N IAO
Northern Ireland Audit Office BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
REPORT BY THE COMPTROLLER AND AUDITOR GENERAL NIA 113/03, 14th October 2004 N IAO Northern Ireland Audit Office
Report by the Comptroller and Auditor General for Northern Ireland
Building for the Future A Review of the PFI Education Pathfinder Projects
NIA 113/03 £18.00 This report has been prepared under Article 8 of the Audit (Northern Ireland) Order 1987 for presentation to the Northern Ireland Assembly in accordance with Article 11 of the Order.
J M Dowdall CB Northern Ireland Audit Office Comptroller and Auditor General 5th October 2004
The Comptroller and Auditor General is the head of the Northern Ireland Audit Office employing some 145 staff. He, and the Northern Ireland Audit Office, are totally independent of Government. He certifies the accounts of all Government Departments and a wide range of other public sector bodies; and he has statutory authority to report to The Northern Ireland Assembly on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.
For further information about the Northern Ireland Audit Office please contact:
Northern Ireland Audit Office 106 University Street BELFAST BT7 1EU Tel: 028 9025 1100 email: [email protected] website: www.niauditoffice.gov.uk
3 List of Abbreviations
BAFO Best and Final Offer
BELB Belfast Education and Library Board
BRE The Building Research Establishment Ltd
DE Department of Education
DEL Department for Employment and Learning
DfES Department for Education and Skills
DFP Department of Finance and Personnel
FHE Further and Higher Education
GCSE General Certificate of Secondary Education
GNVQ General National Vocational Qualification
ITN Invitation to Negotiate
ITT Invitation to Tender
LTE Long Term Enrolment
NIAO Northern Ireland Audit Office
NPV Net Present Value
OFMDFM Office of the First Minister and Deputy First Minister
OJEU Official Journal of the European Union
PFI Private Finance Initiative
ppm Parts Per Million
PPP Public Private Partnership
PSC Public Sector Comparator
SIB Strategic Investment Board
The Belfast Institute The Belfast Institute of Further and Higher Education
The North West Institute The North West Institute of Further and Higher Education 4 VAT Value Added Tax Table of Contents
Page Executive Summary
The PFI procurements were undertaken across a range of schools and colleges in the context of a major capital and maintenance backlog in the education estate. 11
The Departments of Education and Employment and Learning were proactive in identifying lessons to be learned from the Pathfinder projects. 12
The delivery of the Pathfinder projects compares favourably with those procured through conventional contracts. 13
A more strategic review of long term enrolments would help inform decision making. 14
Improvements in design and construction, if applied, could have a positive impact on educational attainment and achievement of departmental targets. 14 Part 1 The Department of Education was proactive in identifying lessons to be learned. 16
The PFI deals were economically and financially feasible. But there was close proximity between the Public Sector Comparators and the successful bids. 16
Affordability, was helped by the disposal of surplus assets. 17
5 Table of Contents
Page The Department acknowledges that it underestimated the resources needed. 18
Some consultants were used to good effect; others worked under less rigorous terms of engagement. 18
The management and planning of projects needs to be improved. 19
A detailed market-sounding study was used to develop a longer term strategy for addressing the capital needs of the education estate. 19
There was potential to learn lessons from the procurement of Education PFI projects in Great Britain. 20
Experiences in Northern Ireland helped shape national guidance. 21
Changes to subsequent procurements demonstrate that steps have been taken to implement lessons learned. 21
PFI procurements of schools and colleges are being organised as clusters where applicable, in compliance with the findings of the market sounding study. 21
Additional resources have been made available. 22
Project management and planning procedures, including the use of advisers, have been refined; this has helped reduce procurement times and driven down consultancy costs. 23
6 Table of Contents
Page
Specialist agencies have provided assistance to DE and DEL. 24
Post project evaluations remain to be undertaken. 24
Part 2
The delivery of the Pathfinder projects compares favourably with those procured through conventional contracts. 26
Taken together, the proposed deals were economically and financially feasible. 26
In some cases the scope of projects changed and alternative solutions were proposed by the private sector. 27
But these changes have impacted on the quality of the projects. 29
While the initial procurement phase for the Pathfinder projects took longer, the construction phase was shorter than in conventional projects. 29
However, there was limited innovation both in terms of design and service delivery. 31
On the whole, long term enrolments were properly assessed but there is a significant disparity between planned and actual enrolments in two PFI schools. 32
A more strategic review of long term enrolments would 38 help inform decision making.
7 Table of Contents
Page
Part 3
Our review of design and construction has highlighted a number of important lessons which, if applied, could have a positive impact on educational attainment. 40
There was a significant difference in architectural quality between PFI and traditionally built schools. 45
The quality of service design was better in Northern Ireland than in England and Wales. 47
A good environment is critical to successful school design and can enhance educational attainment. 48
The cost of ownership appears to be higher in PFI schools/colleges. 52
The least expensive route has not necessarily been pursued by the contractor. 53
With adequate maintenance and free from major defect, there is no reason why the schools and colleges should not last for 50-60 years and beyond. 54
Design Quality of schools in Northern Ireland has room for significant improvement 55
8 Table of Contents
Page
Appendices
Appendix 1: Methodology and Scope of NIAO Examination. 58
Appendix 2: The National Audit Office's Analytical Framework
for Assessing Value for Money in PFI Projects. 60
Appendix 3: Department of Education's Report on
Evaluation of PFI (PPP) for Education Service
Capital Projects (September 1999). 61
Appendix 4: FE Colleges Pathfinders: Belfast Institute of
Further and Higher Education (the Belfast Institute)
and North West Institute of Further and Higher
Education (the North West Institute). 63
Appendix 5: Major milestones in revising the 1994 Building
Handbook 67 Appendix 6: BRE Survey Methodology. 68
9 BUILDING FOR THE FUTURE A review of the PFI Education pathfind Projects
10 ExecutiveExecutive SummarySummary
Building for the Future - A review of the PFI Education Pathfinder Projects
The PFI procurements were undertaken across a range of schools and colleges in the context of a major capital and maintenance backlog in the education estate.
1. In 1996, faced with a substantial capital and maintenance backlog and limited budgets1, the Department of Education (DE)2 launched a twin track approach to explore the extent to which PFI could be used to complement conventional procurement to improve the educational estate. Four secondary schools and two further and higher education colleges were selected to be Pathfinder PFI projects. In sectoral terms, the sample was broad incorporating FE colleges, controlled and maintained schools. This maximised the opportunities to acquire experience of the advantages and disadvantages of PFI procurement and to evaluate its long term applicability. The projects selected were Balmoral High, Drumglass High, Saint Genevieve’s High, Wellington College, Belfast Institute of Further and Higher Education (the Belfast Institute) and the North West Institute of Further and Higher Education (the North West Institute), all of which were high priorities in DE’s planned capital programme.
2. Five PFI contracts were let for the six projects, Balmoral High School and Wellington College being covered by a single contract. Deals were finalised between June 1999 (Drumglass) and October 2000 (Balmoral/Wellington). Drumglass was handed over in August 2000, the North West Institute in February 2001 with the remainder being completed in 2002. Each contract was for the design, build, finance and operation of a facility for 25 years. The capital value of the six projects was £67 million with a total cost, in net present value (NPV) terms, of £113 million.
1. Maintenance of Board Property was the subject of an NIAO report in December 1995 (HC 16, Session 1995-96). The report was considered by the Committee for Public Accounts (HC 269, Session 1995-96). 2. The Department of Education (DE) is responsible for the central administration of primary and post- primary education. Prior to the reorganisation of Northern Ireland Departments in 1999, DE was also responsible for Further and Higher Education. Central responsibility for this sector now rests with the Department for Employment and Learning (DEL)
11 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
The Departments of Education and Employment and Learning were proactive in identifying lessons to be learned from the Pathfinder projects.
3. The Department of Education carried out an interim evaluation of lessons emerging from the Pathfinder projects and a market sounding study, with the aim of informing both future policy on PFI and future practice in relation to the procurement of projects. These indicated that PFI deals, as well as being economically and financially feasible, were more likely to be attractive to the private sector if individual projects were “bundled” together and there was a clear deal flow over a number of years. DE and DEL PFI procurements are now organised on this basis.
4. DE’s evaluation also recognised that staff resources had been underestimated which led to greater reliance being placed on consultancy support. Additional resources have now been made available and project management and planning procedures, including the use of advisors, have been refined; this is helping reduce procurement times and driving down consultancy costs. In addition, DE has established a Public Private Partnerships and Strategy Unit which provides policy and strategic guidance, financial support and direct support services to projects. At an operational level, architectural and project management expertise and skills gained in taking forward PFI projects are being harnessed and developed in the PPP Co-ordination Service3. Specialists’ agencies, such as Partnerships UK and Northern Ireland’s Strategic Investment Board (SIB)4 are also providing support with current and future procurements.
3. Established by agreement between the Department of Education, the five Education and Library Boards, the Council for Catholic Maintained Schools, Department of Finance and Personnel and Office of the First Minister and Deputy First Minister. It operates within the accountability of the South Eastern Education and Library Board and makes its expertise available to all Education Boards and school authorities involved in PPP procurement in Northern Ireland. 4. Established by the Strategic Investment and Regeneration of Sites (NI) Order 2003, SIB’s remit is to ensure that the Reinvestment Reform Initiative is planned and delivered in a way that makes the most of all the means and resources available. SIB will also work in partnership with bodies carrying out major investment projects. It is empowered to advise the Executive and public bodies. Legislation places a duty on these bodies to have regard to its advice.
12 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
5. While we found that post project evaluation of the Pathfinder projects had yet to commence, both DE and DEL have informed us that they will be undertaken during 2004-05; evaluations of the Belfast and North West Institutes were completed in September and DEL is awaiting the final report.
The delivery of the Pathfinder projects compares favourably with those procured through conventional contracts.
6. As part of the learning process, DE was aware of the need to establish whether PFI offered value for money over conventional procurement. In line with best practice, public sector comparators - an estimate of cost if conventional procurement methods were used - were constructed for each of the projects. The Department concluded that, taken together, the PFI projects offered cost advantages over traditional procurement. For the most part these envisaged refurbishment. However, in the majority of cases the option ultimately selected was new build. This was an alternative solution put forward by the private sector, when the projects went to the market, who undertook to deliver, what was viewed by the Department to be, a better outcome at refurbishment prices, i.e. what the Department could afford. However, this choice impacted on the quality of the projects.
7. In terms of timescale, while the initial procurement phase for the Pathfinder projects took longer, construction time was shorter than in conventional projects. The reduction in construction time reflects the inherent incentives of the PFI payment mechanism whereby the service provider will only start to receive payments when the facilities become operational. However, there was limited innovation, both in terms of design and service delivery, in the PFI projects. Where innovation did emerge, it had not been predicted. For example, in the introduction of a novel scheme for the provision of school meals which has resulted in clear educational and management benefits to the school involved.
13 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
A more strategic review of long term enrolments would help inform decision making.
8. Proper assessment of long term enrolments (demand) is one of the most critical factors in determining future school provision, whether this is by conventional procurement or through PFI. However, it assumes greater significance in PFI as once a contract has been signed the authority is committed to making payments for the availability of a school over the whole of the contract period, in the case of the Pathfinder projects, twenty five years. Should demand diminish to such an extent that the school is no longer required, the Pathfinder contracts provide for early termination. However, the financial penalties are severe.
9. On the whole, while long term enrolments were properly assessed, there is a significant disparity between planned and actual enrolments in two PFI schools, with planned enrolment in one being approximately 58 per cent of that originally envisaged.
10. This highlights an important issue, particularly in the context of falling secondary school enrolments. Department of Education projections indicate that the current school population will reduce by 30,000 by 2009-10 with further reductions envisaged up to 2016-17, including a 30,000 reduction from current levels in secondary school enrolments.
Improvements in design and construction, if applied, could have a positive impact on educational attainment and achievement of departmental targets.
11. The design of the schools and colleges we examined is based on 1994 Building Handbook Standards5, the minimum standards to which all projects must adhere. DE considers that these standards provide modern educational facilities which
5. The design standards set out in the 1994 edition and associated Schedules of Accommodation reflected the Northern Ireland curriculum until the revisions to the Information and Communication Technology provisions published in 2000 and Specialist Accommodation sections published in 2003. In addition, environmental requirements set out in the School Premises Regulations and Building Bulletin 87, along with various other statutory and regulatory standards, have been incorporated into the wider design framework. 14 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
are fit for purpose and capable of delivering the curriculum in the twenty first century. There is no doubt that the Pathfinder projects were much needed and are vastly superior to the buildings they replaced. However, the outcome of our review has highlighted a number of important lessons in terms of design and construction that apply to both PFI and traditional procurement. These lessons, if applied, have the potential to make a positive impact on educational attainment and contribute to the achievement of departmental targets.
12. In England, the Department for Education and Skills (DfES) is developing exemplar design standards which address the issues we have identified. Since our review commenced, both DE and DEL have been in contact with DfES regarding these standards. There are, however, cost implications associated with implementing them, but these must be considered in the context of the wider educational benefits that are likely to accrue from their adoption.
13. Overall, the quality of design and build is similar and in some respects better in Northern Ireland than in England and Wales. However, there is still scope for significant improvement. Nevertheless, with adequate maintenance and, if free from major defects, there is no reason why the schools and colleges we visited should not last for fifty or sixty years and beyond6.
6. The useful life of schools and colleges, e.g. the suitability of the buildings, is also related to major changes in the curriculum or teaching process.
15 Part 1
The Departments of Education and Employment and Learning were proactive in identifying lessons to be learned.
1.1 DE undertook an interim evaluation of lessons emerging from the six Pathfinder projects and a market sounding study7 which it had initiated. The aim was to inform both future policy on PFI and future practice in relation to the procurement of projects. The report was subsequently refined and issued as a consultative document (with school authorities as the main stakeholders) on the future use of PFI8. The lessons which DE identified are outlined in paragraphs 1.2 to 1.12. These were also reflected in the wider Northern Ireland experience as reported by the Northern Ireland Assembly9 and Executive10.
The PFI deals were economically and financially feasible. But there was close proximity between the Public Sector Comparator (PSC) and the successful bids.
1.2 DE concluded that it is possible to broker viable deals on individual projects. However, the cost advantage of the successful bids, as measured against the Public Sector Comparator11 (PSC), was marginal. The Department reported a figure of one to two per cent saving based on the combined NPV12 of each of the
7. “Report on Evaluation of PFI (PPP) for Education Service Capital Projects”, Department of Education for Northern Ireland PFI Unit, September 1999. 8. “Information Memorandum on the Private Finance Initiative in Schools”, Department of Education, September 2000. 9. “Report on the Inquiry into the use of Public Private Partnerships”, Committee for Finance and Personnel, July 2001, NIA 7/00. 10. “Review of Opportunities for Public Private Partnerships in Northern Ireland”, Office of the First Minister and Deputy First Minister and the Department of Finance and Personnel, May 2002. 11. A PSC is a benchmark to assess the value for money of conventionally financed procurement in comparison with a privately financed scheme for delivering a public funded service. 12. This is the discounted value of a series of future costs, benefits or payments. 16 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
preferred bids against the combined PSC NPV. The variance for individual projects ranged from six per cent over (Drumglass), i.e. conventional procurement would have been cheaper, to 11 per cent under (the North West Institute), i.e. conventional procurement would have been more expensive. DE, in line with accepted practice at the time, made a limited disclosure of the PSC during the procurement. In retrospect, they concluded that this might have been a significant factor in the close proximity between the PSC and the bids made. DE and DEL policy is now to discourage the disclosure of information relating to the PSC and this is in line with current guidance.
Affordability was helped by the disposal of surplus assets.
1.3 Disposal of surplus assets13 formed an integral part of five of the projects and improved their affordability by reducing unitary payments over the 25 year concession periods. For example, although the combined Wellington/Balmoral project had the highest net present value (£36.4m), it has the lowest unitary payment.
1.4 We noted however, that while the North West Institute14 benefited from such a deal, its ability to afford the PFI proposal had not been properly assessed. A consultants’ review of the financial status of the Institute, produced in 2002, confirmed DEL’s conclusion that PFI was a less costly option than traditional procurement. However, they concluded that the Institute’s ability to pay its contribution of the unitary charge had not been properly resolved prior to contract signature.
13. The disposal of surplus assets is the subject of a separate review and may be reported on at a later date. 14. From 1 April 1998, Further and Higher Education Colleges became independent corporate bodies; prior to this they had been under the control of Education and Library Boards. 17 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
The Department acknowledges that it underestimated the resources needed.
1.5 DE was progressing multiple projects under a complex negotiated procurement process, which is intrinsically time consuming and can be lengthy. The projects were resourced by officials in DE, education authorities and schools/colleges (these officials contributing invariably on a part-time basis in addition to other duties); and by externally recruited consultants. DE acknowledges in their review that most officials at project team level lacked the appropriate skills in project management as well as commercial contracts and negotiation; they were also not necessarily of appropriate seniority. This resulted in much greater use of consultants than initially envisaged with corresponding cost consequences.
Some consultants were used to good effect; others worked under less rigorous terms of engagement.
1.6 DE’s PFI Unit centrally co-ordinated the recruitment of consultants. Legal advisers were contracted to DE to provide advice on all six projects. This facilitated a consistent approach across all projects and contributed significantly to the standardisation of future procurements. The charging structure was a daily call-off fee basis within a capped limit.
1.7 Financial, property and technical advisers were recruited on a project by project basis and contracted to the relevant school/college authority rather than DE. They were also contracted on a simple call-off basis without fee caps. This resulted in escalating costs with increasing use of consultancy expertise during the procurements. Subsequent to the Pathfinder projects, both DEL and DE (in partnership with DFP) have introduced a new framework for the engagement of consultant advisers (see paragraph 1.20).
18 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
1.8 Total expenditure on consultancy support on the Pathfinder projects was £2.8m, just over four per cent of the total capital value of the six projects. This compares favourably with the Royal Victoria Hospital Car Park, where consultants’ fees were seven per cent of total capital value and is similar to the Antrim Renal Unit PFI, where consultants’ costs were also 4 per cent.15 DEL has advised us that consultancy costs on subsequent FE College projects have been reduced to one per cent of the capital value.
The management and planning of projects needs to be improved.
1.9 DE’s review acknowledges that the Pathfinder project teams, anxious to secure a deal and a new facility as quickly as possible, commenced procurement without adequate pre-planning. This lengthened the actual procurement process as problems were dealt with in an incremental fashion. Preparatory work, which DE identified as necessary, included scoping of projects, development of output specifications, procurement documentation, models on payment and pricing mechanisms, standard contract terms and negotiation strategies. DE anticipates that documentation developed during Pathfinder will greatly reduce the amount of time and effort required in future procurements. It also expects to reduce the amount of negotiation required with private sector bidders thereby shortening the procurement process (see paragraph 1.18).
A detailed market-sounding16 study was used to develop a longer term strategy for addressing the capital needs of the education estate.
1.10 DE surveyed over 300 private sector companies, gathered detailed information on 70 companies expressing interest in PFI deals in education, and had structured interviews with over 20 companies.
15. NIAO Report “The Private Finance Initiative: A Review of the Funding and Management of Three Projects in the Health Sector” (HC 205: Session 2003-04). 16. Market sounding is the process of assessing the reaction of the market to a proposed requirement and procurement approach. It brings supplier perspectives to public sector procurements at an early stage, 19 offering potential benefits in terms of making the subsequent procurement process more focused and efficient. BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
1.11 The private sector advised that future PFI projects in the schools sector should be “bundled” together as single contracted packages, because individual schemes may not be large enough to be attractive or financially viable as separate contracts. There was a broad consensus that the capital value of such bundles should be a minimum of £20 million and possibly over £50 million. Those with a particular interest in delivering PFI solutions indicated that a viable deal flow i.e. projects spread over a number of years emanating from a single sector would generate increased interest from potential investors. Most importantly, it would also attract the companies with a long term commitment to PFI, incentivising them to risk bidding costs.
1.12 The Department also undertook financial modelling to determine how the schools estate backlog could be best eliminated within a reasonable timeframe. This showed that clearing the backlog by conventional procurement would take at least 20 years, whereas a combination of both PFI and conventional investment, or, alternatively through a strategic partnership17, the backlog would be cleared within 10 years (see Appendix 3).
There was potential to learn lessons from the procurement of Education PFI projects in Great Britain.
1.13 The Pathfinders took between 26 and 42 months from the notice in the Official Journal of the European Union (OJEU) to contract award. The Department noted that when Great Britain moved to bundling, PFI projects were procured within a timescale of between 15 and 20 months. This timescale in Great Britain was achieved by using suitably trained and skilled full-time project team resources with significant input from Treasury Taskforce personnel. DE and DEL expect that their clustered projects will have a comparable reduced procurement timetable. The Departments told us that every effort is being made to reduce the timetable for future projects, through the production of standard contracts and
17. A Strategic Partnership was an option considered by DE in its report on “Evaluation of PFI (PPP) for Education Service Capital Projects”. Adopting such an approach would involve one (or at most a very small number of) contract(s) between the NI Education Service and private sector consortia to manage and operate the whole school estate, or large part of it. 20 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
documentation (see paragraph 1.18), and expertise through the use of the PPP and Strategy Unit within DE and, at an operational level, the PPP Co-ordination Service (see paragraph 4). However areas remain, such as planning, where they have little control over timescales.
Experiences in Northern Ireland helped shape national guidance.
1.14 DE told us that it had identified the need for, and developed guidance on managing the delivery of PFI contracts. This work helped shape the Treasury Task Force’s guidance, Technical Note 6 “How to Manage the Delivery of Long- Term PFI Contracts”.
Changes to subsequent procurements demonstrate that steps have been taken to implement lessons learned.
1.15 The capital development programmes, to the end of the 2003-04 financial year, within DE and DEL, include another nine projects with an estimated capital value of £294m, which are being taken forward as Public Private Partnerships. Both Departments told us that they have taken account of the experience and lessons of the Pathfinder procurements and also the evolution of general policy on PFI in progressing these projects.
PFI procurements of schools and colleges are being organised as clusters where applicable, in compliance with the findings of the market sounding study.
1.16 Seven of the nine projects (six in DE, one in DEL) were launched as bundles of between two and six schools/colleges. The estimated capital values of these bundles range from £15 million to £74 million18. DE also introduced their clusters
18. The £15 million bundle covering three schools in the Northern Eastern Education and Library Board area has subsequently been reduced to a single school procurement.
21 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
over a three year period, creating a deal flow. The July 2001 report of the Assembly’s Finance and Personnel Committee identified the need for a Northern Ireland investment strategy that established such a sustained programme and “deal flow”. The subsequent 2002 OFMDFM/DFP review supported clustering, recommending that the Executive should give greater consideration to the scope for bundling, or aggregation of small PPP projects, to both minimise transaction costs and secure better value for money outcomes. All clustered projects, with the exception of one in DE, comply with the proposed minimum threshold of £20 million contained in the July 2003 HM Treasury Paper, “PFI: Meeting the Investment Challenge”19 which recognises the potentially disproportionate transaction costs of pursuing smaller PFI projects.
Additional resources have been made available.
1.17 Both Departments have increased the number of staff dedicated to taking forward procurements. This has also been reflected at a local level where schools can receive earmarked funds to compensate for additional work of senior and teaching staff input into PPP at Project Board, Project Assurance Team and Project Team levels. The Establishment of the PPP Co-ordination Service (see paragraph 1.13) also provides support and project management expertise. DEL told us that Colleges of Further and Higher Education are already resourced to meet such demands. Each college has, for example, a dedicated finance officer and an estates manager. In addition, there is increased use of full time project managers, along with a general uplift in the seniority of project board members. Regular training programmes have also been introduced. The Department also has available to it a professional and technical service comprised of architects, quantity surveyors and engineers, to help assess the need for construction projects and to ensure value for money and excellence of design in the estate.
19. The policy proposals in this document have direct effect only in England, as policy on PFI is devolved in Scotland, Wales, and Northern Ireland.
22 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
Project management and planning procedures, including the use of advisers, have been refined; this has helped reduce procurement times and driven down consultancy costs.
1.18 DE has introduced standardised documentation, particularly at the preparatory stages. This includes a template for Outline Business Cases and output specifications, substantial parts of which schools authorities prepare directly. More emphasis is now given to completion of preparatory work before publication in OJEU. Wider changes such as the standardisation of contracts should also contribute to reducing the length of procurements.
1.19 In September 2003, a bundled project in DEL (Tyrone Colleges) was the first of the post-pathfinder projects to reach contract signature, being signed 24 months after publication in OJEU. The appointment of Preferred Bidder was achieved within twelve months; the subsequent delay to contract signing was mainly due to the achievement of full planning permission taking longer than expected. Lessons have been learned and DEL now includes the progressing of all planning permissions in the main consultancy package, which they expect will bring a more coherent approach to the running of projects.
1.20 Both Departments (in partnership with DFP) have introduced a new framework for the engagement of consultant advisers. Advisers covering the requisite disciplines are organised on a consortium basis (each consortia having a lead consultant) and compete for procurements on that basis. Commissions are awarded on a fixed price basis and payment is linked to the achievement of milestones in the project. DEL has advised us that it has now reduced consultancy costs to one per cent of capital costs (see paragraph 1.8). In addition, a PPP Co-ordination Service (see paragraph 1.13) has been established with the aim of harnessing the skills and experiences gained in taking forward PFI projects. DE also told us that it intends to visit this area again now that the Strategic Investment Board (SIB - see paragraph 4) has set up its Consultancy Framework.
23 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
Specialist agencies have provided assistance to DE and DEL.
1.21 DE is currently working in partnership with SIB on a £135 million bundle (including a library) within the Belfast Education and Library Board (BELB). In parallel, DE is discussing future procurements with the SIB. It has also received assistance from Partnerships UK20, not only in developing a standardised contract (see paragraph 1.18) but also in bringing wider Partnerships UK experience and expertise to projects. DEL has also arranged for SIB support to be available as required in relation to the Tyrone Colleges project.
Post project evaluations remain to be undertaken.
1.22 In 1997, DFP issued, as policy guidance for Northern Ireland, HM Treasury’s “Appraisal and Evaluation in Central Government” (The Green Book), supplemented by a Northern Ireland Preface21. This reiterated existing guidance that post-project evaluation played an important role in complementing appraisal. The Full Business Cases for the Pathfinder schools included a commitment to undertake such evaluations following completion of the implementation phase. The main purpose of such evaluations is to ascertain whether or not the expected benefits promised by the project have been realised and whether or not there have been any problems or issues with the standard of service delivery achieved by the contractor. The Office of Government Commerce’s Gateway process22 advises that, for long-term contracts such as PFI/strategic partnering, there should be a formal review of the operational contract every three years.
20. Partnerships UK works with the Government in the development of PPP policy and contract standardisation, helps with project evaluation and implementation, and supports PPPs in difficulty. It combines private sector expertise with a strong public sector mission, placing it in position to bridge the gap between the public and private sectors. 21. In January 2003, HM Treasury published a new edition of the “Green Book”. In March 2003, DFP formally advised Northern Ireland Departments to comply with the new edition in respect of project appraisals that had not reached the Invitation to Tender (ITT) or Invitation to Negotiate (ITN) stages by 1 April 2003. 22. The Gateway process reviews a project at critical stages in its life cycle to provide assurance that it can progress successfully to the next stage. 24 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
1.23 In April 2001, in written evidence to the Assembly’s Finance and Personnel Committee, DE stated that there were plans to undertake such evaluations within 1 to 2 years of operational phases commencing. Some facilities are now in their third and fourth years of operation, but evaluations have yet to commence. Both DE and DEL informed us that they will be undertaking post-project evaluations covering the six Pathfinder projects during 2004-05; evaluations of the Belfast and North West Institutes were completed in September and DEL is awaiting the final report.
25 Part 2
The delivery of the Pathfinder projects compares favourably with those procured through conventional contracts.
2.1 The Pathfinder projects were experimental. They were undertaken against a backdrop of a substantial capital and maintenance backlog and provided DE with the opportunity to explore whether PFI could be used to complement conventional procurement to improve the educational estate.
Taken together, the proposed deals were economically and financially feasible.
2.2 As part of the learning process, DE was aware of the need to establish whether PFI offered value for money over conventional procurement. In line with best practice, they constructed a public sector comparator - an estimate of cost if conventional procurement methods were used - for each of the projects. Based on an evaluation, which compared the combined net present values of the public sector comparators with the combined net present values of the bids received, DE concluded that, in each project, although there was close proximity between the two, PFI deals were economically and financially feasible.
2.3 A review by DE in September 1999 of the individual projects showed that, at full business case23 stage, three bids (the North West Institute, the Belfast Institute and
23. The business case provides justification for the project in terms of its alignment with the objectives of the organisation; it also provides the basis for managing the delivery of the project on time, within budget and to agreed quality standards. It evolves throughout the procurement process, from a high level summary of possible options to meet the business need, through to an Outline Business Case with indicative costs and finally a Full Business Case with the indicative information confirmed. The Full Business Case is continuously reviewed. It will provide the basis for the project implementation review and beyond. 26 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
St. Genevieve’s) were below their respective public sector comparators; Wellington College was virtually identical; with Drumglass and Balmoral above (see Figure 1). However, we noted that, at contract close, only the North West Institute and, by then, the combined Wellington/Balmoral project (see paragraph 2.4) were below the public sector comparator. Of the remaining three contracts, the Belfast Institute was virtually identical while St. Genevieve’s and Drumglass were both above. Overall, the total value of the agreed contract prices across the projects was 2.6 per cent (£2.9m) below their combined public sector comparators.
Figure 1: Project Costs v PSC
In some cases the scope of projects changed and alternative solutions were proposed by the private sector.
2.4 Although Wellington/Balmoral was originally proposed as two separate projects, involving new build (Wellington) and refurbishment (Balmoral), DE endorsed the Belfast Board’s decision to combine the projects on the understanding that this would be likely to produce significant improvements in value for money. A comparison of the net present value of the accepted bid
27 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
(£36.4m), which was based on new build at both schools plus the construction of a Regional Training Unit for the Education and Library Boards at Balmoral24, with the net present value of a new build public sector comparator (£38.2m), suggested that using PFI would result in a saving of around five per cent.
2.5 In relation to the Belfast Institute, DE’s September 1999 analysis was based on a public sector comparator which envisaged refurbishment and partial new build. Because of concerns about the risk of existing defects in what would be old refurbished buildings, an alternative solution, based on new build, was proposed by the private sector. This ultimately formed the basis of the contracted solution, being viewed by the Department as a better outcome, particularly as it was to be achieved at refurbishment price which was within its affordability envelope. However, this impacted on the quality of the project (see paragraph 2.9).
2.6 We also noted in relation to the Belfast Institute that, although new build was presented as a variant bid, it had not been fully worked up at “Best and Final Offer” stage of the negotiations. However, the outcome helped realise the partial rationalisation of the Belfast Institute’s estate and contributed to the wider regeneration of the Millfield area (see Appendix 4).
2.7 With regard to the North West Institute, the original approved scheme was refurbishment, by conventional contract, of an existing off-campus listed building. However, a new build solution, incorporating facilities management for the entire North West Institute campus, was put forward as a proposed PFI solution (see Appendix 4). This offered better value for money when assessed against the corresponding public sector comparator and was the selected option. However, while Figure 1 purports to show a 10 per cent saving at contract close, this is not a like for like comparison as the agreed contract only provides for facilities management at the new build campus and other North West Institute owned sites. This arose due to changing requirements and associated uncertainty regarding the length of time rented sites would be required by the
24. The final bid also provided a number of enhanced facilities e.g. a larger sports hall at Wellington and a mathematics resource room at Balmoral. 28 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
North West Institute.
2.8 In March 2002, a consultants’ review of the financial status of the North West Institute confirmed DEL’s conclusion that PFI was a less costly option than proceeding down the traditional procurement route. However, at the time the contract was signed, the consultants identified an affordability gap between existing service costs being met by the Institute and the agreed unitary payments. This had not been properly resolved prior to contract signature.
But these changes have impacted on the quality of the projects.
2.9 The adoption of new build carries with it the perception of a better quality product and the prospect of a better long-term deal. However, DE had, in line with guidance at the time, made a limited disclosure of the public sector comparator to bidders during procurement and concluded that this might have been a significant factor in the close proximity between the public sector comparator and bids made (see paragraph 2.2). We concur and, based on the findings from our review of design and construction (see Part 3), it seems that this has impacted adversely on the relative quality of the Pathfinder projects. This is because contractors have sought to deliver more costly new build solutions at refurbishment prices.
While the initial procurement phase for the Pathfinder projects took longer, the construction phase was shorter than in conventional projects.
2.10 In traditionally procured contracts, submitted tenders are assessed and evaluated against specific design and build criteria. In contrast, the design, build, finance and operate nature of PFI schemes tends to require a more complex evaluation
29 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
and negotiation process. This additional input is evident when the period from OJEU advertisement to commencement of contract for Pathfinder schemes is compared with similar data for the four traditionally procured new-build schools in our sample (see Figure 2). The increased timescale also reflects DE’s relative inexperience in PFI, which they acknowledge as a contributory factor (see paragraphs 1.9 and 1.13). However, the lessons learned have helped reduce the timescale in more recent PFI projects (see paragraph 1.19).
2.11 What is also apparent from Figure 2 is that, while the initial procurement phase may have been more protracted, once the contract was signed, the Pathfinder schools/colleges were all constructed more quickly than those procured through traditional contracts. This can be attributed to the inherent incentives of the PFI payment mechanism whereby the service provider will only start to receive payments when the facilities become operational. This ensures that unnecessary construction delays are minimised.
Figure 2
30 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
2.12 In contrast, we found that a common feature of traditionally procured schemes was staged delivery i.e. construction was phased in line with the availability of funds. For example, St Malachy’s High School, Castlewellan was constructed, due to the funding mechanism, over a three year period. Likewise St Patrick’s High School, Keady, where, although the main school was occupied by pupils from August 1999, the pitches and external works were not completed until March 2000. Again the nature of the payment profile for PFI schemes can help eliminate the need for staged delivery, ensuring that a complete facility is in place when the students take up occupancy.
However, there was limited innovation both in terms of design and service delivery.
2.13 One of the ways in which PFI can offer better value for money is that it provides the private sector scope to offer innovation both in terms of design and service delivery. In terms of the Pathfinder projects we noted some examples where bidders proposed innovative solutions to meet output requirements, for example, the laying of synthetic all-weather playing pitches. However, a general concern expressed to us during our visits was that innovation was restricted by what was seen as the prescriptive nature of the Department’s Building Handbook. As a consequence we found limited evidence of innovation in design (see also Part 3). DE told us that, while the Building Handbook and associated schedule of accommodation set out the minimum standard required for educational establishments to deliver the Northern Ireland Curriculum, there is flexibility within these standards for design innovation. Nevertheless, DE recognises the need to ensure that the Handbook remains relevant to the changing needs of schools and the curriculum and it is currently reviewing it.
2.14 Where innovation did emerge, it had not been predicted. It has however, resulted in clear educational and management benefits to the school involved, Drumglass High School. Here the service provider introduced a loyalty scheme to
31 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
encourage student uptake of school meals; this has proved very successful, with uptake doubling from 45 per cent to 90 per cent. While the primary objective may have been to increase revenue, it has also resulted in benefits from a school management perspective. For example, pupils enjoy a well-balanced meal in the confines of the dining area, making supervision easier thereby improving discipline. Also within Drumglass, if the service provider spends less on planned maintenance because of reductions in vandalism, some of the savings are redirected to spending on books and equipment for use in the school, at the discretion of a pupils committee.
On the whole, long term enrolments were properly assessed but there is a significant disparity between planned and actual enrolments in two PFI schools.
2.15 The procurement process for schools includes an assessment of accommodation needs based on predicted student numbers i.e. long term enrolments. DE regards these predictions as critical factors in establishing the size of, as well as the need for, any proposed new school or extension.
2.16 We previously examined long term enrolments as part of a wider study on the provision of school accommodation25. Our main findings at that time were that:
• one in three completed projects had resulted in surplus capacity or insufficient accommodation;
• there had been time lags - on occasions, several years - between long term enrolment predictions and the commencement of work;
• the Department had commenced the systematic review of actual against predicted enrolments after schools had opened; and
25. “Department of Education: Provision of School Accommodation”; Report by the Comptroller and Auditor General for Northern Ireland, June 1993 (HC689). 32 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
• the Department attributed variations in provision to unpredictable factors rather than a failure to review the long term enrolment during development or inherent faults in its methodology.
2.17 In response to our report26, DE advised that :
• they had introduced procedures to ensure regular reviews of long term enrolment, i.e. at least annually for all capital projects in planning and a further check at the pre-tender stage;
• an immediate review of long term enrolment would be carried out where there are significant changes in enrolment patterns due to unforeseen circumstances; and
• in cases where enrolment patterns are particularly fluid, the position would be kept under constant review.
2.18 Given the importance of this assessment, particularly in relation to PFI schools where the educational authorities retain all risks relating to future student numbers, we compared current enrolments at the schools in our sample to their long term enrolment predictions27. This highlighted an over-provision of accommodation in two of the PFI schools, Balmoral and Drumglass, where there were fewer students than anticipated (see Figure 3).
26. The response was in the minutes of the Audit Review Group (11 January 1994), a local forum, which prior to devolution examined NIAO reports not taken by the Committee of Public Accounts. 27. A long term enrolment forecast is based on an examination of trends over the recent five year period. The Department of Education obtains details of the year 8 intake broken down by primary school previously attended. An average extraction rate is then applied to the average of the pupils in the lower class groups of the same contributory primary schools. The figure produced is the potential year 8 intake in 7 years time. That year 8 intake is multiplied by 5 in the case of secondary (non-grammar) schools and by 7 for schools in the grammar sector. Provision for over school leaving age pupils in the non grammar sector is considered separately.
33 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
Figure 3: Long Term Enrolments (LTE) and Current Pupil Numbers Year of Last 2003-04 School LTE Assessment* LTE Enrolment
Balmoral HS, Belfast 1998 500 289
Drumglass HS, Dungannon 1999 500 428
St Genevieve’s, Belfast 1998 1,000 1,036
Wellington College, Belfast 1998 770 772
Antrim Grammar 1997 740 729
Dominican College, Belfast 2002 815 1,022
Mount Lourdes GS, Enniskillen 2002 740 892
Regent House GS, Newtownards 2001 1,560 1,407
St Columb’s College, Londonderry 1994 1,540 1,505
St Joseph’s College, Londonderry 1996 850 895
St Malachy’s HS, Castlewellan 1999 950 969
St Patrick’s HS, Keady 1991 1,000 1,035
Aquinas Grammar, Belfast 770 776
Lumen Christi GS, Londonderry 824 844
* LTE determines potential enrolment 7 years from date of assessment.
Denotes the physical capacity, rather than the long term enrolment of the school. Following a report carried out by the Standing Advisory Commission on Human Rights, the Department of Education agreed, in July 1992, to provide an additional 1,470 grammar school places under Catholic management - 700 places for Londonderry and 770 for Belfast. The physical capacity of the 2 new schools - Aquinas and Lumen Christi - was determined by evidence of severe under- 34 provision of grammar school places in the Catholic sector. BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
2.19 Balmoral: The Belfast Education and Library Board (BELB) and DE agreed a long term enrolment of 500 (to be achieved by 2003) for this school on the periphery of South-West Belfast in January 1997. This was re-examined and confirmed in May 1998. The full business case recorded that the school had 406 pupils in October 1996. This included pupils who had moved after amalgamation with Deramore High School, another BELB school in South-East Belfast, which occupied a site adjacent to the old Wellington College campus (the combined site subsequently formed part of the land deal for the Wellington/Balmoral project) - see Figure 4.
Figure 4
2.20 In January 1999 (a few weeks before DE sought approval to the full business case from DFP) the Belfast Board advised DE that they remained satisfied that the LTE would still be in the range of 450-500. This was based on the continued popularity of the school; an anticipated growth in the number of pupils in feeder primary schools; and plans to cater for a small sixth form. The Board also confirmed that it had taken into consideration the impact of a recently opened (September 1997) integrated school in the South Belfast area (Malone College) and surplus accommodation in other neighbouring schools. 35 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
2.21 In light of the dramatic decline in enrolment to 289 in September 2003, we asked DE why the projected long-term enrolment had not been achieved. DE told us that the 1998 calculations were based on pupil trends since the amalgamation took effect, which produced an average extraction rate of 49 per cent of primary 7 pupils, from the main feeder primary schools. However, transfer rates declined to 43 per cent in the year the integrated school was opened (1997); there had also been a subsequent decline in contributory primary school numbers, for example the overall 1997-98 P1 enrolment of 164 contracted to a 2003-04 P7 enrolment of 125 (it is recognised however that numbers are erratic and are expected to be in the 146 range in 2007-08).
2.22 Drumglass: The Southern Education and Library Board and DE agreed a long term enrolment of 500 in March 1994 when pupil numbers were 444. The LTE was reviewed annually, the final review taking place in May 1999, a month before financial close. The pupil numbers calculated in those reviews are detailed at Figure 5.
36 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
Figure 5
2.23 The 1997 and 1998 long term enrolments were both predicated on the potential closure of Aughnacloy High School with a resulting transfer of over 50 pupils. The context for the 1999 review included a drop in the catchment primary school population and trends emerging since the opening of an Integrated College in Dungannon. The 1999 review also determined an alternative LTE of 450 in the event of the closure of Aughnacloy High School - which is still open. Despite these factors DE decided to retain an overall LTE of 500.
2.24 Included within the 2003 enrolment figure (428) is a sixth form comprising 27 pupils. DE’s policy in relation to post-16 provision at non-grammar schools is to leave such provision to each school’s discretion where the school can accommodate this within its existing approved accommodation capacity.
37 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
A more strategic review of long term enrolments would help inform decision making.
2.25 Proper assessment of long term enrolments (demand) is one of the most critical factors in determining future school provision, whether this is by conventional procurement or through PFI. However, it assumes greater significance in PFI given that, once a contract has been signed, the authority is committed to making payments for availability over the whole of the contract period. In the case of Balmoral and Drumglass this is 25 years. The Pathfinder contracts provide for early termination by the authorities but the financial penalties are severe.
2.26 While current enrolment figures for Drumglass are below the envisaged LTE, they are not of immediate concern and have the potential to be augmented by pupils from Aughnacloy High School, should rationalisation occur. However, Balmoral has shown a marked decline, with current enrolment approximately 58 per cent of that envisaged for 2003 by DE and BELB. Applying DE’s own criteria (see paragraph 2.17) would suggest that the trend could have been identified at an early juncture. For example, the significant fall in numbers transferring in 1998, coupled with increasing enrolments at Malone College, should have alerted both DE and BELB to the potential fluidity of enrolment patterns and hence risks of going down the PFI route. This trend could have been confirmed by reviewing 1999 and 2000 enrolment data, both of which would have been available prior to contract signature in October 2000.
2.27 We also noted in this case that only BELB secondary school data was considered. However, we are aware that Dunmurry High School, which is situated in close proximity to Balmoral High School but within the South Eastern Education and Library Board area, has a current enrolment of 292. As there is no major work currently proposed for this school, DE has not calculated a long term enrolment.
38 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
2.28 This highlights an important issue, particularly in the context of falling secondary school enrolments. Department of Education projections indicate that the current school population will reduce by 30,000 by 2009-10, with further reductions envisaged up to 2016-17, including a corresponding 30,000 reduction from current levels in secondary school enrolments. In light of this, and to ensure the most effective use of limited resources, we recommend that a more strategic review of long term enrolments, incorporating inter-Board analysis, should be used to inform decision making. DE told us that it will shortly be reviewing its methodology for calculating Long Term Enrolments.
39 Part 3
Our review of design and construction has highlighted a number of important lessons which, if applied, could have a positive impact on educational attainment.
3.1 Research has shown that capital expenditure on schools and colleges, coupled with proper design, can have a beneficial impact on educational attainment28. Improving attainment levels was one of the key targets contained in the Northern Ireland Executive’s Programme for Government and both the Department of Education and Department for Employment and Learning had related public service agreement objectives. More recently within the Northern Ireland Priorities and Budget 2004-06, the Government has selected a small number of outcomes and targets from departmental Public Service Agreements which have a particular importance and which should be planned and monitored at the highest level. These include:
Priority Outcomes Associated Targets
Department of A high quality education (a) By 2007, 76 per cent of Education system that allows young primary pupils to achieve people to reach their full level 4 or above in Key potential State 2 in English and 79 per cent in Maths compared with 74 per cent and 77 per cent in 2002. (b) By 2007, 63 per cent of year 12 pupils to obtain 5 or more GCSE’s (or equi- valent), at Grade A* to C (or equivalent) compared with 59 per cent in 2002.
28. Building better performance: An empirical assessment of the learning and other impacts of schools capital investment, Department for Education and Skills, Research Report RR407, March 2003; and Heschong Mahone Group, Daylighting and Productivity study: Daylighting in schools, USA, August 40 1999. BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
Priority Outcomes Associated Targets
Department for A better qualified and To increase the percentage Employment and skilled workforce. of working age people Learning qualified at (GNVQ) Level 2 or above from 63 per cent in summer 2003 to 68 per cent in spring 2007.
Although the main focus of our examination was to establish through the Pathfinder projects whether PFI can deliver VFM (see Appendix 1), the outcome of our review has also highlighted a number of important lessons in terms of design and construction that apply to both PFI and traditional procurement. If applied, these lessons have the potential to make a positive contribution to the achievement of these outcomes and targets. This will require further significant revisions to the 1994 Building Handbook29 which set out the standards that were applied to the design of the projects we examined.
3.2 In England, the Department for Education and Skills (DfES) is developing exemplar design standards which address the issues we have identified. Since our review commenced we are also aware that both DE and DEL have been in contact with DfES regarding the exemplar standards. There are however cost implications associated with implementation; these are estimated to be in the region of 15 per cent30. But, given that Northern Ireland’s space standards have been traditionally higher than existing standards in England and Wales, the
1 / additional costs are estimated to be about 7 2 per cent. However, these must be considered in the context of the wider educational benefits that are likely to accrue from the adoption of higher standards.
29. The Building Handbook has undergone a number of revisions since 1994 and further revisions are being progressed - see Appendix 5. 30. The 15% cost difference allows for statutory requirements such as the Disability Discrimination Act 1995 which comes fully into force in October 2004. For example, to meet the acoustic requirements of this Act, it would typically require 4% of the additional costs. DE told us that, although Northern Ireland schools are currently exempt from the Act, it is consulting on new Special Educational Needs and Disability legislation, due to come into effect next year, which will remove this exemption and align Northern Ireland with Part IV of the Act.
41 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
3.3 In addition to the issues we identified, discussions with DE’s Education and Training Inspectorate have also highlighted general concerns with design and specification, improvements to which could enhance the running of schools/colleges and the effectiveness of tuition. For example, corridor widths being too narrow and poor general design, both of which lead to delays at class changeover and hence reduce teaching time. Non-standard specification and siting of equipment was also identified as a problem (for example one of the schools had purchased a lathe to such a high specification that it was deemed unsafe for use by the students); this impacts upon health and safety and usability. Poor specification appears to have arisen because of confusion between the Boards and providers, particularly in understanding the difference between traditional procurement and PFI31.
3.4 To remedy these problems the Inspectorate has suggested to us that there should be greater teacher input to design and specification. We agree. The effective delivery of the curriculum is paramount, particularly in the context of raising educational standards, and teachers are best placed to advise on how this can be achieved. Each of the five Education and Library Boards has a Curriculum Advisory Support Service comprising qualified teachers who, we recommend, should be formally involved in reviewing and confirming, from a professional teaching perspective, all plans and specifications prior to sign off by the contracting authority.
3.5 As part of our review we sought, through use of the Construction Industry Council’s Design Quality Indicator questionnaire, users’ views on the quality of their new buildings. Unsurprisingly, given the nature of some of the accommodation that the new build, extensions and refurbishments replaced, 75 per cent32 of respondents were satisfied with the design and construction of their new facilities; satisfaction levels were broadly similar within procurement routes.
31. In Drumglass High School, DE and the Southern Education and Library Board had to make a further £300k available, post contract signature, for furniture and equipment that had either not been specified or, incorrectly had been thought to be the responsibility of the provider. 42 32. Based on a 60 per cent response rate. BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
3.6 We also appointed the Building Research Establishment (BRE) as technical support to analyse and compare design and construction of Pathfinder schools and colleges with those procured through traditional contracts. Our assessment looked at quality in terms of architectural design, service design, user productivity indicators, cost of ownership and detail design.
3.7 We determined median scores by procurement route for each sub factor based on a scale one to five. The median scores of the PFI projects were benchmarked with those procured through the traditional method. BRE also calculated overall median scores (incorporating both traditional and PFI) in Northern Ireland for further comparison with England and Wales. Scoring levels were objectively set by BRE construction and property professionals; Level 5 is exemplary; Level 4 represents the highest level to widely accepted definitions of competence acceptable to appropriately skilled professionals and craftsmen and Level 3 is considered a minimum acceptable standard. Each descent in performance usually implies a failure to achieve best practice in at least one significant area or several minor shortcomings. Appendix 6 provides a more detailed summary of the methodology used.
3.8 A summary of our main findings is contained in Figure 6; more detailed comment on our findings is contained in the paragraphs which follow.
43 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
Figure 6: Summary of Main Findings
General • Overall the quality of design and build is similar and in some respects better in Northern Ireland compared with England and Wales. However, design quality of schools and FHE colleges in Northern Ireland has significant room for improvement; • PFI schools are of lower design quality - with the exception of one. There was no discernable difference in the design quality of FHE colleges, in general; • Cost of ownership appears higher in PFI schools, and similar in FHE colleges; • Poor internal environments were widespread and are likely to impact on educational achievement - to some extent this is a management issue; • Solutions to some of the problems will have cost implications; and • Major opportunities exist to improve energy efficiency
Top Problems • Architectural input was less evident in PFI; • Poor specification and lack of attention to detail - mainly PFI; • Lack of environmental sustainability; • Poor acoustics, ventilation, visual environments, and indoor air quality; and • Poor detailing, particularly at junctions (again PFI) which may have implications for future maintenance.
Top five successes • Some good architecture, mainly traditional approaches, which included two outstanding examples; • Good site planning; • Good space planning and flexibility; • A notable reduction in vandalism; and • A few examples of good daylighting strategies.
44 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
There was a significant difference in architectural quality between PFI and traditionally built schools.
3.9 In considering architectural quality, we examined both internal and external merit, space planning, specification (including component selection and placement) and sustainability. In keeping with each of the areas examined, each sub factor was scored on a 1-5 scale. In our review, we scored traditionally procured schools/colleges one point higher, on average, than their PFI counterparts (see Figure 7).
Figure 7 - Architectural Quality
3.10 In terms of detail, we found a number of good examples of site planning and architectural quality, mainly in those schools built using the traditional approach e.g. Aquinas Grammar and St Patrick’s, Keady. In contrast, the architectural input in PFI schools/colleges appeared to be less evident, with two schools (Wellington and Balmoral) being virtually identical, showing little respect for architectural identity. DE and DEL have both told us that good design is now given a much
45 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
higher priority and this is reflected in the criteria that current projects will use to assess bids.
Figure 8 -Aquinas Grammar School
3.11 We also found that both procurement types warranted attention in their consideration of environmental, economic and social matters. Both external and internal merit were found to be better in traditionally built schools with particular concerns raised in specification failure in PFI schools.
3.12 Overall, there was little difference between England and Wales and Northern Ireland schools - apart from specification - where Northern Ireland scored better in space planning largely due to the setting of higher building standards by DE compared with its England and Wales equivalent (DfES).
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The quality of service design was better in Northern Ireland than in England and Wales.
3.13 We examined each school’s integration (service design) with its architecture, mechanical and electrical systems design, the maintainability of the building, access to replacement parts and the sustainability of materials (see Figure 9).
Figure 9 - Services Design
3.14 Our review found little difference in the service design of traditionally procured schools/colleges and their PFI counterparts. In benchmarking with England and Wales schools, Northern Ireland schools/colleges scored marginally better, with the exceptions of maintainability and sustainability sub factors, which were significantly better. However, given that overall scores did not exceed 3.0 in any of the sub factors, there is scope for improvement in quality of service design in local schools/colleges, regardless of procurement method. Those areas needing most attention are mechanical, electrical (see Figure 10), maintenance and sustainability.
47 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
Figure 10
A good environment is critical to successful school design and can enhance educational attainment.
3.15 We carried out a review of comfort conditions such as light, heat, audible and visual intrusion, acoustics and air quality, all of which were scientifically measurable in order to assess the user productivity of each of the schools (see Figure 11).
Figure 11 - User Productivity
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3.16 We found that there was a lack of environmental sustainability with major problems in the areas of:
• ventilation and air quality, both of which could be easily addressed through better environmental management of classrooms, e.g. by opening windows before or between classes or using trickle vents; • acoustics quality, which manifests itself in intelligibility of speech and raised speech levels, especially in gymnasiums, assembly halls and dining halls; this was particularly evident in PFI procurements, where in one college there are serious question marks over the fitness for purpose of its media recording studios; • visual intrusion (lighting), which was found to be much better in traditional builds (Figure 12) than PFI (see Figure 13); and • sustainability and energy efficiency: there was widespread evidence of the use of inefficient boilers and unnecessarily high heating levels. Figure 12 - Classroom with Good Daylighting
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Figure 13 - Classroom with Inadequate Daylighting
Further technical detail is provided on each of these issues at Figure 14 Overall, we found that traditional build either equalled or bettered PFI. However, scores for both build types indicate that there is scope for improvement. DE told us that it is currently updating its environmental standards in line with, for example, the revisions to Building Bulletin 87, the recently published Building Bulletin 93 (Acoustics), the Exemplar Schools Project and the Low Carbon Design Initiative.
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Figure 14
Issues impacting on educational productivity Significant opportunities to improve educational productivity were found in the majority of the buildings we visited. The main areas were: Ventilation Measurements of carbon dioxide levels were made in all premises33. Frequently, the ppm figures were above 1,500, with figures in the range of 1,800 to 2,500ppm being common. Where high ppm figures were measured, both inadequate window opening area and poorly positioned window openings were commonplace. Also, single sided ventilation was used for rooms up to 10m deep, beyond the general limit of 7m. Ventilation problems were observed in most assembly and sports halls, the main problem being that whilst provision was made for exhaust air by means such as high level windows, there was no source for inlet air, and therefore inadequate ventilation for occupants. Acoustics Intelligibility of speech was below what could be reasonably expected in a number of areas, especially assembly halls, sports halls and dining halls. The main cause of this was reverberation time (the time for sound to decay by 60dBA) being too long. This also made the rooms noisier than necessary which, in turn, made conversation difficult. Measured noise levels in some areas were above 74dBA - getting close to the 80dBA level where occupants in an industrial workplace would be required to wear ear-muffs to avoid hearing damage. Daylight The majority of teaching spaces had inadequate daylighting. Typical daylighting levels were 0.2 to 0.6%, which compares badly with the 4% threshold needed to achieve the educational building design objective of daylight being the main source of lighting energy. In addition, the quality of daylight was poor in most teaching spaces, with uneven levels of lighting which was well below guidance figures. A frequent cause was inadequate floor to ceiling height for the depth of room away from the window wall, and/or lack of daylighting provision to the rear of the rooms. The lack of daylighting was compounded by the tops of windows being well below ceiling level, in all likelihood to minimise capital costs. There were also frequent problems with glare from windows and worktops, veiling reflections on ICT screens, unsatisfactory selection of furniture, fabric and VDU screen surround colours. The Heschong Mahone Group Report, Daylighting and productivity study: Daylighting in Schools, USA, (Aug 1999) indicated improvements of 14-23% with good daylight showing strong correlations between ample daylight and good educational productivity. Sustainability and energy efficiency We found widespread evidence of unnecessarily high heating levels, which can have an impact on educational productivity, and on heating costs. Room temperatures of 230C or above were frequently observed and differences of more than the good practice of 30C between floor and ceiling temperatures were commonplace, leading to problems of hot heads and cold feet. In most instances, this is a heating design issue where a revision to the standard approach to heating systems is warranted. Many opportunities to install efficient boilers together with matching heat emitters (radiators etc.) had been lost at the design stage, especially where natural gas was available. Heating energy cost reductions of 12% are possible by using condensing boilers, with payback periods of less than 4 years.34 Action Energy35 estimates that UK schools spend around £350 million a year on energy for heating, lighting, hot water, catering and increasingly for IT, of which £60 million is thought to be wasted.
33. As a guide to good practice, a level of 1,000 parts per million (ppm) corresponds to the optimum ventilation rate in teaching spaces and the general limit of acceptability is 1,500ppm. Higher ppm figures are associated with stuffy rooms and reductions in alertness of occupants. Danger to health starts at 3,000ppm with significant risk to health above 5,000ppm. 34. The use of whole-life costing approaches such as ISO 2000: 15686 Constructed assets - whole life costs, would provide a rational basis for decisions. 35. Action Energy is a programme run by the Carbon Trust and funded by the Department of the Environment, Food and Rural Affairs, the Scottish Executive, Invest Northern Ireland and the National Assembly for Wales. It is designed to help businesses and public sector organisations, including schools and colleges, cut their energy costs through the provision of free, professional advice and assistance. Action Energy is an integral part of the government’s climate change programme, aimed at meeting the UK’s carbon reduction obligation under the Kyoto Protocol.
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The cost of ownership appears to be higher in PFI schools/colleges.
3.17 Cost of ownership is defined as the potential whole life performance of the building’s fabric and environmental services. As part of our review of the cost of ownership we examined external materials, internal fabric and finishes; this included reviewing all building components in terms of capital and maintenance costs, the fitness for function of the structure in relation to its facilities management and the flexibility of the building for both layout change and extension (see Figure 15).
Figure 15 - Cost of Ownership
3.18 In general there was little difference between procurement routes with the exception of East Antrim Institute which, although a traditional build, scored only 1.0 for its external materials, due to poor specification of original materials, i.e. the wrong materials were used given its coastal location (see Figure 16). This was compounded by poor installation. We also found that the cost of ownership was highest in PFI schools and in Further and Higher Education Colleges
52 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
(reflected in a lower score in Figure 15). Three of the colleges visited, the Belfast Institute, the North West Institute and East Antrim appear to be the most costly to maintain. In contrast, there were a number of good examples of site planning, space planning and flexibility, with one school, Aquinas Grammar, scoring an exemplary 5.0 for flexibility.
Figure 16 - East Antrim Institute
3.19 Overall, the scores for Northern Ireland in each sub factor bettered those achieved in England and Wales. However, similar to our results for service design (see paragraph 3.14) no sub factor score exceeded 3.0 indicating that there is still scope for improvement.
The least expensive route has not necessarily been pursued by the contractor.
3.20 As a rule, PFI schools used metal sheet roofing (see figure 17), while the traditional schools used favoured traditional materials such as facing brickwork and concrete roofing tiles. Both coverings are considered to have good service lives, but the traditional covering tends to ensure a higher design quality. This in
53 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
turn should ensure longer life for components and materials. Aluminium powder covered or anodised door and window frames, which should ensure a maintenance and trouble free life cycle for more than 35 years, were common across all schools/colleges visited. The use of both materials indicates that the least expensive route has not necessarily been pursued and contractors have had regard to durability and the impact of future maintenance costs.
Figure 17 - Metal Sheet Roofing
With adequate maintenance and free from major defect, there is no reason why the schools and colleges should not last for 50-60 years and beyond.
3.21 The residual value and ultimate life of the facilities will depend on adequate manufacture, installation, maintenance, repair and replacement of key components. Within traditionally procured schools and colleges, responsibility for maintenance and repair rests with the Education Boards and the Colleges respectively. However, in PFI the service provided is required to maintain the property to the standard specified in the contract over the concession period. Our review (see paragraphs 3.9 to 3.20) has highlighted significant shortcomings in PFI schools/colleges which may pose potential maintenance difficulties.
54 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
We would suggest that this is an area both DE and DEL may wish to keep under review, particularly in the latter stages of the 25 year concession periods of the Pathfinder projects. There is, however, no reason why the schools and colleges should not last for a typical lifecycle of 50-60 years and beyond, if adequately maintained and free from major defects. This also applies to those schools and colleges procured through traditional means.
Design Quality of schools in Northern Ireland has room for significant improvement.
3.22 Our review of detailed design found that the use of traditional materials, coupled with conventional detail in traditionally procured schools, tended to ensure a higher design quality. This in turn should ensure longer life for components and materials. In both external and internal detailing, PFI schools/colleges scored 2.0, which indicates that not all major components and the greater majority of minor components did not meet requirements (see Figure 18).
Figure 18 - Poor External Detailing
3.23 As indicated at Figure 19, there was a significant difference between PFI and traditional build in terms of safety, security and fittings.
55 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
Figure 19 - Detail Design
3.24 With the exception of one school, St Genevieve’s, PFI schools/colleges did not have the same detail design quality as their traditional build counterparts. We identified poor specification with a lack of attention to detail, particularly at construction junctions as a particular weakness. Our overall conclusion is that the design quality of schools in Northern Ireland, while scoring higher than their England and Wales equivalents, still has significant room for improvement.
56 APPENDICES Appendix 1
Methodology and Scope of NIAO Examination
1. The main issue and the focus of our examination was to establish through the Pathfinder projects, whether PFI can deliver VFM. The Pathfinders were undertaken at the same time as an ongoing capital programme of schools and colleges procured through conventional means. We set a series of audit questions that we considered would answer this issue:
• were lessons learned from the Pathfinder projects?
• was the design, build and operation of PFI comparable or better than conventionally procured projects?
• has the delivery of the Pathfinder schools/colleges been equal to or better than conventionally procured projects?
As such, our review has concentrated on outputs and outcomes as opposed to a detailed review of the PFI process. However, as a good practice guide we have included, at Appendix 2, an analytical framework which seeks to cover comprehensively the key value for money issues that should be taken into account in the PFI process.
2. In the course of our examination, we consulted DE and DEL officials, teachers and other professional staff involved in the design and provision of educational facilities. We visited the 6 schools/colleges which had been procured by PFI together with 12 others, of which 4 were new build, representing the most recent and major conventional procurements. We engaged The Building Research
58 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
Establishment (BRE) as technical consultants to compare the design and construction of both PFI and traditionally procured schools and colleges (see Appendix 6). We also sought, through use of the Construction Industry Council’s Design Quality Indicator Questionnaire, users’ views on the quality of their new buildings.
3. Local authorities in England, Scotland and Wales are also using the Private Finance Initiative (PFI) to provide new schools. The experiences of the early PFI schemes in those jurisdictions has been examined and reported on by the statutory auditors in 200236 and 200337. We have taken account of the main findings in those reports where they are relevant to the experience in Northern Ireland. In the 2003 report, “PFI in Schools”, the Audit Commission were advised by the same technical consultants, BRE.
36. “Taking the Initiative - Using PFI Contracts to Renew Council Schools”, Audit Scotland, June 2002. 37. “PFI in Schools”, Audit Commission for Local Authorities and the National Health Service in England and Wales, January 2003.
59 Commitment Appendix 2
Assess the weight Establish likelihood The National Audit Office's to be attached to of a vfm affordable Evaluation policy imperatives project criteria Analytical Framework
Make preliminary Identify the scope Project evaluation of the for risk transfer timetable benefits sought in advance
Select only top Assess private Identify room Assemble a properly Prepare a Option appraisal Plan procurement Investigate Identify likely Prepare a credible Prepare a public priority projects sector capabilities for innovation qualified project tendering strategy the market contract issues project timetable sector comparator in advance thoroughly team in good time and timetable
Express the results Identify feasible Prioritize projects Create a good desired in output project mechanism Objectives Establish conditions Create a good Maintain competitive specification of terms for a successful tender list tension to completion requirements final contract
Apply the proper processes Select the best Make the project Determine best Produce an outline project to pursue deliverables clear form of partnership business case Regularly reassess that the project is worthwhile
Set realistic Monitor and Make the project Control costs Appoint advisers objectives clear budgets after competition manage costs Make the project a good deal Ensure that a good Operational Financing Deliverable Risk transfer range of solutions Design variants variants variants variants variants was put forward Make sure the deal makes sense
Evaluate Financial Quality of elements of Financial Risk transfer stability of service the bid bidder
Select the best Were alternatives Will the contract Is the deal Does it and will it evaluated and ensure delivery of the affordable in the available deal meet objectives? services over the short and fairly eliminated? Select the most contract life? long term? economically Cost Bidder track Design features Operational Impact of risk advantageous bid record features
Were all reasonable Does the contract Are there sources Original objectives? alternatives reflect the deal that for capital funds? has been negotiated? examined? Manage differences Design Operational between the winning Sanctions Financial deviations deviations Deliverables Risk allocation bid and contract award Was it the most Are there adequate Fit with latest Are there sources economically arrangements to circumstances? for ongoing advantageous manage the contract? solution? payments?
Was there a clear Are termination/ overview confirming hand over the desiarabilty of arrangements clearly proceeding with specified? the best deal?
Are there 60 appropriate sanctions/bonsues?
Are there appropriate provisions for dealing with changing requirements? Appendix 3 (Paragraph 1.12)
Department of Education’s Report on Evaluation of PFI (PPP) for Education Service Capital Projects (September 1999)
DE’s report on the Evaluation of PFI (PPP) for Education Service Capital Projects concluded that it would take at least 20 years to eliminate the current backlog in capital works using conventional procurement methods38.
In contrast, both the PPP models which it developed (i.e. strategic partnering (Figure 2) and Bundling (Figure 3)) demonstrated that the elimination of capital backlog could be achieved within 10 years. It also concluded that it could be afforded within the limits of existing public expenditure levels and deliver value for money.
38. This calculation was based on the assumption that the existing levels of public expenditure to develop and operate the school estate were maintained (i.e. approximately £173m per annum, capital and recurrent), and could be exploited to the full. 61 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
62 Appendix 4 (Paragraphs 2.6 and 2.7)
FE Colleges Pathfinders: Belfast Institute of Further and Higher Education (the Belfast Institute) and North West Institute of Further and Higher Education (the North West Institute)
The scope of the projects changed during procurement.
1. Before the Pathfinder developments, the Belfast Institute delivered services from seven main sites. The original procurement proposals were to target the largest site (Millfield) and the two sites in the worst state of repair (Ormeau and College Square East), through the closure and sale of Ormeau and upgrading of Millfield and College Square East sites. After short-listing of bidders, College Square East was removed due to concerns over affordability. Later, during the bid evaluation stage, two more sites at Templemore Avenue and Willowfield were identified for closure and their functions transferred to Millfield; the Belfast Institute’s administration was also identified for transfer to Millfield in its entirety.
2. The original North West Institute project, covering the Institute’s main site, had been approved by DE in 1995 to proceed through a conventional procurement. Prior to commencement, DE advised the Western Education and Library Board who, at that time, were responsible for the North West Institute, that the project should be tested against PFI. This process commenced in April 1996. We noted that by full business case stage, July 1997, the preferred bidder had proposed a variant solution which included providing facilities management to the Institute’s entire estate. At that time the net present value for the public sector comparator was adjusted to reflect this proposal. Although the variant bid was
63 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
less costly than the adjusted public sector comparator, uncertainty surrounding the future of the Institute’s satellite sites resulted in the eventual deal being confined to new build and facilities management at Strand Road.
The overall time taken to conclude a deal could have been reduced through more timely preparation
3. The North West Institute and the Belfast Institute deals were signed 38 months and 41 months respectively after OJEU advertisement. The North West Institute advised the Assembly39 that the procurement timetable was grossly underestimated. Difficulties in obtaining full planning consent, which could only be sought after the selection of the preferred bidder, contributed to a 24 month delay between selection and conclusion of the deal.
4. The reference project for the Belfast Institute was based on the preferred option contained in an economic appraisal, which had been completed on the assumption that the project would be taken forward as a traditional procurement. This appraisal was converted into an outline business case within similar parameters, i.e. a capital ceiling of £10 million and the deal being closed within 13 months. Up to the short listing of bidders, the indicative timetable was met. However, this changed when the Belfast Institute project board received the recommendations of an independent condition survey, which had been commissioned to provide estimates of refurbishment costs needed to bring Millfield and College Square East up to the standard specified within the user requirements.
5. The condition survey recommended works costing an estimated £28 million. DE then expressed major reservations about the affordability of the project but reaffirmed their support (allowing the project to proceed to Invitation to Negotiate (ITN)) after reducing the costs of the proposed works from the estimated £28m to £20m (£10m more than the outline business case), through the excision of College Square East from the core bid (see paragraph 1) and other savings.
39. Committee for Finance and Personnel: “Report on the Inquiry into the Use of Public Private 64 Partnerships” p66, Vol 3; July 2001. BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
Negotiations with the short listed bidders for the Belfast Institute contract were more complex than expected
6. The likely preferred bidder was selected after eleven months and it was another eight months before they were formally appointed. All bidders sought and obtained extensions on the time for the submission of first bids as well as Best and Final Offers (BAFO). Their input at the seven formal briefing sessions (instead of the planned four) was an important factor in the reconfiguration of Millfield.
7. There were clear arrangements in place for the evaluation of bids, which included specialist sub groups to consider the bidders’ proposals in relation to each group’s own area of expertise. The bid eventually selected was a variant bid which was submitted at the same time as the first bids. In its initial form, the variant had amended services and financial assumptions, but was in an unworked state. As the variant bid was only alluded to in the financial section of a core bid, the evaluation teams looking at the Design and Services aspects of the bids did not get early sight of the variant proposals. The Sub Groups therefore only became aware of the variant bid during the BAFO evaluation. At the final presentations the project board obtained from the consortium confirmation that the variant bid, albeit in an unworked state, was “still on the table”. The consortium was selected as the preferred bidder on the expectation that the variant would be developed so that a full business case could be submitted to the Department of Finance and Personnel (DFP).
The preferred bids were deemed value for money as they were less than the respective public sector comparators.
8. In both the Belfast Institute and the North West Institute procurements, the preferred bids came in below their respective public sector comparators (see Figure 1, paragraph 2.3). This was maintained through to contract signature.
65 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
While the signed Belfast Institute deal was almost identical to the public sector comparator used (based on partial new build and refurbishment), the North West Institute bid, the first Pathfinder to reach full business case stage, showed a marked improvement in value for money from 4.2 to 10.6 per cent below the public sector comparator at contract close. However, this largely reflects the decision to only provide facilities management in the owned and new build elements of the North West Institute campus as opposed to the whole campus, as originally proposed by the PFI consortia and reflected in the public sector comparator.
9. The public sector comparator for the Belfast Institute evolved as the configuration of the scheme changed (see paragraphs 1, 5 and 7) but during the bidding preliminaries, all of the short listed consortia expressed concern about the lack of detailed disclosure. Only after the preferred bidder was selected on a putative basis, was the public sector comparator adjusted to reflect a more appropriate valuation of risks. This had the effect of increasing the public sector comparator by £1.3m. The public sector comparator was increased by a further £0.3m when an update on the 1996 disposal value of the Ormeau site was obtained.
10. DFP approved the Belfast Institute business case acknowledging that, although the gap between the public sector comparator and the preferred bidder was narrow, they were content that the greater intangible benefits accruing from new build refurbishment would ensure that the project would continue to provide value for money even if there was a further narrowing of the gap.
66 Appendix 5 (Paragraph 3.1)
Major milestones in revising the 1994 Building Handbook
March 1998 Publication of “A Guide to the Energy Efficient Design of Educational Buildings” - adopted Building Bulletin 87 as the reference for energy efficiency standards.
August 1998 Publication of Section 5, School Meals Accommodation.
June 2000 Publication of the revision to Part 12 (ICT) of the Secondary School Handbook.
Summer 2003 Publication of a revised section on Specialist Accommodation - this confirmed the adoption of Building Bulletin 87 as the reference for environmental standards, including the internal environment.
Ongoing Implementation of the Low Carbon Design Initiative both in the Building Handbook and also in current projects.
67 Appendix 6 (Paragraph 3.7)
BRE Survey Methodology
BRE reviewed 14 Post-Primary Schools and 4 Colleges of Further and Higher Education.
1. To assist with our review we appointed the Building Research Establishment (BRE) as technical support to analyse and compare the design and construction of PFI schools and colleges with those procured through traditional contracts40. As part of their remit, BRE considered whether:
• construction materials and components used for PFI schools were significantly different to traditionally financed schools;
• whole life costs for workmanship and materials used in PFI schemes were adequate;
• decisions relating to whole life costs considered the period beyond the contract period; and
• PFI schools provided material Design, Build Operate synergies beyond the contract period.
2. BRE visited each school, accompanied by professional staff from the Department of Education’s Building Advisory Branch (who also provide professional advice and support to the Department for Employment and Learning), and conducted a visual, non-intrusive survey of the building fabric.
40. Our sample comprised 6 Pathfinder projects and 12 traditionally procured schools and colleges, representing the major post-primary extensions and new builds completed in the same period.
68 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects
3. Assessment was based on BRE’s Design Quality Method (DQM) which they had previously utilised in a similar exercise carried out for the Audit Commission in England and Wales41. This comprises a series of five matrices containing several sub-factors covering the following areas:
Architectural Design Quality
Building Services Design Quality
User Productivity Indicators
Building Cost of Ownership
Detail Design
4. We determined median scores, based on a scale of 1 to 5, by procurement route for each sub factor. The median score of the PFI projects were benchmarked with those procured through the traditional method. BRE also calculated overall median scores (traditional and PFI) in Northern Ireland for further comparison with England and Wales. Scoring levels were objectively set by BRE construction and property professionals: Level 5 is exemplary; Level 4 represents the highest level of widely accepted definitions of competence acceptable to appropriately skilled professionals and craftsmen and Level 3 is considered a minimum acceptable standard. Each descent in performance usually implies a failure to achieve best practice in at least one significant area or several minor shortcomings.
41. BRE had been appointed as consultants by the Audit Commission in its study of PFI School Design in 2002, and their findings technically underpinned the Commission’s subsequent report “PFI Schools (2003)”.
69 BUILDING FOR THE FUTURE A review of the PFI Education Pathfinder Projects List of NIAO Reports
Title NIA/HC No. Date Published
2003 The Sheep Annual Premium Scheme NIA 75/02 6 February 2003 The PFI Contract for the Education and Library Board’s New Computerised Accounting System NIA99/02 20 March 2003 Areas of Special Scientific Interest NIA103/02 27 March 2003 Financial Auditing and Reporting: 2001/02 NIA 107/02 2 April 2003 The Use of Operating Theatres in the Northern Health and Personal Social Services NIA111/02 10 April 2003 Investigation of Suspected Fraud in the Water Service HC 735 26 June 2003 Management of Industrial Sickness Absence HC 736 1 July 2003 Encouraging Take-Up of Benefits by Pensioners HC 737 3 July 2003
2004 Navan Centre HC 204 29 January 2004 The Private Finance Initiative: A Review of the Funding and Management of Three Projects in the Health Sector HC 205 5 February 2004 De Lorean: The Recovery of Public Funds HC 287 12 February 2004 Local Management of Schools HC 297 19 February 2004 The Management of Surplus Land and Property in the Health Estate HC 298 26 February 2004 Recoupment of Drainage Infrastructure Costs HC 614 8 June 2004 Use of Consultants HC641 10 June 2004 Financial Auditing and Reporting: 2002 -2003 General Report by the Comptroller and Auditor General for Northern Ireland HC673 24 June 2004 Introducing Gas Central Heating in Housing Executive Homes HC725 1 July 2004 Department of Employment and Learning: Jobskills HC 762 6 July 2004 Imagine Belfast 2008 HC826 14 July 2004
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