Stoke council bosses are locked in dispute over almost 3,000 school building issues just months before England’s biggest education private finance initiative (PFI) contract ends.
Local authority chiefs in Sheffield also fear legal action from trusts if they fail to ensure a PFI company meets contractual obligations to return schools back to state ownership in good condition.
Meanwhile, multi-million-pound court rows have also erupted in Lancashire over alleged defects in a number of schools built through similar deals, which are now coming to an end.
‘Zero-sum game’
Andrew Chubb, of advisory firm Project PFI, says the contracts are a “zero-sum game”.
“Every pound the contractor has to spend on making sure the school is handed back is a pound less for their company… [but] the school needs the most spent in line with making sure it’s in the condition it’s paid for under the contract.
“If that isn’t done in good time, then the chances of schools being handed back in a less than perfect condition are far higher.”
Successive governments have used PFI to fund new schools since the late 1990s.
Private companies build and maintain sites in exchange for mortgage-style payments, normally over 25-year contracts – which rise beyond inflation – before handing them over to taxpayers.
Stoke has 88 schools built under a PFI contract due to end in October. It’s the largest school PFI contract in the country.
But during a meeting last year, the local authority revealed that the findings of its own surveys have prompted disagreements with the PFI company, Transform Schools (Stoke) Limited, over work to be undertaken before handback.
Figures shared during the meeting suggest almost 36,000 assets – from roofs and boilers to tables and chairs – were analysed during the checks.
Almost 8 per cent – about 2,800 items – are at the centre of “dispute resolution discussions”, where the council believes an item requires action before the contract ends, but the PFI firm disagrees.
The Sheffield story
In Sheffield, six PFI schools are due to reach the end of their contract next August.
Each of the schools “is due to be returned… in broadly similar condition to the point at which they were when new-built, but subject to ‘fair wear and tear’”.
Council papers show the authority carried out its own surveys, comparing its results with information from the PFI company.
This exposed “differences” that “will be the main area of focus as we move towards handback”, the documents said.
The company proposed to undertake £5.6 million of work in 2024-25.
But the authority believes “major risks” are whether that is achievable and if the £900,000 this would leave in the “lifecycle pot” – cash built up to cover maintenance projects – “is wholly sufficient… for return of assets”.
Minutes from a meeting of the area’s schools forum last summer also show leaders are concerned “there is inadequate time to undertake the building work required and [about] the implications if this is not possible”.
Sheffield says it will work to “hold the PFI [company] to their contractual obligations to return the school assets in the contractually agreed condition”.
But if this doesn’t happen, the council will need to pay for any outstanding work from its capital funding, “adding to our own financial exposure”.
19 PFI deals expiring in three years
Meanwhile, a series of legal fights, totalling £11 million, have erupted in Lancashire over alleged defects in a number of schools. Court documents show Lancashire council also wanted to make deductions of about £3 million to PFI payments.
The first of these deals will end in 2033.
The company at the centre of one of the disputes argues if there is an issue, it’s the result of breaches of the building or facilities management contracts, held by other companies.
The cases again expose the huge issues hollowed-out councils face in ensuring schools do not lose out under the complex deals, which often involve multiple companies.
Just two school PFI deals have expired. Four more will end this year, with 15 more finishing by 2028.
In 2021, the Cabinet Office started running health checks on contracts set to expire in less than seven years. In March last year, just two of 41 checked were deemed to be on track. One in five was found to need “major” additional work.
Your thoughts