From both sides: What the Stoke schools issues tell us about PFI

As featured in Partnerships Bulletin

Recent news reports on problems at one of the oldest PFI schemes don’t tell the full story, says Neil Okninski, senior director at Local Partnerships 

A recent article on the BBC website highlighted myriad issues at Stoke-on-Trent City Council’s grouped schools PFI scheme. As the biggest PFI scheme in the largest Departmental portfolio¹, this is a hugely significant project and while some of the difficulties arising will be related to incorporating refurbished properties into the PFI Model, serious issues around (lack of) build quality have been identified previously at schools delivered via Public Private Partnership (PPP) models with the Edinburgh schools² case of 2017 the highest profile example.

As is often the case with PFI, however, there is another side to the PFI debate. This was highlighted in the Radio 4 documentary, The Great PFI Debt, where some facilities are lamented for being over-specified and maintained to such a high standard as to ensure a two-tier estate across a local education authority based on the PFI’s contractually binding levels of maintenance and handback provisions with associated cost implications. 

Reporting on PFI projects can give rise to strong feelings, regarding both the model itself and the nature of facilities often being delivered, such as hospitals or schools, but what lessons can be learned from these cases, both in terms of existing projects and any potential new models, specifically regarding asset quality. 

“How can asset quality be ensured both in existing PFI projects and any new, similar models?”

First and foremost, any issue with poorly designed or constructed facilities is exactly that, rather than a function of the method of financing. Likewise, where contractually required (and budgeted) ongoing and lifecycle maintenance levels aren’t delivered, this is not solely a PFI issue rather one of poor contract management. So how can asset quality be ensured both in existing PFI projects and any new, similar models?

As a first step, Authorities need to resource contract management effectively to ensure their PFI contractor fulfils their contractual obligations. As the White Fraiser report points out, there is a distinction between self-monitoring and self-reporting, with the onus on an authority to ensure it receives what it is paying for. Noting authorities’ resources are stretched in all areas, an NAO report highlighted the need for the Infrastructure and Projects Authority (IPA) to work with Departments to provide support to these projects. To this end, there is an IPA PFI Contract Management Board and Local Government Budget, which has identified projects in need of support as well as wider issues to be addressed with resources to deliver guidance and assistance. Authorities are advised to seek out all such available support. 

The Stoke project highlights the issue of expiry and associated asset condition as well as that of poor facilities over projects life, albeit these are exacerbated by the refurbished nature of several project assets. Local authority schemes account for 43% of all PFI projects expiring over the next 7 years, with approximately half of these being schools’ projects. Authorities are again advised to familiarise themselves with the IPA guidance and avail themselves of all available support ahead of time. 

“Local Partnerships are advising a number of authorities on how best to establish suitably robust governance structures”

To ensure effective contract management and expiry planning and delivery, not only must adequate resources be identified, but the relevant structures within the public sector organisation must be established to allow effective decision making and project governance. Local Partnerships are advising a number of authorities on how best to establish suitably robust governance structures and these lessons will need to be disseminated to ensure lessons are learned across the PFI estate. 

Finally, any new PPP models will need to ensure appropriate focus is paid to asset condition during construction, upon completion and ongoing through the project term. Authorities will always need to maintain an appropriate level of internal resource and governance structures, but standard form contracts must be developed to provide requisite safeguards. To this end, the Mutual Investment Model in Wales, for example, includes not only an Independent Tester, but also a requirement for a BIM Information Manager, Clerk of Works and M&E Commissioning Manager and Independent Tester with a detailed commissioning programme highlighting roles and responsibilities. Anecdotally, both contractor and authority feedback is that the associated discipline has been welcomed and the assets being delivered are of the highest quality. 

There is much work to be done to ensure appropriate asset quality both during and post PFI operations. Authorities must ensure, wherever possible they are suitably resourced and informed while working with their Contractor to resolve issues in a timely and effective manner. Support is available to assist with this and lessons can, and should, be learned by all authorities that have these projects, with any new delivery models to be developed accordingly.