How do pfi schools work

However, the charge for this does not just include the cost of a caretaker opening and closing the facility, but also assumptions based on the amount of wear and tear that will be made on the building, and the implications of this for lifecycle replacement. All of this could mean that opening costs are several times more expensive than would be imagined. The situation is exacerbated in that the unitary charge to the authority and the schools includes these costs, whether or not the school is actually open for that particular period of time — meaning that these already excessive charges could be made for a service that is actually never fully used, or indeed not used at all.

However, this exercise is carried out by the management company, who ultimately work in the financial interests of the SPV, not the end-user. As such, it should be no surprise that after these reviews, costs always rise. Because constructing a building is the riskiest part of the operation, these insurance costs are highest at the start of the operation. However, on-going insurance costs are often set at this increased level and fixed for the duration of the contract, indexed at the rate of inflation at the time of the contract start.

The expectation is that these costs would reduce over time, with savings passed on to the end-user. This has added up to tens of thousands of pounds not being available to individual PFI schools each year. From this it can be seen that in order to achieve bonuses, the management company actually has to act in the interests of the SPV, rather than the local authorities and the schools.

It is important to note that in many cases the local authority finds itself caught between the demands of the SPV, central government and those of the schools. Let me give two examples…. However, these are often not sufficient to pay for the unitary charge, not least as this often rises throughout the duration of the contract. In these cases, non-PFI schools end up having to contribute to the unitary charge, a fact of which they may well be unaware.

Second, while many authorities realise they had little choice other than to accept the PFI contracts, they are at the same time responsible to central government for ensuring that their PFI estate is managed in accordance with government expectations. Given the fact that the contracts are complex, and that local authorities are often under-resourced to deal with issues of this level of complexity, tackling unjust PFI contracts can, sadly, be perceived as simply too difficult a task to undertake.

Indeed, at one point, these risked bankrupting us in the medium term. At one point, I became so frustrated with the whole process that I simply stopped paying the bills. This achieved nothing however, other than a somewhat humiliating climbdown. Undeterred, I persisted in trying to find a way to renegotiate the contracts. By our finances were in a critical position, but at that point, our local authority was good enough to put me in touch with CPP.

This established that the academy was paying considerably more than it needed in order to ensure the building remained in a good state over the life of the contract. It was painstaking, detailed work, but at the end of it, we were able to terminate and renegotiate our contracts, demonstrating that we could quite legitimately reduce our payments without jeopardising either the maintenance or long-term condition of the building.

Armed with this high-quality piece of analysis, we put both our contracts out for retender, and ended up successfully recontracting with the same provider for a significantly lower sum. The local authority officer responsible for managing this work was happy to authorise the PFI contract variation, and as a consequence, we saved a six-figure sum every year for the life of the contract — in our case, another 17 years.

While the process of renegotiating the contracts had certainly been a challenge, I became very interested in this area. I just could not believe the apparent level of, in my opinion, excessive profits being made by the management services companies at the expense of schools and pupils.

With this in mind, I approached CPP and suggested that we establish a venture to tackle this issue more widely and effectively. We formed ProjectPFI as a vehicle to expose the issues and offer practical solutions delivered through the CPP operational model, the aim being to make more money available to schools for core services. To this end, we have three priorities.

From our experience, we have found that typical savings can be made by using specific clauses of the PFI contract to:. PFI as a system enables the contracting parties to design expensive buildings, which are expensive to maintain and run, with expensive insurance policies in place, with little or no say for schools in reducing these costs.

A further injustice is that schools can be given the impression by the SPV and its partners that there is nothing they can do to rectify the issues. But my experience has shown that by working in partnership it is perfectly possible for very large savings to be made. For example by performing the FM poorly. A PFI contract generally lasts 25 years and, at the end of the contract, the new facilities built by the contractor are transferred back to the local authority, trustees or governing body, depending on the category of school that entered into the contract.

This flows down certain rights and responsibilities under the PFI to the governing body. If a local authority were merely to detach the school from the PFI, it is likely that they would have to make additional contractual payments to the contractor. Because of this, conversion to academy status does not offer schools a cost effective opportunity to remove themselves from existing PFI contracts.

This commits the academy to meet its PFI obligations usually in the same way as provided for in the existing GBA, although certain new obligations may be included and entitles it to continue to receive the PFI services. Any specific service or other issues that have arisen to date under the PFI can be considered at this point. This aims to ensure that the local authority is not financially worse off as a result of the conversion — for example should the academy fail to make its PFI payments.

Further complexities arise where the converting PFI school is part of a group for example a multi-academy trust with others which are not subject to a PFI or where school premises are shared, in which case a shared use agreement may be required. Focus on MAT mergers - a guide for academy trust leaders and trustees A joint guidance paper written in collaboration between Browne Jacobson and the National Governance Association NGA on academy mergers within the education sector has been released today.

Legal updates. A policy in the sun As we approach the end of a particularly turbulent academic year, finding the time, energy and buy-in to review school policies may seem less likely than finding a holiday cottage in Cornwall for mid-August. View all. Our people. The school is not party to the contract; it exists between the local authority and the PFI contractor. The authority is responsible for managing and enforcing the contract, but there is a cost to schools of training staff to monitor service provision.

The authority pays a fixed monthly charge for the capital investment, facilities management and any IT services provided. Schools contribute to this charge, as well as to the costs of any additional work undertaken by the facilities management provider.

The monthly fixed-charge rises with inflation, and additional works are usually subject to a management fee, which could be up to 15 per cent of the cost of the work. One of the appeals of PFI is the assurance it gives schools that buildings, fixtures and fittings will be maintained to nearly-new standards.

In some cases, schools are very happy with these contracts. There is a flip side, however. There should be flexibility to redirect these funds to meet changing curriculum needs or to update the toilet block that actually needs it.