The government is set to spend £450m on new and refurbished PFI schools next year. To help firms thinking of bidding to prepare tenders, Citex details the occupancy costs of typical schools, together with case studies of new-build and refurbished institutions.
The PFI schools market

Over the past couple of years, the government has been road-testing ways of handling private finance initiative school projects. About 260 schools are involved in the first group of pilot schemes.

If the current programme of pilot jobs is perceived to be successful, the government could roll it out across some of the other 22 700 schools on its books. So far, it has committed £1.6bn of spending between 1998 and 2002, with £450m earmarked for next year.

The first PFI schools to open were a £2m primary school at Victoria Dock in Hull, the £12m Sir John Colfox School in Bridport, Dorset, and the £18m Barnhill secondary school in Hillingdon, west London. The Victoria Dock school was built by Sewell Group and opened last Easter. The schools at Bridport and Hillingdon were both delivered by Jarvis and opened in September 1999.

Eleven other local authorities are now in the process of procuring schools using the PFI. The largest of these is Stoke-on-Trent, where the project comprises the council’s entire stock of 122 schools. A consortium led by Balfour Beatty was recently selected as preferred bidder for this. About a dozen Stoke primary schools are likely to be demolished and rebuilt; the remainder will be refurbished or upgraded, with a strong emphasis on improving their energy efficiency. The schools to be demolished and rebuilt include Blurton Primary School, a case study on page 67. The other Stoke school discussed in this article, Grafton Infants School, will be refurbished.

In Cornwall, the local education authority has shortlisted three consortia to rationalise four split-site secondary schools and to refurbish, repair and operate 33 primary schools. In Kirklees, the local authority is looking for a joint-venture partner to repair, rebuild and operate 20 of the area’s most dilapidated schools. Two consortia have been shortlisted and the preferred partner will be announced shortly.

Tilbury Douglas has been named preferred bidder for a project involving four secondary schools and two primaries in Sheffield. In London’s Tower Hamlets, three bidders have been shortlisted for a scheme to repair and maintain 47 schools, as well as running an energy conservation exercise. A consortium including Galliford, architect Abbey Holford Rowe, Lloyds Bank and corporate financer Innisfree has been selected as preferred bidder for Birmingham’s main PFI schools project, which comprises 10 primary and secondary schools. Two consortia have been shortlisted to provide a new secondary school in north London’s Haringey and three firms have also been shortlisted for a nine-school project in Wirral.

A Laing/Hyder team is set to complete the London Borough of Enfield’s first large PFI secondary school in September, and in Portsmouth, the Grannag consortium – comprising King Sturge, Ballast Wiltshier, Mott MacDonald and the Royal Bank of Scotland – should also finish a new-build 1000-pupil school for the start of the academic year. The new Cardinal Heenan school in Leeds is due to be completed by Jarvis at the same time.

With a new secondary school typically costing £10m-15m, and a new primary costing £2m-3m, the combined construction value of current PFI projects is probably about £300m.

The level of facilities management services provided by the PFI consortium varies from one education authority to another. Some want a comprehensive service including caretaking, meals and IT support; others want the services limited to the provision of utilities and day-to-day maintenance. Nevertheless, the average annual FM services contract on a primary school can be £200 000-300 000 a year. For a secondary school, the figure can reach £400 000-500 000 a year.

Some authorities, such as Haringey, have chosen to procure one PFI school at a time; others, such as Stoke, have bundled their stock. The cost of PFI procurement – that is, the fees of consultants that advise the authority – can be as much as 2-3% of the contract value for a one-off school project. When schools are bundled, the cost drops to about 1%.

It has been argued – mainly by the larger contractors – that schools should be bundled to create bigger packages. Smaller contractors, however, argue that they are just as capable of undertaking a PFI project so they are keen on smaller units of work. The priorities across the schools vary enormously. Some very old buildings may be at the end of their natural life span. Other schools – particularly Victorian ones – are very robust, structurally sound and capable of serving the needs of the education authority for many years to come, provided they can be brought up to modern standards.

Some schools built in the 1950s and 1960s seem to be already at the end of their lifetime, and are prohibitively expensive to upgrade. In these instances, demolition and rebuild is often the most cost-effective solution.

Case study one: Stoke-on-Trent

The Stoke-on-Trent bundle focuses mainly on improving the fabric of 122 schools. The facilities management role is limited, as cleaning, catering and caretaking services are not included.

The project’s output specification identifies the teaching environment that needs to be provided in the schools by setting standards for temperature, lighting levels, ventilation rates and so on. The schools have to meet these standards between 8am and 6pm (and until 11pm on nights when the building is in school use) for 240 days of the year.

It is up to the Balfour Beatty-led consortium to work out how to deliver this teaching environment. When accommodation fails to meet the output specification, deductions are made to payments.

The Stoke-on-Trent scheme has a strong focus on energy conservation, so the output specification includes a 25% reduction in the amount of energy used in the schools over the 25 years of the contract. Most schools can be upgraded to meet the requirement but a small number are so inefficient that new build is the only option.

In the 110 schools that are being refurbished, the energy conservation programme will focus on the installation of much more effective and sensitive energy controls, the fitting of modern boilers (some of the schools still have 30-year-old solid fuel boilers) and the introduction of better insulation. Water-use control systems are also likely to figure strongly.

Of course, it is the users, staff and children, who directly affect energy consumption. Therefore, the PFI provider’s installation of a direct energy control system, such as a building management system, will have to be complemented by attempts to educate staff and pupils to save energy.

On the FM side, Balfour Beatty takes responsibility for all service installations, power sourcing and utilities, the maintenance of the building fabric and some security issues.

Mike Inman, head of premises and client services at Stoke-on-Trent, believes financial close will be achieved shortly and he expects work to begin in the spring. “The first tranche of work is likely to be four new school buildings and eight refurbishments. It’ll take Balfour Beatty about five years to work its way through the whole stock,” he says.

“After five years, it will have to achieve a 10% energy saving. And to encourage it to keep up the momentum, we’ve demanded that 5% of the saving be delivered in the last five years of the concession.”

Inman has also had to tackle trickier issues such as:

  • whether or not to penalise the contractor for delays caused because of archaeological finds and mine shafts

  • how to transfer the risk of latent defects from some of the existing schools

  • how to estimate likely interest rates 25 years into the future.

The following tables show how these issues were resolved at two Stoke schools.

Blurton Primary School

Blurton Primary School is a typical post-war, single-storey, concrete-frame building. It has the usual problems of such buildings, including a leaking roof and windows and asbestos. There has also been a great deal of vandalism. There are two derelict buildings on the site but the main school would last 30 years or more with maintenance.

At first glance, the table below seems to support the refurbishment option, as the new-build cost of £850–950/m2 compares with a capital expenditure on refurbishment of £333/m2. But the Stoke authorities decided to demolish and rebuild. The reasons behind the decision are:

  • The M&E facilities are old and inefficient Energy efficiency is high on the list of performance targets, and there is a risk that Balfour Beatty could not meet the targets with the old equipment. Therefore, the cost of a new system would have to be added to the capital expenditure total within the first five years. A building management system helps energy-saving programmes because it takes the human element out of building control. It is more cost effective to install a BMS in a new building than to modify one in an existing school.

  • Sprawling school layout The school is divided into wings with long corridors, an inefficient layout in terms of heating, lighting and security. There is much wasted space because classrooms lead off only one side of the corridor, and there are too many external corners and hiding places for vandals or errant pupils.

  • Structural problems There is a considerable risk of structural problems within the concrete frame. The only visual indicators are spalling concrete, but this may extend to problems with reinforcement.

  • Maintenance backlog There is an extensive maintenance backlog and the total cost of the work is significant. It includes materials plus any call-out charges and the fact that disruption to the school could result in the failure to meet performance targets.

    The school does not meet current regulations for emergency lighting, water bylaws and disabled facilities. These regulations would have to be met as part of the refurbishment.

  • Lack of IT facilities The school has no IT facilities and to incorporate these would cause major disruption and expense. There is also the health and safety issue of trailing cables and suchlike.

  • Refurbishment would require a move to a temporary building With a new build scheme, there is enough space to build the new school before knocking down the existing building.

Grafton Infants School

Grafton Infants School initially looks like another candidate for rebuild as the report on the school refers to “a doubt on the stability of the fabric”. Grafton is a pre-1900 school typical of the period, with large windows and pitched tiled roof. On the surface, it looks worse than Blurton, yet Stoke’s advisers have recommended refurbishment.

The capital expenditure cost for a refurbishment is £666/m2, compared with a proposed new-build cost of £850-950/m2.

The reasons for deciding on the refurbishment route are:

  • Structural problems not as serious as originally thought The structural problems, although varied, are visible and straightforward to resolve.

  • Good layout The school has a good design with a suitable floor area and well located facilities; there are no wasted areas.

  • Good M&E facilities Two new gas boilers have recently been installed that, together with the required fabric refurbishment, should bring the building up to the required performance standards.

  • Plenty of space  The school’s area is satisfactory for today’s standards. Using the Building Bulletin 82 formula, the gross floor area works out at between 996-1123 m2.

Once the building has been repaired, there are few latent defects or risks. The school has stood for more than 100 years and there is no reason to expect that it will not last for another 30.

In comparing the two schools, it becomes apparent that the provider will have to weigh up the risks of each building individually, and this includes much more than just the capital expenditure costs and the life-cycle or occupancy costs. Although there is always an ideal solution for each school, the bottom line is that the budget limits what can be done and cash flow restricts what work can be done when.

Case study two: Hillingdon, west London

Jarvis is building the first new-build school to be constructed under the PFI. The £17m Barnhill Community High School in Hillingdon, west London, is a new school that will replace a secondary school that closed in 1993. Originally due to start on site in November 1998, the project was deferred for 12 months before being reinstated with a revised start date of December 1998. Despite the delayed start and an already tight construction timetable, Jarvis completed the first phase in September 1999, three weeks ahead of programme.

The 12 800 m2 school is being constructed and reopened over seven phases, with pupil numbers rising from 180 in 1999 to a maximum of 1450 in 2004. Phase one comprised a three-storey teaching block accommodating administration offices, classrooms (including temporary science, music, library and art rooms) and an all-weather sports pitch. The sports hall, main hall, dining rooms, changing rooms and music and drama facilities are being built as phase two of the project, with early access to some facilities secured ahead of the December 1999 completion date. Additional classrooms, staff room, and specialist IT, science, crafts and technology departments are scheduled for completion in September 2000.

Jarvis is responsible for the finance, design, construction and facilities management over the 25-year life of the contract. A detailed value engineering exercise at the beginning of the process allowed product specifications to be enhanced at an increase in construction cost but at lower FM costs.

These included: the specification of hardwood doors in place of softwood; Schüco windows throughout; stainless steel balustrades in place of mild steel; and high-quality stainless steel ironmongery, such as door locks and overhead closers.

Although the school has a substantial M&E element, low running costs were an important design feature. Natural ventilation has been used wherever possible and clerestorey windows provide a high level of natural light. Ease of access for maintenance was also a design consideration.

During construction, a strong management presence on site has ensured a very high level of build quality and finish to minimise the potential for defects or repair during the FM phase.

Jarvis’ main consultants were Citex Project Delivery, architect Terence O’Rourke, structural engineer Hyder and M&E engineer Buro Happold.

What a typical primary school should cost to maintain

Occupancy costs for primary school buildings have recently been assessed in Occupancy Costs for Typical Primary Schools, a report published by the RICS’ Building Maintenance Information service in December 1999. This report analysed two typical schools in detail, looking at the costs over five and 20 years.

The first school was single-storey and built using traditional construction methods. It was rectangular in plan, with 2319 m2 of space provided in 14 classrooms, three multi-use areas, a music room, main hall, staff accommodation, kitchen, storage areas and toilets.

The second school was based on the Consortium of Local Authorities Special Programme system, but at 1740 m2 was slightly smaller. It, too, had 14 classrooms and three multi-use areas. It also provided a library, assembly hall, dining room, kitchen, staff room and toilets. The main difference was that this scheme was arranged around two courtyards.

The average annual cost per 100 m2 was relatively similar for both schools. The main cost differences are attributable to variations between the schools in:

  • Decoration The larger window areas in the courtyards added costs, but the internal walls in the CLASP school were wipeable, so needed less decoration

  • Fabric The semi-open-plan layout in the first school meant there was less internal wall area than in the CLASP school

  • Cleaning The CLASP scheme had a greater window area.

Both schools are designed to accommodate 420 pupils, so the average occupancy cost/pupil a year is £13.59 for school one and £15.72 for school two. If external works are included, the costs go up to £13.90 for school one and £16.07 for school two.

With most school buildings, maintenance costs remain fairly static over the first decade, with internal redecoration usually taking place every four to five years and external decoration every three years.

At the 10-year stage, a number of major items need to be replaced or renewed (such as wall finishes and floor coverings) and heating and ventilation systems are likely to require either a serious service or replacement.

After 20 years, major internal and external decorations are to be expected and new electrical and heating systems are likely to be needed. Sanitary appliances are also likely to be upgraded at 20-year intervals. The figures below detail the average cost per year – over a 20-year period – to maintain 100 m2 of school.