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Bam Construction has been dropped from a package of five priority schools in London worth nearly 拢50m after failing to reach an agreement over pricing, with the move raising wider concerns over the ongoing viability of the government鈥檚 low-cost school building model.

Bam was appointed to the 拢75m London batch of Priority School 好色先生TV Programme (PSBP) schools last May, but has only proceeded on site with three of the eight schools in the batch.

It is understood that the remaining five schools have now been taken back by the Education Funding Agency (EFA) after the contractor and the client failed to come to an agreement over a price for two of the schools: Landsdowne School, a special school in Lambeth; and Hawkswood School, a pupil referral unit in Waltham Forest.

It is understood that at the price set by the EFA, Bam anticipated it would have had to build the two schools at a loss.

It is understood the disagreement over the price only concerned the two special schools in the batch, but under the EFA鈥檚 contract mechanism the failure to strike a deal prompted the agency to take back both the two special schools, along with the three remaining schools in the batch that had yet to start construction: a Harris Academy in Bromley and a Harris Academy and primary school in Beckenham.

The five schools taken back by the EFA have now been packaged up as a new PSBP batch, worth around 拢46m, with bids being invited from contractors on the EFA鈥檚 main contractors framework.

Bam will continue as the main contractor on the three other schools in the batch that are already under construction - Stratford Academy, in Newham, which was the sample school in the batch; Pardes House Primary School in Barnet; and a Harris Academy in Greenwich.

Sources close to the situation said the development raised wider concerns over the viability of the EFA鈥檚 low-cost approach to school building work.

A contractor source said the issue around the pricing of the EFA鈥檚 schools was becoming 鈥渋ncreasingly acute鈥� as costs in the supply chain rise as the market recovers.

鈥淭he difficulty with these contracts now is affordability. Cost inflation is just horrendous at the moment, as subcontractor prices are rising sharply, and it鈥檚 creating real problems,鈥� the source said.

鈥淚t鈥檚 a problem across the country, but particularly in London and its most acute with the EFA, where the work is already so tight in terms of affordability.鈥�

Another contractor source said: 鈥淏am obviously decided it wasn鈥檛 worth building at a loss - the question now is will anyone else be able to build them at the EFA鈥檚 price?鈥�

An EFA spokesperson confirmed Bam would remain as main contractor on three of the schools in the London batch, but declined to comment further.

A Bam spokesperson said: 鈥淲e support the EFA鈥檚 decision, having negotiated with it extensively and in good faith about the schools.

鈥淲e remain strongly committed to the [EFA鈥檚] framework under which we have produced many successful education projects across the UK and we value our healthy and honest relationship with the EFA with whom we continue to work productively.鈥�