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ITEM EX11

EXECUTIVE – 10 DECEMBER 2002

SCHOOLS PFI CREDITS

Report by Acting Chief Education Officer

1. PFI credits issued by the DfES will amount to over 25% of total capital support available to schools in 2004/05. LEAs will be required to submit, by the beginning of January 2003, an expression of interest to the DfES on prospective school PFI schemes that would meet the appropriate prioritisation criteria. It is expected that over £1 billion will be available in this round of bidding following the recent Public Sector finance review. It is likely, however, that demand will once again exceed the amount of funding available.
2. This report is being circulated to the Learning & Culture Scrutiny Committee for its meeting on 3 December. Any comments on the part of the Committee will be reported at the meeting.

Background to PFI

3. In 1999/2000 there were 14 successful bids with an average value of £31 million. This has grown to a position in 2003/04 where there are 21 successful bids, with an expected average value of £44 million. An increasing number of these schemes involve groups of schools. The overall impact is to provide significant numbers of new buildings very quickly, providing fully serviced schools for, typically, 25 years. Contractors are paid a unitary charge over that period of time and the capital cost of this are provided through credit approvals which are additional to the usual authority entitlement. At the end of the contract period the buildings are usually handed back to the LEA and the expectation is that they will be in excellent condition.
4. PFI provides:-

• The opportunity for large scale investment
• Budgets to maintain high standards
• Reinvestment in assets over contract period
• The ability for schools to focus managerial time on educational attainment
• The more likely delivery of the project on time and cost with appropriate transfer of risk to the provider
• 0-10% savings over traditional procurement

• Restricts financial flexibility for the LEA and the school
• Governors concern over LMS and how the school budget will be affected
• Quality of design has been variable in the past
• Complex procurement process
• Staff resources and need for a skilled team
• Procurement costs

5. In financial terms PFI provides the benefit of PFI credits from the Government and there is no requirement to pay anything to the contractor until buildings are fully operational, but there will be revenue costs through the procurement process in accessing appropriate staff and expert legal and financial advice. If an expression of interest proves to be successful and a more detailed scheme is developed and agreed then the County Council will need to acknowledge that additional funds over and above the PFI credits may be required.

Criteria for PFI credits

6. Outline Option Appraisals need to be carried out in order to establish which schemes would be most suitable for PFI and also meet the criteria as set out by the DfES. These focus on the following:-

1. How the project will transform educational attainment and address wider DfES priorities (40% of the marks). There is a new focus on transforming secondary education, dealing with schools of concern, supporting the 14-19 agenda, workforce reform, inclusion, community schools and better ICT infrastructure.
2. How the project will transform the school estate (40% of the marks). LEAs are required to indicate the equivalent capital spend that would be used to overcome sufficiency, condition and suitability problems within schools – each element carrying equal weighting.
3. How the project will address wider Government priorities (10% of the marks). Proposals that seek to tackle wider Government priorities will score higher marks. This could include addressing social inclusion and non-school elements such as libraries, health and sport.
4. Project delivery and PFI development (10% of the marks).
   
   
7. Indications are that the DfES employ a marking scheme out of 20. Clearly on such a marking scheme 1 point or ½ a point has made a difference between schemes being accepted or not. Therefore it is very important to try and address all the issues raised in the criteria.

Proposals for PFI bid

8. There is a logic in a bid which encompasses one part of the County given the relative inexperience that the authority has in this form of procurement, but this must be balanced with the fact that a project must be large enough to make a difference and be attractive to contractors. Given the change in the criteria that were announced on 30^th September, there is a possibility of looking at a bolder more wide ranging grouped schools bid that aims at transforming secondary education in a number of places.
9. Certain areas of the County have situations which may lend themselves to a PFI bid and a number of schools have been proposed. These include the County towns ear-marked for growth (Banbury, Bicester, Didcot, Witney) and also Sonning Common and Wantage.
10. The methodology that needs to be applied is to carry out outline option appraisals on different schemes to see whether they would meet the DfES criteria, time scales for signing a contract, and whether a PFI scheme is likely to produce the outcomes that are required and where funding through traditional means is not available or insufficient and does not provide such good value for money. Outline option appraisals have been carried out on several schemes and costings have been looked at on a whole life basis in comparison to other alternative methods of funding.

Banbury

11. A scheme could encompass the redevelopment of schools in Banbury and provides real opportunity to improve the school estate and raise standards from a relatively low base. It is likely that a bid that includes Banbury School will contribute most to an expression of interest. The school is currently categorised as having serious weaknesses and the buildings themselves have significant problems and are scattered around a large site. The prospect of a capital receipt for the existing Stanbridge Hall site would assist in the value for money test. The assessed condition needs of the school are high. A scheme here would make significant impact. An option appraisal would demonstrate that Drayton School would not meet the criteria in school buildings terms, but a development plan needs to be agreed so that other sources of funding possibly freed up by a development of Banbury School could be directed to more limited work at Drayton School in the medium term. It is proposed to include, under basic need, a bid for a new 7 class primary school in the centre of Banbury, which given site issues and distribution of housing may be difficult to procure through traditional means.

Bicester

12. Proposals are currently being explored with regard to a possible 3^rd secondary school in Bicester. The expectation is that this might be an 11-16 school with 6^th form provision being focused at Bicester Community College. Although Bicester Community College could accommodate all the growth in the current Local Plan it would not be able to do so beyond that period and therefore it is prudent to look at a new secondary school. However, planning issues are not well developed and the inclusion of a new school of sufficient size is not possible within the time scales necessary for a bid this time round. Bicester Community College has had extensive new work and new buildings recently. Cooper School is full and has no capacity for further growth. Both its condition needs and suitability problems are significant. It currently features as the 2^nd worst school on the current suitability assessment(AMP). It might expect some limited funding though the NDS Modernisation Fund in the next 2-3 years. However, given the development of new provision within the town and the high identified need at Cooper School, there is a strong case for including the school in a PFI project, in order to secure its long term future and enable it to make progress in raising standards.

Didcot

13. There is a requirement for an additional 3,200 houses on the west of Didcot and a further 1,200 elsewhere in the town. The Didcot Girls’ School site is below the size required for a school of its size and St Birinus is constrained on its current site, despite off-site sports fields. Excluding these developments numbers on roll at both schools are planned to rise to over 1,600 by 2008. It is clear that a 3^rd secondary school is required, a strategy agreed by the County Council 3 years ago. It is proposed to secure 3 schools each with a permanent capacity of 1,450. 600 pupils would be generated from the west Didcot site for which developer contributions would be sought. This, however, still produces a significant shortfall both in terms of cost of buildings and land acquisition to provide for the new school. In addition to this growth, Didcot Girls’ School has 600 temporary places and St Birinus 300. The Girls’ School has significant condition needs. This also raises the whole issue of the need to bring the other schools up to a similar standard to the new school, with 1,450 permanent places. Any new school could be built in a phased way, but gives the opportunity to incorporate features which would score highly in a bid. It provides an opportunity to build a new school in co-operation with the Church of England Diocese to compensate for lost Church of England places in Oxford City (subject to formal consultation), and to open it with its own specialism, possibly Business and Enterprise, given its potential location in respect of the Milton Business Park. It would be anticipated that the joint 6^th form arrangements would continue and other resources such as community facilities could be incorporated which provides a value for money benefit. The option appraisal process would suggest that remodelling and refurbishing of St Birinus and Didcot Girls’ School, along with the provision of the 3^rd new secondary school, could be effectively procured through PFI. It is also proposed to include Greenmere School which serves the most deprived area of Didcot and its site is adjacent to St Birinus. By including Greenmere this opens up the opportunity to develop this and the St Birinus site more flexibly and to produce a more cost effective primary school building to serve the community.

Sonning Common (Chiltern Edge School)

14. There is some poor accommodation at the school and 180 temporary places. There is no forecast growth at the school and it does not score highly on deprivation or inclusion issues. Although the new guidelines support popular schools not able to access other funds it is not untypical of a number of other schools across the authority. Option appraisal would demonstrate that it does not add to a proposed PFI bid at this stage.

Wantage (King Alfred’s)

15. Members will be aware of reports outlining the Governors’ desire to promote a new secondary school, probably on a site between Wantage and Grove, as part of the proposed redevelopment within the Vale of White Horse Local Plan. The school has currently around 25% surplus spaces, though it could be argued that a higher proportion of surplus places is required as the school operates on three sites. Members will be aware of the arguments relating to the financial and achievement issues in respect of the operation of a split site school. There are a number of other options to developing the school, including consolidation within Wantage. Provision of a new school would score highly on ‘other Government objectives’ and demonstrates good value for money through possible capital receipts generated from the sale of the existing sites. It is not possible to proceed with an agreed scheme until the planning issues are resolved and they are not far enough advanced to enable this school to be included within this round of bidding.

Witney Secondary Schools

16. It is anticipated that the Basic Need required within the West Oxford Local Plan to 2011 for Witney can be accommodated on the existing two school sites. Given significant work at both schools in recent years, it is likely that funding for this growth could be catered for from within Annual Capital Guidelines allocations and developer contributions.

Conclusion

17. Following option appraisals of a variety of schools, it is felt that a strong bid could be submitted on the basis that, having carried out a successful reorganisation within Oxford City, it is sensible for the Education Department to seek to make a significant difference in the other Country towns and that an expression of interest be submitted which encompasses a 3^rd new secondary school at Didcot and the redevelopment of the existing two schools, the Cooper School in Bicester and Banbury School. A new primary school in the centre of Banbury will also be promoted and Greenmere School will be drawn into the redevelopment of the St Birinus site.
18. Other resources through developer contributions and capital receipts are not sufficient to enable objectives to be met through traditional means but will contribute to demonstrating value for money and provide additional funds towards the schemes and potentially enhance them further. An estimate on the total level of PFI credits being requested and additional financial information will be provided at the meeting. Should an expression of interest by the Council be supported by the DfES, then consideration and approval of detailed proposals will be required at a future date.
    
    Supplement
    

RECOMMENDATION

19. The Executive is RECOMMENDED, subject to consideration of any views on the part of the Learning & Culture Scrutiny Committee, to approve the submission of an expression of interest for schools’ PFI credits to the DfES by 3 January 2003, to include a new aided secondary school in Didcot (subject to formal consultation); remodelling/re-furbishing of St Birinus, Didcot Girls, Greenmere School, Banbury School and The Cooper School; and a new primary school in Banbury.

November 2002

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