The firm overseeing England’s biggest school PFI contract is planning to “go into liquidation” with millions of pounds worth of building repairs work still outstanding.
Transform Schools (Stoke) Ltd (TSSL) was responsible for maintaining 88 schools in Stoke-on-Trent built under a private finance initiative (PFI) contract, which ended on October 25.
It is one of the first school contracts to end.
But as of late August, £7.2 million of “hand-back works” were still yet to be completed by the PFI company, Stoke council previously said.
While the firm said £2.3 million of the works had been completed and just needed sign off, the council had stumped up £3.5 million of taxpayers’ cash to fill the void.
However, in a letter to schools sent on Thursday and seen by Schools Week, the council said TSSL has engaged an insolvency practitioner and is “taking steps to place the company into a creditors voluntary liquidation”.
Work remains unfinished
This means the firm’s directors have taken the decision to shut while a row over who stumps up for outstanding school repairs rages on.
But in a statement the council said it has “planned for this scenario” and aims for all outstanding works to be completed.
But this will be funded by “using a blend of remaining handback funds, other funding legitimately withheld from TSSL for non-delivery of contractual works, and the council’s own resources”.
In the letter to schools, Stoke council chief executive, Jon Rouse, said TSSL had “a number of unpaid creditors (suppliers) for works provided to schools”.
He added: “The council understands that some of TSSL’s contractors may be left unpaid or part-paid, and that not all commenced works have been fully and satisfactorily completed.
“The council appreciates the concern that this may cause schools and it continues to engage with TSSL and its insolvency practitioner to discuss possible options available in respect of these, as well as with schools directly.”
The council said it had entered a “supplemental agreement” with TSSL in May to provide “a back-stop period for works to be completed”.
Council ‘has planned for scenario’
However Stoke said in September it would pay as much as £3.5 million to cover “extra costs caused by the impact of high inflation” since hand-back condition surveys were carried out.
Rouse added: “The council would like to reiterate its commitment to ensuring that outstanding works that were a PFI responsibility are completed.”
A “specific helpline for creditors” has been set up, and the council “will be working through these issues on a case-by-case basis”. A dedicated mailbox has also been set up.
In a statement, a Stoke-on-Trent City Council spokesperson said: “First and foremost, we want to reassure schools and parents that we have planned for this scenario and our intention is to work jointly with schools to establish a final list of outstanding works and agree a clear position on responsibility, the nature of the work required and who is best to deliver this work.
“We continue to hold the remaining PFI funds to be applied for this purpose, as well as the additional resources we have committed as a city council.
“Our commitment remains to deliver the best possible outcome and ensure that children in Stoke-on-Trent have safe, high-quality school environments.”
Vercity Management Services, listed as TSSL’s secretary on Companies House, has been approached for comment.
PFI deals have been used to fund new school projects since the last 1990s.
They involve private companies building and maintaining sites in exchange for mortgage-style payments, normally over 25-year contracts – which rise beyond inflation – before handing them over to taxpayers.
But many contracts are now reaching expiry.
Government data shows there are 219 active PFI contracts in education in the UK, more than any other sector. They will all expire in the next 17 years.
The majority relate to schools in England, where there are 170. Of those, 43 are set to end in the next seven years.
The Stoke case has raised wider concerns about whether councils are prepared for this.
At the Education Estates conference last month, experts said schools, trusts and councils could face billions of pounds in unplanned maintenance costs as the contracts come to an end.
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