If your idea of a secondary school is a row of scruffy huts with leaky roofs, think again. As education provision falls under the media spotlight, we examine the progress of the first PFI school projects and finds facilities management passing the test
Five years ago, Ian McDonald was in a fix. Glasgow's 39 secondary schools were falling apart but the council couldn't afford to meet the £100m repair bill without hiking council taxes.

McDonald, depute director of education at Glasgow City Council, had the grim evidence in front of him. St Paul's High had become a hang-out for vandals, attracted by the nearby shopping centre. Hillhead High was plagued by leaks and heating breakdowns, and at Holyrood Secondary, huts were gradually taking over from classrooms. Urgent action was required if the council was to deliver the kind of modern schooling environment parents and teachers had a right to expect.

The problems facing Glasgow were not uncommon. Councils up and down the UK have been struggling to meet a backlog of school repairs brought about through underinvestment. At Glasgow, the education team approached the Scottish Office for advice. A Private Finance Initiative (PFI) was proposed.

It was a risk. Project 2002, which will bring Glasgow's schools up to scratch for a capital injection of £220m, is the UK's largest PFI education project. The cost of maintaining the 29 schools over the next 30 years will be £1.2bn at today's prices.

But by spreading the costs of construction and ongoing maintenance, PFI will deliver the facilities traditional procurement methods could only have provided over a much longer time frame. PFI allows Glasgow City Council to budget, knowing there will be no unanticipated costs. It is also bringing facilities management to the fore in a way that could not have been envisaged 10 years ago.

To put PFI into perspective, 31 projects have reached financial close between 1997 and June 2001, accounting for 449 schools. According to the DfEE, the total capital spend it funds through PFI credits is £810m.

The biggest players are 3ED — the consortium comprising Amey, Miller and Halifax, which operates Project 2002 in Glasgow; Balfour Beatty, which runs schools in Stoke; Pyramid Schools Sheffield, operating six schools in Sheffield, and Jarvis, with assorted projects around the country.

Warm, dry, clean classrooms are the biggest plus points for McDonald. 'Being able to make a single call for construction and facilities management is a relief. In the past, if a classroom was dirty due to building works, it wasn't always clear whose responsibility it was. PFI puts in place a quality management system.'

At Sheffield City Council, Paul McCormick, education officer — PFI and premises management is pleased with PFI. 'We could never have opened six schools at once. Is it value for money? Nobody knows yet. The proof will be five to 10 years down the line, but to date we've had no problems in terms of non-delivery of service.'

From the contractors' point of view, PFI has brought about many benefits. Henry Lafferty, chief executive of Jarvis Accommodation Services, says: 'PFI provides a regular stream of quality income, making it easier for analysts to value our company. It is a combination of longevity of demand and visibility of earnings.'

Gaynor Birley-Smith, special purpose company general manager, Pyramid School Consortium, says PFI has been a key factor in Tilbury Douglas' evolution into Interserve. 'We have moved from being quoted as a construction company to being quoted as a support services company. We are looking for long service contracts.'

With facilities management at its heart, PFI has also broken the old cycle of build and go. Lafferty says: 'It delivers serviced accommodation. Head teachers can concentrate on the core business of providing education without worrying about a leaking roof. Councils pay for the assets as they use them and, because of the predictability of outgoings, they can plan more effectively.'

There are downsides of course — the cost of bidding is high and there can be only one winner. Amey, for example, worked for 18 months on its Project 2002 bid before Glasgow City council announced it was the preferred bidder.

Lafferty agrees projects are time consuming and expensive to bid, but believes this ensures 'only the fit enter the race'.

He says: 'We don't win every project and are always disappointed if we lose, but to stay ahead we are driven to provide better value for money the next time we bid.'

In the last few months, Interserve has been named as the preferred bidder for schools in Manchester and Southampton. In Sheffield, the Pyramid School Consortium comprises two equity partners, Interserve and investment company Innisfree, with two main subcontractors, Tilbury Douglas Construction and Interserve FM. The contract is worth £250m over 25 years for a capital cost of £55m. Two of the six schools, Owler Brook and Mosborough Primary School, are now open.

Birley-Smith explains each school has a facility supervisor, plus a facilities manager who oversees all six schools. An Interserve facilities management helpdesk will be situated at Ecclesfield school when building works are complete. Out of hours, the Interserve Bureau in Birmingham, will man emergency calls.

A similar arrangement has been implemented by Jarvis. Each of its schools has a contract manager who reports to a regional director. In addition, there is a helpdesk for normal working hours, reverting to Jarvis' York-based control centre out-of-hours. The call centre services the company's other PFI projects, such as rail, roads and university accommodation.

The serviced element of PFI is one of its chief attractions. Contractors are paid according to the level of service delivered to schools. The payment mechanism measures services, such as heating and clean floors, on their availability and performance. For example, if the heating failed and a classroom could not be used as a result, there would be a fee deduction. However, the size of the deduction depends on how many pupils are affected. A leak in a broom cupboard, for example, would not be as severe as a leak in the assembly hall.

PFI contractors keep in regular contact with their clients. At 3ED, Charles McLeod, general manager, says the team meet Glasgow City Council every month to discuss areas that could be improved and ideas that could be developed.

'The main challenge is to provide a solution within a financial model,' says McLeod. 'Maybe we haven't met individual teachers' expectations, but we have met the council's requirements.'

Outside school hours, contractors can open up schools for complementary activities. Lafferty says the income generated by this can contribute to the running of the school. 'It also brings the community into the school and vice versa. There can sometimes be problems when a school is isolated from the local community.'

So what happens at the end of a PFI contract? This depends on the council. Generally there are three choices — to renew the agreement, walk away from the asset or keep the asset. If the council chooses the latter, it can either take over the management of its schools itself or appoint another contractor.

The idea of walking away from a school, especially when it will be well-kept, may seem like madness. But as Lafferty explains, the decision is not so clear-cut. Some schools currently earmarked for demolition are just 30 years old.

'Buildings typically have a 25-year fashionable and technical lifespan. If built to a high standard, which will be the case with PFI projects, the building itself will be good for 60 years. But buildings don't wear out, they ugly out.'

And there are other factors which may effect a council's decision. As demographics change, the location of certain schools may no longer be deemed appropriate.

While no one knows how PFI will be judged in 30 years, for now at least councils appear to be happy with the level of service contractors are delivering. So what's next? Will the provision of schooling follow facilities management down the PFI path?

The answer is it is already happening. The DfEE holds a list of education providers, including Nord Anglia and Cambridge Education Associates, which it approaches when a Local Education Authority (LEA) intervention becomes necessary.

And last month, Surrey County Council announced it was to hand over the management responsibility of Abbeylands comprehensive school to education provider Nord Anglia. It was the first time the request had been made for a school not deemed to be failing.

Lafferty does not rule out following Nord Anglia's example. 'If our clients wished to outsource education provision then we'd be foolish not to consider this.'

He cites the example of prisons. 'About 10 per cent of the current prison market is managed by the private sector. This seems to be the politically acceptable level — it can be used as a benchmark to rate the public sector. If this were the case in education, it would account for about 3,000 schools. The big difference is that we would be front of house.'

The outsourcing of schooling is not an option McDonald at Glasgow City Council is keen to consider. 'Everyone has a range of expertise,' he says. 'I think the education of young people is best left as a public service.'

While McDonald is happy for contractors to take over the management of his schools, the education of the city's pupils is sacred.

It’s bonny on the clyde

In common with many education providers in the mid-nineties, Glasgow City Council was experiencing soaring school maintenance bills against a backdrop of declining pupil numbers. In 1996, the council estimated there was a surplus of 21,000 places at its 39 secondary schools, with no major demographical changes anticipated. Faced with a £100m backlog of maintenance work, the council did the maths, closed 10 schools and appointed a contractor to build 11 new secondary schools and upgrade the remaining 18. The contract was awarded in July 2000 to 3ED, the consortium comprising Amey, Miller and Halifax. It is worth £1.2bn over the next 30 years, making it the largest PFI education project in the UK. Project 2002 is Amey’s first venture into educational PFI. The company has recently been named the preferred bidder for a bundle of schools in Edinburgh. Two schools have been completed in Glasgow, with the remainder scheduled to open by the end of 2002. The exception is St Thomas Aquinas Secondary, due in late 2003. Unusually, 3ED is providing an interim facilities management service while the schools are being rebuilt or refurbished. It has also effected over 600 Tupe transfers, as well as managing pupil decant. ‘It’s quite a challenge,’ concedes Ian McDonald, depute director of education, from his office on Glasgow’s India Street. ‘In terms of facilities management, the existing buildings are not that pretty. There is a small tendency that 3ED will be judged on their interim service, but staff understand they cannot expect a premium service from the start, it’s a phased thing.’ Teachers and pupils are already feeling the benefit. At Holyrood Secondary, new accommodation is replacing the rows of huts. Over at Hillhead High, double glazing has been installed, with tinted windows in south facing walls to minimise glare and heat from the sun. And St Paul’s High, which was plagued by vandalism, has moved to a parkland setting with modern security, including 24-hour monitored CCTV. The head teacher is known to compare his new park campus to Harvard University. Along with the obvious benefits of a premium schooling environment, the provision of IT is set to raise education standards across Glasgow’s schools. 3ED is contracted to provide a managed IT service, guaranteeing one computer for every five pupils, a laptop for every teacher by August 2002, email addresses for pupils and staff and remote helpdesk support. But any project the size of Project 2002 is bound to have its critics. A recent article in The Observer suggested the project was in difficulty, with six swimming pools due to close, science lab benches facing the walls instead of teachers, fewer games halls and smaller and fewer classrooms. ‘The truth is the opposite,’ counters McDonald. ‘We have larger classrooms and have opted for an innovative design in the labs, with experiments carried out on the periphery for safety reasons.’ As for the swimming pools, McDonald says Glasgow is ‘very well endowed’ for pools and where new schools are situated near major swimming facilities, pools have not been provided. ‘It costs the council £40 per pupil per dip. Since swimming pools are expensive to run and schools have free access to pools, we have decided to make more use of dry facilities.’

Jarvis cock-a-hoop at burgeoning PFI portfolio

Education is just one sector in which Jarvis Accommodation Services is embracing private finance procurement. It runs PFI projects at healthcare facilities, town halls, courts, universities and military establishments. Unlike the vast majority of PFI education contractors, Jarvis does not work with consortium partners. However, in the area of LEA intervention, where the private sector provides a schooling service to ‘failing’ schools, Jarvis has teamed up with Nord Anglia and is now the final bidder for the Waltham Forest contract. To date, the company has been appointed preferred bidder or has won 15 PFI contracts to provide and maintain facilities at 78 schools across the UK and Ireland. Recent wins include two contracts for schools in the Metropolitan Borough of Wirral and the Metropolitan Borough of Kirklees, which have a combined whole life value of £526m. In the Wirral, it will build two new schools and redevelop seven others, expanding existing services to over 9,200 pupils. Facilities management will include caretaking, transport, cleaning, catering and security over a 28-year period. At Kirklees, Jarvis is contracted to modernise, upgrade and deliver facilities management to 20 schools over the next 30 years. In a pathfinding agreement, Kirklees council will join Jarvis and Barclays Infrastructure Fund as an equity partner. The council will hold 30 per cent of the company, making it a partner as well as a client. In April, Jarvis announced it has been appointed preferred bidder to build 15 new schools and refurbish three others in Liverpool. It is the largest new school building programme in the UK and has a whole life value of £252m over 25 years. Henry Lafferty, chief executive officer, Jarvis Accommodation Services, says: ‘We prefer new builds because they provide more flexible space and many old buildings are technically obsolete. New buildings are more efficient to heat and operate, are made of very modern materials, are more environmentally friendly, and clients like them.’ He adds that new builds do not disrupt pupils’ routines in the same way as refurbishments. One of the major benefits of PFI is that contractors have an incentive not to cut corners. Since fees depend on the smooth running of a school over the terms of the contract, they cannot afford to install cheap boilers or use inferior materials. ‘We are competing on whole life costs,’ says Lafferty. ‘We will always install an expensive boiler as opposed to a cheap and cheerful one. We spend more on a school than the public sector comparison, but the building is cheaper to run over 25 years.’ Lafferty says Jarvis has carried out research into the most hard wearing components of school buildings, such as floor coverings. And while the procurement of fixtures and fittings is a new field for the company, Lafferty says Jarvis works with specialist providers to ensure desks and blackboards meet with teachers’ and pupils’ requirements. The contractor has also implemented some innovative measures, such as a school dinners cards for pupils. Under the new system, children who receive free school meals should make harder targets for discrimination, and because cash has been taken out of the equation, bullying should be reduced. Elsewhere, wider and shorter corridors have been built which Lafferty says encourage the free flow of traffic and act as a deterrent to loitering.

Source

The Facilities Business