Schools Forum Meeting of 2 July 2008 Agenda Item 3
Building Schools for the Future – Outline Business Case.
Author – Gordon Powell/Jim MacDonald
1. Introduction.
The Schools Forum received an initial report on the implications of the Building Schools for the Future (BSF) project at its meeting of 1 February 2007.
The project has now drawn up an Outline Business Case (OBC) for the first wave of schools (Wave 4) which will be submitted to Cabinet in September. The OBC will then be submitted through Partnerships for Schools (PfS) to the DCSF. Once the OBC is approved, the procurement phase of the project will commence. The OBC September approval is a key and time critical step to the completion of the first phase of works early in 2012.
Paragraph 1.1 (ii) of the Schools Forum Terms of Reference requires the LA to seek the view of the Schools Forum ahead of procurement commencing.
2. Purpose of the report.
2.1 The report seeks to gain Schools Forum’s understanding and views upon (i) the cost and funding implications of the OBC (delivery of the first wave of schools), (ii) the medium and long term affordability horizon for the BSF programme.
3. Headlines:
· The annual affordability gap for Wave 4 BSF is provisionally (pending final draft OBC) £1.0m - £1.3m per annum (0.2 – 0.3% ISB); this unlocks a government funded investment programme of over £130 million & enables us to progress with development work for future Waves. In endorsing the OBC we will be committed to meeting this annual contribution (for 25 years) starting in 2011-12.
· There is not any formal commitment to Waves 5 to 15 (ie delivery of the full programme for over 100 schools and other alternative education provision) at this stage. However the paper presents the affordability gap using Wave 4 as a precedent. Over the full life of the programme (through to 2020) the annual affordability pressure steps to £7.2m - £10.1m per annum (or 1.8 – 2.5% ISB). This would unlock some £1.4 Billion of investment in secondary, special schools and other provision.
· The medium and long term affordability will be assessed against other SCF priorities during the current budget planning round, led by SCF Senior Management Team
· There are no other funding opportunities to enable large scale transformation of the secondary estate
· There is precedent within Essex CC to funding PFI revenue pressure from within DSG
· There is precedent at other BSF authorities for the revenue affordability gap to be met from top-slice of either DSG or ISB; the affordability gap emerging from our modelling is consistent with that of peer authorities.
4. Progress to date.
4.1 A sample project has been determined which will include the procurement of:
· New build through PFI at:
o Cornelius Vermuyden; Canvey Island;
o Castle View, Canvey Island (on the Furtherwick Park site);
o Chelmsford NMSS (on the St. John Payne School site); and
· A Design and Build project (phase 2) at The Pioneer Special School; Basildon and
· A Local Education Partnership (LEP).
4.2 The nationally prescribed procurement model is through a LEP. The LEP will be a private sector company part owned by the local authority (10%); the government (10%), and a private partner. This approach will speed up the ongoing procurement. Once the initial procurement is complete, the LEP will deliver the remainder of Wave 4 of the project and, Waves 5 and 6 (the remaining schools in the South of the County) – this represents 25% of the entire secondary estate. If the approach proves successful, then the remit of the LEP will be extended to Waves 7 to 9.
4.3 The schools within the remainder of Wave 4 and the schools in the confirmed Waves 5-6 are set out in Annex A.
5. Funding issues.
5.1 The funding allocation for construction works for Wave 4 is
likely to be in excess of £123 million (at 2010-11 prices) with a further £7.7 million for a managed ICT service for these schools. Funding for Waves 5-6 (and beyond) is subject to government spending reviews but the DCSF say that they should go ahead. Whilst the sums of money seem very large, and are indeed unprecedented in scale, there will inevitably be issues surrounding affordability. Funding is intended purely for the schools element and hence there will be a need to join up funding from other sources for extended schools use, faith facilities, vocational centres etc.
5.2 The total capital cost identified at 3.1 is represented by PFI new build, Major remodelling and ICT. Annex B provides further detail.
5.3 Based on the experiences of other LAs, there is likely to be an affordability gap of around £250 per pupil per annum on the PFI element of the project.
5.4 Across wave 4, this could result in an annual shortfall (at current prices) of some £960,000 per annum once Wave 4 projects are complete.
6. Affordability issues.
6.1 As stated at 5.3 above, experience suggests that the PFI projects within BSF are likely to require revenue support . Based upon the current capital and revenue costs for the project, we have modelled scenarios with a range of £250 to £350 per pupil per annum. We have modelled for a higher cost scenario given the higher costs to debt funding (which underpins PFI) as a result of the conditions in the credit market. The graphs below highlight the implications for the schools budget of an affordability gap based on both £250 and £350 per pupil per annum. The %s are calculated against the Secondary and Special School delegated budget totals:
The graph highlights the affordability gap by wave through to the point at which the LA will need to meet the full cost of the BSF project. By 2021-22, the cost will have increased to £7.2 million (at £250) or £10.1 million (at £350). All prices are at 2011/12 prices.
The graph identifies the impact (in % terms) of the affordability gap when compared with the 2008-09 delegated budgets for Secondary and Special Schools. By 2021-22 the costs could represent some 1.8% (at £250 per pupil) or 2.5% (at £350) of the delegated budgets. This assumes neutrality between the indexed uplift for PFI and the increase in DSG. Of course the proportion of budget will be determined by future settlements and market conditions that are not known.
6.2 The views of the Schools Forum are required on issues around the affordability of the PFI element of the project:
· Does Schools Forum support the initial contribution of, in the range of £1.0m - £1.3m to enable the progression of the first OBC to Cabinet?
· Should the revenue affordability gap be shared across the full DSB such that the full education budget supports the programme recognising its benefit to the full education community
· Should just the Secondary and Special schools ISB be “top-sliced” to meet the affordability gap which may have risen to £7.2 million which equates to £88 per annum for every per pupil by 2021. Currently, per pupil funding in the secondary sector totals £4,032: £88 represents 1.8%
· If the overall secondary and special schools budget is to meet the affordability gap, then how should the individual schools contribute?
o The most recent completed school’s PFI project in Essex required each school to contribute to the maintenance of their buildings (as a % of its delegated budget) and meet the full real costs of soft FM services (cleaning, security etc)
· Assuming a contribution from the overall ISB, should the school contribution be dependent upon the size of its delegated budget?
· Should each PFI school meet the full extent of any affordability “gap”? Such an approach would add £250,000 to the budget of a 1,000 place secondary school each year (at £250 per pupil) and the ‘liability’ of any individual school would therefore be driven in significant part by the historical investment in that school; Schools Forum needs also to recognise that this approach could delay delivery of the programme due to the need to carry out individual negotiations
· Should the project be managed within the special grants available plus “affordable” school contributions (i.e. no affordability gap at all)? We could not commend this to Schools Forum; indeed this may not be possible as reducing capital expenditure and lifecycle costs would reduce the funds available.
7. Risks
7.1 With such an ambitious and long term project, the opportunities for price changes are almost infinite. As a part of the Project Plan, an extensive risk register has been and continues to be developed. The Project Team keeps the register of risks under regular review.
8.Governance arrangements.
8.1 Building Schools for the Future is a high profile project. Both the Local Authority and central government are determined to ensure that it is a success.
8.2 Annex C sets out the governance arrangements around the project. You will note that the all stakeholders are represented. BSF expertise from the private sector is also supporting the process.
9 How will we measure the success of the BSF project?
9.1 BSF is primarily a school improvement rather than a buildings project.
9.2 The LA and its advisors have been working with all of the schools involved in the early Waves, developing their education vision for the future, the schools’ Strategies for Change. The vision is a pre-requisite to inclusion in the programme.
9.3 It will be necessary to demonstrate how the BSF proposals are helping to deliver the school’s Strategy for Change.
9.4 The success of the programme will be measured against agreed Key Performance Indicators which are being developed in conjunction with the schools by SIAS and support advisers.
10. Conclusion.
10.1 The views of the Schools Forum are requested on:
· the revenue implications resulting from the delivery of a £1.4 billion BSF programme in Essex over the next 15 to 20 years and
· how any affordability gap might be addressed as set out at 6.2 above.
Annex A
Schools to be included in Waves 4 to 6 of the Essex BSF Project.
Wave 4 non-sample schools:
· A new build secondary school at Woodlands, Basildon delivered through PFI
· James Hornsby; Basildon (D&B)
· De La Salle; Basildon (D&B)
· Shorefields NMSS; Clacton (D&B)
Furtherwick Park School, Canvey Island
Beauchamps High School; Wickford
The King Edmund School; Rochford
Woodlands School; Basildon
Cornelius Vermuyden School; Canvey Island
The Fitzwimarc School; Rayleigh
The King John School; Thundersley
Castle View School; Canvey Island
Greensward College; Hockley
The Sweyne Park School; Rayleigh
The Deanes School; Thundersley
The Appleton School; South Benfleet
The Bromfords School; Wickford
De La Salle School; Basildon
The James Hornsby School; Basildon
Mayflower High School; Billericay
The Billericay School; Billericay
Hadleigh ISS Centre
Basildon ISS Centre
Homestead School (residential EBD)
Chelmsford NMSS; Chelmsford
SENaPS PRU - Fairview site
Waves 7-9: West Essex
Waves 13 – 15: Mid and North Essex
ANNEX B funding sources for Wave 4
1. PFI new build - £96.3m, funded by:
a. Government grant across the life of the contract
b. Lifecycle costs which form part of the contract, from the school’s budget;
c. Affordability gap, which previously has been funded from the dedicated schools budget.
2. Major remodelling and refurbishment through design and build contracts - £26.9m, funded by:
a. Capital grant for building works;
b. Devolved formula capital;
c. Capital receipts; and
d. An LA contribution; with
e. Programme overruns met from the authority’s capital programme
3. ICT managed service - £7.7m, funded by:
a. Standards funds
Appendix C
BSF Member Project Board
• Cllr Peter Martin - chair
– Cllr Anthony Jackson
– Cllr Michael Lager
• Cllr Simon Walsh
– Cllr Ray Gooding
• Cllr Jeremy Lucas
• Graham Tombs (senior responsible officer / project sponsor)
– Terry Reynolds (SCF)
• Peter Kelsbie (CPIS)
– Nicole Wood (CPIS)
• Gordon Powell
• Kathy Kirkham - PfS
• Martin Lipson - 4ps
• Schools’ Representatives
– Deborah Hollister
– Stewart Grant
BSF Officer Project Board
• Graham Tombs
• Gordon Powell
• Peter Kelsbie – chair
• Nicole Wood
• Ken Dobson
• Nick Bell
– Margaret Lee
• Dave Williams
• Terry Reynolds
• Roger Abo Henriksen
• Richard Waterhouse
• Barry Shaw
• Simon Neilson
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