledging the anxiety that the current suspension of the funding programme has caused.
The government will now have to move quickly to bring certainty to the programme. However, there is unlikely to be a quick fix to this debacle. So what next? How do the measures to address the delays differ to other situations where delays or suspension of projects could lead to disputes?
Delays have different causes
Private sector suspension or termination of projects is often caused by a diminishing market or insolvency, and there is often little benefit in continuing a dialogue or maintaining good relations. But in this case, projects have been stalled by public funding delays. There remains a massive demand within the sector and public funding is unlikely to dry up completely. There is therefore less risk that these projects will be pulled entirely and consequently greater incentive for contractors and consultants to remain involved.
It is likely that the college renewal plans may re-emerge, split into smaller packages
Although the private sector generally has some control over the decisions made in respect of periods of suspension, colleges do not. There is no indication of when or how projects may re-emerge at this stage. This produces more uncertainty for contractors and consultants in planning resources, and leads to significant business risk. How do you juggle your commitments to your employees, your banks and your shareholders? There is no easy answer to this. What you can do is to plan for what happens when the project is recommenced.
It is likely that the ambitious college redevelopment plans may re-emerge, split into smaller packages or less complex projects. The public funding regulations and the requirement to use the Official Journal of the EU are likely to restrict options for simply recommencing the reformulated projects. There is a risk that contractors will need to re-tender. If necessary, this will be unwelcome for all the interested parties, but everyone is bound by the public procurement regulations.
With the likelihood of projects recommencing (in some guise) and greater certainty of public funding remaining available, it’s probably in a contractor’s and consultant’s best interests to stay involved rather than cut ties. They should exercise caution in looking to contractual remedies. Disputes are costly in terms of hard cash and time. Better to arrive at a mutually advantageous solution, particularly where preconstruction agreements and consultants’ appointments are likely to give the college discretion as to whether it proceeds with the project or not. So what can you do?
- Projects will almost certainly be prioritised according to criteria that are now being established. The most profitable way of protecting your work stream may be by engaging with your client to ensure that all available information is provided to ensure that its project on top of the pile.
- Losing individual expertise on the project due to redundancies or redeployment of staff is a risk that can be planned for during the period of suspension. Having appropriate systems in place will enable you to make the best of a bad situation.
- Where colleges are forced to re-tender, not all your costs will be thrown away. It should be possible to mitigate further costs and to use the experience gained to advantage during the tender process.
Simon Chamberlain is a partner in Eversheds
Original print headline: 'Don't just twiddle your thumbs'