Key Points on PFI BSF
funds are allocated on the basis that 50% of the floor area within
each local authority’s BSF
project can be ‘new build’ i.e. completely new
facilities will be built. The remaining floor area is funded so that 35%
can be remodelled and 15% undergo refurbishment. The floor area is
calculated using the national space guidelines for secondary schools in
DCSF Building Bulletin 98 for the current number of schools in that
Pupil numbers are also used in the calculation and are based on the 10
year projections agreed with the local authority. These can allow, for
example, for any proposed rationalisation.
Funding for running costs once the school is built will come from the DCSF
rather than the local authority.
Once the managed service is in place, schools will pay an annual service charge. This will be negotiated with the local authority in advance of signing the managed service contract and will be covered by the agreement between the governors and the local authority.
Payment for the ICT
assets (e.g. hardware, network components) and
the services within the implementation period will be made by the local
authority to the LEP on a school by school basis.
The payment for the implementation will normally be made in three
■ 70% will be paid following satisfactory completion of
■ 25% will be paid following a period of two consecutive months
during which the performance of the ICT
at the school has been of a sufficiently high standard; and
■ the final 5% will be paid upon successful implementation
of the area wide network across the schools and will therefore
follow the implementation tests for the final school. BSF
funding does not cover staff resourcing and it is estimated that local
authorities will spend the equivalent of 2-3% of their total BSF
deliver the programme locally. Likewise, school governing bodies need to
agree in principle to commit future revenue funding to buy agreed levels
of service for ICT
, facilities management, maintenance and any services
provided through a PFI agreement.
In PFI, a private sector partner is awarded a contract to design and build a
school and then to operate and maintain that school (and provide related
services) usually for 25 years or more. Often that private sector partner
comprises a consortium of organisations, working together and
co-ordinated under one umbrella, called a Special Purpose Vehicle (SPV).
The SPV is also responsible for raising the necessary finance for the project.
With PFI there is considerable scope for innovation: the local authority, together with the school(s), sets the overall objectives (i.e. building a school with specified facilities and operating it to set standards) in a document known as an Output Specification. The local authority then invites prospective contractors to bid and price their proposed solutions to those requirements.
Under a PFI contract, the SPV provides, pays for and operates the
school buildings over the period of the contract. It therefore acts as if
it is effectively the owner of the school buildings. However, the local
authority, or trustees (in the case of a VA school) retain the freehold of
the site, and the SPV has a lease or a licence to use or occupy the site. At
the end of the contract the whole school reverts to the local authority or
governors (or trustees for VA). When the buildings are handed back they
must be ‘fit for purpose’ for a period beyond the end of the contract.
Existing schools with new facilities provided under PFI are operated in their
entirety under the contract. It is not practical or desirable to have parts of
schools subject to such long-term agreements, whilst other parts are not.
Where a LEP is formed for the delivery of BSF
projects, it will set up
and invest in an SPV for the PFI contracts. Many organisations and
consortia bidding to form LEPs are composed of companies with previous
experience of PFI contracts. The LEP will normally be composed of at least
80% private sector to 20% local authority.
Once a contract is signed, the local authority receives financial
support towards the cost of the contract through revenue support
from the government. However, this contribution, whilst substantial, is
intended to cover only that part of the unitary charge relating to the
repayment of capital and life cycle maintenance. The local authority will
therefore need to cover the remainder of the charge, often referred to
as the affordability gap or an increase to the council’s contribution. It
should, however, be noted that the service specification for PFI schools is
often set at a higher standard than conventional service contracts.
The local authority pays a monthly fee called the Unitary
Charge to the SPV to cover its capital repayment and service delivery
costs. The Unitary Charge is subject to inflation on pre-agreed indices and
is subject to benchmarking (soft services costs only) at periodic intervals,
usually every 7 years.
In a school provided through a PFI contract the headteacher is no longer
directly responsible for many aspects of the school buildings – the
responsibilities are transferred to the contractor (which has a contract
with the local authority rather than directly with the school).