Jarvis' fortunes set to turn as FM contracts sale begins

The sell-off of Jarvis' loss-making facilities management contracts begins today, with documents detailing the projects being sent to interested bidders.

It is understood that the sale of four, believed to include the Wirral and Liverpool schools schemes (see table), will return the group's FM work to the black. All but one of the remaining 24 contracts are profitable.

The sale is being organised by the Secondary Market Infrastructure Fund, which took over a large chunk of Jarvis' PFI contracts at the height of the contractor's problems in early 2005. However, Jarvis retained operations contracts, such as FM and construction work, on a number of these schemes.

A source close to the sale said: "All Jarvis is looking to do is terminate these contracts. What it is willing to to do is cover the difference if the FM contractors submit prices that are higher than they charged. This all follows extensive discussions with the local education authorities and central government."

In effect, Jarvis will pay a compensatory sum to the special purpose vehicles running the projects if, as seems likely, the new FM providers demand a higher payment. It is difficult to estimate what this might be, although a source said it could be hundreds of thousands of pounds on any one contract.

It is hoped that one or more FM contractors will be selected by the end of April. Four have been approached, and they can bid for a single scheme or combination of contracts. The documents sent out include information such as site surveys and employment details.

SMIF confirmed that it was in discussions with Jarvis and other contractors to deal with its non-core business, but declined to comment further.

A spokesperson for Jarvis said: "We have already exited from 14 FM contracts in three separate deals and have told the market that we will exit others if and when the opportunity arises."

Jarvis' FM contracts have a turnover of just £45m, but the loss-making schemes represented a drain that could have lasted 25 to 30 years. Alan Lovell was recently quoted as saying five FM contracts still suffered "significant losses".

Andrew Sutton, the former chief executive of Jarvis Accommodation Services, has re-emerged in the industry as commercial director at fit-out group Curzon. Sutton had been on gardening leave since he left Jarvis in February 2004 following a profit warning because of contract delays.

Curzon used to be known as Jarvis Newman and was part of Jarvis before a management buyout.