好色先生TV

The shortfall of school places in England, and the thousands of school buildings in stages of disrepair, are twin problems that the country has faced for over a decade. And despite the billions of pounds that have been ploughed into trying to address this crisis, the problem is far from being resolved.

When the previous government鈥檚 拢55bn 好色先生TV Schools for the Future programme was cancelled, back in 2010, two thirds of the UK鈥檚 secondary schools were without investment - a fact that has led to a deluge of applications for its much smaller-scale replacement, the Priority Schools 好色先生TV Programme (PSBP). In addition, population expansion means there is a dire shortage of school places, particularly at primary level. Estimates produced in 2012 indicated that an extra 800,000 primary places would be needed by 2020.

These pressures, combined with an agenda to cut public spending, were behind the current government鈥檚 radical approach to school building - a target to cut 30% from the capital costs of schools by using a greater level of standardisation in both design and procurement. But although those pressures have not gone away since the new approach was announced three years ago, the economy is changing rapidly. And there are signs that this is leading to fresh problems in the drive to replace and expand the country鈥檚 schools.

Some contractors - who were prepared to invest in schools solutions at cost in the early days of the programme - are beginning to claim that the tight margins are no longer viable given price rises. The highest profile example has been Bam, which handed back a package of around 拢50m worth of schools to the Education Funding Agency (EFA) this spring after failing to reach an agreement on price.
At the same time, suggestions are emerging that the standardised techniques intended to bring down cost are not being fully exploited in practice.

So what is the reality behind this supposed new era of school building? Here we investigate whether it is working as its advocates intended, or whether revision is needed to deliver the schools the country urgently needs.

Rates of change

Concern over the viability of the cost of building schools centres on the main contractor framework being used by the EFA, the government鈥檚 delivery agent for schools and the biggest single client for school building work.

Firms were appointed to the framework, which is worth up to 拢4bn and succeeded a previous deal, in November 2013. Some contractors are now complaining that prices for materials and suppliers have risen so steeply since the original bids that the rates they bid at are untenable for carrying out work.

鈥淲e did bid those rates, and we thought they would be viable鈥�, says one contractor, who does not wish to be named. 鈥淏ut the reality now is very different.鈥�

The situation is being exacerbated by the fact that other sectors in the building industry, such as commercial and leisure, are starting to offer higher areas of return. According to some sources this can cause reluctance from parent companies to bid for too much schools work.

They fiddle with the PSBP batches, and it may make them slightly more attractive. but in the end, the problem comes down to the rates

Contractor

This appears to be borne out by the number of contractors bidding for some of the recent batches of capital funded PSBP work released to market through the framework. 好色先生TV understands that three batches failed to attract any interest when put to the contractors on the framework. Two of the batches covered work in Lambeth and Havering, the third could not be confirmed as 好色先生TV went to press. Some other recent batches are understood to have been awarded to the sole bidder.

In cases where batches have failed to attract interest, the EFA has usually taken them back and repackaged them in consultation with contractors to make them more appealing - by grouping the schools differently, or adjusting the timing of the release to market. But this inevitably slows the programme down, and even then does not necessarily yield an appointment, as the Havering example shows.

One contractor says: 鈥淭hey fiddle with the batches, and it may make them slightly more attractive. But in the end, the problem comes down to the rates.鈥�

The rates offered under the framework track inflation in the form of the public sector index, so in theory prices can be adjusted to take account of rising costs. However, some contractors argue that the market is moving so rapidly that even when rates are adjusted, these are being outpaced. One says: 鈥淭here鈥檚 always a lag. The rates go up, and then the index goes up.鈥�

Contractors argue that the viability of the rates being offered is also being affected by the growing disparity of costs between building in London and the South-east, and elsewhere. The EFA applies a 鈥渓ocation factor鈥� to work to take account of regional price differences, but these rates were set several years ago and contractors argue they now do not reflect market realities. An example given by one source was the difference between the London location factor, approximately a multiple of 1.2, and outer London, a factor of 1.11, which the contractor argued makes the outer London schemes unfeasibly tight.

鈥淭he difference on the ground is between the South-east and elsewhere, not inner and outer London,鈥� they said. 鈥淭here might be a slight difference, but it鈥檚 not 9% cheaper to build if you鈥檙e near a different part of the Thames.鈥�

Mike Green, director of capital at the EFA, says that he hears 鈥渁 mixture of things鈥� about rates from the framework contractors, and points out that the EFA has already made some adjustments. However, he says that he does want 鈥渢o maintain a bouyant market鈥� and is always looking into the rates offered. He says: 鈥淢y job is to get value for money, so it鈥檚 a question of finding the bite point; I don鈥檛 believe we鈥檙e a million miles off.鈥�

There are several other factors which some contractors say are hitting margins on schools work, which have only emerged through experience of delivering to new schools standards.

One is the demands of the EFA鈥檚 facilities output specification (FOS), which details the new standards to which schools must be built. One framework contractor says: 鈥淵ou only realise the impact when you start to build. The FOS is more demanding than standards we had before, and some specifications - particularly on daylight and ventilation, for example - are incredibly precisely modelled.

鈥淥ur concern is that they only lead to a marginal difference in experience, which can be disproportionate to what you need to do to meet them - like allowing a fraction more daylight by raising the height of the whole building.鈥�

There is also a need to factor in the additional cost of meeting the London Plan requirements for energy efficiency on some schools in the capital, which go above the EFA鈥檚 own requirements.

Standardisation, not as standard

Despite these concerns, there is emerging evidence that one of the central tenets of the new school building approach designed to drive down costs - standardisation - may not be being used to its full potential.

The use of standardised approaches 鈥� for design, procurement, and materials selection 鈥� was a key recommendation of the James Review into school building, and one on which the government argued the logic of its 鈥渕ore for less鈥� school programme.

Although there was vociferous criticism of the principle 鈥� particularly on design 鈥� from some outspoken critics, large parts of the industry embraced its potential, investing in developing standardised models and processes in the hope of winning a pipeline of work.

The impact of standardisation on costs in practice was established by EC Harris and Mott MacDonald in a study on the first 20 schools on PSBP to reach commercial close. The study, findings of which have been seen by 好色先生TV, shows a trend for costs to go down with an increased 鈥渟tandardisation factor鈥� 鈥� calculated by assessing the degree of standardisation used in building blocks and components.

Marcus Fagent, head of education at EC Harris, says: 鈥淲hen we plotted standardisation against price, there was a very strong correlation. This assessment was made on a relatively small sample set and the PSBP contractors have developed the art of standardisation to different degrees, but it remains our view that the best performing contractors are driving efficiencies from applying standardisation.鈥�

There are also examples in practice of a standardised approach making it possible to achieve a large-scale school building programme. Steve Cummings, an associate architect at Pick Everard, which is working on a huge 拢250m programme to build and renew schools in Hounslow, won through the Government Procurement Service framework, says standardisation is central to the scheme鈥檚 delivery. 鈥淲e worked very hard with the borough over 18 months to standardise as much as we could to deliver economies of scale,鈥� he says.

However, large scale programmes from individual local authorities such as this are relatively rare. Cummings鈥� colleague, partner Alastair Hamilton says that, although there is steady demand for standardised approaches in relation to design, it is not what you would expect given the pressure to deliver places quickly. 鈥淐lients still want some elements of bespoke design, but what they may not realise is with standardisation you can personalise buildings.鈥�

I don鈥檛 want 500 or 600 identical schools. I鈥檝e always said i don鈥檛 want standardised schools, but I do want standardised design components

Mike Green, EFA

When it comes to the EFA鈥檚 procurement, the market expectation was that having a single, central client would help drive take up of standardisation, not only because the EFA itself was advocating standardised principles, but also because standardised solutions developed with one batch in mind could be rolled out across other batches.

There is evidence of standardised approaches being employed on EFA projects, albeit not to the degree that led some to fear 鈥渋dentikit鈥� schools. The EFA鈥檚 baseline designs, issued as examples of designs that would meet its specifications, have often been taken as start points by contractors, but they have layered their own approaches on top of this.

Michael Buchanan, education director at Galliford Try, says: 鈥淚t鈥檚 not to say we鈥檙e not using standardisation, but sometimes its difficult to use more rather than less, because of site constraints. So people are often reverting to a design that looks bespoke but has standardised components, and where supply chain agreements are in place.鈥�

The EFA鈥檚 Green says the level is broadly what he expected. 鈥淚 don鈥檛 want 500 or 600 identical schools, and anyway, the sites are too difficult. I鈥檝e always said I don鈥檛 want standardised schools, but I do want standardised design and components.鈥�

However, these approaches appear to be more in evidence on capital funded schools than on PF2 batches. The North-east batch, recently awarded to Miller, for example, was won by a traditionally constructed two-storey brick design.

One source working on PSPB says that they believe the nature of PFI deals 鈥� whereby the contractor is responsible for ongoing maintenance costs 鈥� is leading bidders to rely more on traditional solutions because they fear cheaper approaches will lead to greater risk of liability for repairs further down the line. Contractors on PFI projects have more freedom to spend more on initial costs, as the price they give is assessed on its value over the life of a contract, not just on the capital element.

Green acknowledges capital cost is 鈥渕ore of a primary factor鈥� in selection on the EFA鈥檚 capital batches than the PF2. He says: 鈥淚t will be really interesting to see the difference in the two approaches, particularly if you have the same contractor.鈥�

Mark Roberts, education lead at Interserve Construction, which has been appointed preferred bidder on the Herts, Luton and Reading PF2 batch, says that the contractor鈥檚 FM team鈥檚 knowledge of the components and materials which are 鈥渞esilient enough鈥� to be used in schools has informed its choices on HLR, and says that this will be 鈥渞epeatable and scalable across all of the schools in the batch鈥�. In terms of wider application, he says: 鈥淲e also take that knowledge and use it to bring a standard kit of parts approach to all schools, using them as long as there鈥檚 not a significant cost premium in doing so. It鈥檚 not quite as clear-cut as saying we would on PFIs and not on others.鈥�

Spare parts

However, Roberts adds that he believes education could get a greater degree of standardisation by learning from Procure 21+, where contractors were consulted by the Department for Health to come up with standardised, volumetric procurement across all projects under the framework. 鈥淚t鈥檚 the next stage in getting value out of standardised components,鈥� he says.

Even with the market apparently favouring standardised components more than whole standardised solutions, the take up may increase during the second wave of the programme (PSBP2), on which schools are currently bidding for inclusion. This wave is likely to be based more around block replacements or extensions rather than whole new builds.

Alan Coole, head of service at East Midlands Property Alliance (EMPA), which manages the Scape framework, says most of the demand he has seen for standardisation is for extensions, particularly in primary schools where there is a pressure to add places quickly. 鈥淕enerally we are adding between two or four classrooms,鈥� he says.

Using standardisation in this respect could also help PSBP2 stack up better financially for contractors - there is already concern in the light of the current pricing issues, that smaller projects, with more refurbishment, will be even less attractive to market.

Green says: 鈥淭here is still more value to be driven from standardised approach. We鈥檙e all in this together.鈥�

The EFA is currently finalising its procurement route for PSBP2, and is likely to consider approaches which favour this kind of component standardisation. But in doing so, and in considering whether or not to increase its costs for work, some in the sector believe it should also take heed of the early warning signs that, taken too far, the extremely tight costs on schools might be storing up a costly maintenance burden for the future. 鈥淨uietly, there are many of us who fear that these new schools are not as solid, and there may be a bill to pay in 10 years鈥� time,鈥� says one project source.

Given that the government is already grappling with a huge cost equation on schools, that鈥檚 an extra headache it should be keen to avoid.