Industry warns that unusual PFI strategy could result in short-term savings but not long-term value
Contractor consortiums bidding for work under the government’s flagship £2bn PFI schools scheme will not be told the targeted cost of schemes before they bid, Building understands.
The move, which is being advocated by government officials and is understood to be close to being approved, is designed to force down the cost of schools schemes under the Priority Schools Building Programme (PSBP).
Contractors and their design teams will be asked to bid on the basis of an “output specification” which will set out design goals, without guidance as to the earmarked capital cost or the amount of unitary charge they will be able to recover in regular payments from the client under the terms of their PFI contract.
One source said: “Before, it was all about setting the envelope and then teams working towards a number. This is about having more incentive to get a better cost, but in many ways it’s quite radical.”
The move, which runs counter to usual practice for PFI contracts, has led to concern from some within the schools construction sector that contractors will simply focus
on lowest possible cost, rather than on trying to get the best long-term value that can be extracted from within a set
Chris Gilmour, design and marketing director at Bam Construct, said: “The industry works best knowing and working within constraints. With Priority Schools, if they’re not telling us
a unitary charge, it becomes open ended. We would hope that when PSBP comes out, they will not only tell us what they want, but what they want to pay.”
Simon Lucas, head of education at EC Harris, said he believed contractors should be “cautious” until seeing the full procurement documentation as the government could manage price certainty in different ways.
“I can’t believe that the government won’t focus on best value,” he said.
Peter Lauener, chief executive of the Education Funding Agency (EFA), told last week’s Building Future Education conference in London that once the PSBP programme was announced, the EFA would arrange sessions with potential contractors to explain the new procurement system.
He said: “There will be opportunities to engage with us, and we are continuing to work with the PPP forum and the CBI to facilitate a dialogue with industry.”
A list of schools to be included in the programme is expected to be announced imminently by the Department for Education.