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PFI Benchmarking Outcome for Bristol Schools PDF

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PFI Benchmarking Outcome for Bristol Schools PDF Decision Pathway – Report PURPOSE: Key decision MEETING: Cabinet DATE: 22 June 2021 TITLE PFI Benchmarking Outcome for Bristol Schools Ltd Ward(s) n/a Author: Lee Hannan Job title: Strategic Supplier Relations Manager Cabinet lead: Cllr Cheney Executive Director lead: Mike Jackson Proposal origin: BCC Staff Decision maker: Cabinet Member Decision forum: Cabinet Purpose of Report: To advise members on the outcome of the soft services (catering, caretaking, cleaning and grounds maintenance provision) benchmarking exercise concluded on the Bristol Schools Ltd Private Finance Initiative (PFI) and the impact the results will have on the annual unitary charge payable by the Council with effect from each contract review date. Seek agreement to accept the final proposal and secure a reduction to the annual unitary charge (UC) and to vary aspects of the contractual and commercial documentation in place in order to realise savings and other benefits from the PFI contract from 1 April 2021, subject to any discussions with and, where applicable, any consents required from DFE and/or the relevant PFI Academy schools under the terms of the Schools Agreements and Principal Agreements. Evidence Base: About the Bristol School Ltd PFI Contract The Bristol Schools Ltd PFI agreement is one of 3 PFI agreements held by Bristol City Council. This agreement is managed by Bristol Schools Ltd (Special Purpose Vehicle) (SPV) and was mobilised over a staggered service availability programme over 2005/2006. The contract is due to end in 2031. The contract (as amended) covers the construction and ongoing manged facilities service for the following education and leisure buildings: Blaise High School (Academy) Oasis Academy Brightstowe Kingsweston School Brightstowe (LA Community School) Bedminster Down School (Academy) Orchard Academy Filton Avenue at Orchard (Academy) Henbury Leisure Centre. We are currently in year 15 of a 25 year contract. The annual fee (unitary charge or UC) payable to the PFI contractor is built up of a number of different cost elements, including repayment of the original construction costs, insurance costs, utilities costs, building asset lifecycle costs and provision of Facilities Management Services for the duration of the 25 year contract. All amounts payable to the SPV and the FM Provider are part indexed annually and elements of the contract, notably Soft Services are subject to bench-marking / market testing arrangements every 5 years 1 Version April 2021 throughout the contract term. About Benchmarking & Market Testing The benchmarking exercise is aimed at ensuring that the quality and competitiveness of the soft facilities management services within the UC is reflective of the market rate and offers up an opportunity to test the comparative costs of the current service provision to ensure continued value for money. This is achieved by comparing the standards and prices of the Benchmarked Services and the costs of providing them with the standards and prices of equivalent services. The results indicate the extent (if any) that the comparable rates differ to those paid by Bristol City Council. Where the market costs sit within a +/- 5% tolerance of the current charge, no change shall be made to the charge. Where the Market Costs sit outside a +/- 5% tolerance of the current charge the parties shall agree any changes to be made to the Unitary Charge. If no agreement is reached the Contractor shall undertake actual Market Testing. The council has the option of proceeding to Market Testing but the option is unlikely to improve on the outcome of the benchmarking exercise. Further information on the Market Testing option is included in Appendix I: [Exempt Information]. About the outcomes of this Benchmarking exercise It is essential that the information being provided for the benchmarking exercise is both transparent and robust. In order to aid the exercise and ensure consistency with the wider PFI Sector, Council officers influenced the level of detail being provided and by undertaking a separate in-house exercise have subsequently negotiated a final position that compares favourably with other market comparators for the provision of soft services. If Best Value is to be maintained it will become increasingly essential to invest the same oversight at future benchmarking intervals. In summary, the findings from the benchmarking exercise and subsequent negotiation indicate that adjustments can be made to the tested services, which result in an overall combined reduction to the annual UC of £98kpa, (1.07% of the total contract value of £9,142,964.55 for 2021/22, which is subject to RPIX). During the course of the benchmarking negotiations the Council was also able to secure agreement to the following value added changes to the Project Agreement: Monthly report on the DBS numbers and status for all the operatives on site. The current contract is silent on DBS and safeguarding, meaning the school are at risk if they do not have prompt and direct access to this information. Extended access beyond the core hours of 8am – 6pm to 7am – 7pm for school staff at no extra charge. School staff currently have informal access to the site from 7am – 7pm during school time and 8am – 4pm during the holidays. This in free of charge and sits outside our contractual entitlement of 8am – 6pm. Whilst this is the current free arrangement there are currently no guarantees it will remain. This arrangement will be formalised, so the schools have some predictability with access to their building. A minimum of 4 work experience placements to each school in any academic year. This will enable young people to gain access to employment skills and experience in a number of different sectors of Facilities Management, such as catering, cleaning, building maintenance, grounds maintenance, management, administration and energy management. The negotiated position, if accepted must also include the following financial adjustments: Price for primary and secondary school meals will not be increased beyond by 10p per meal (to £2.40 Primary and £2.50 secondary) subject to a review in 2026 (the next benchmarking interval). 2 Version April 2021 The increase to the school meal costs is aimed to ensure the contractor can charge a fair market rate, as the current price has not increased since 2013. This increase will remain fixed for 5 years period and at the prosed level is still comparable with rates used in the surrounding areas for both a PFI standard and non PFI standard. The 10p increase is lower than inflation for the same 8 year period. Where, for example, an inflationary rise since 2013 would result in a new meal rate of around £2.81 for secondary schools. The table below notes current meal prices for similar schools. It is slightly higher that the Trading with Schools rate used elsewhere in Bristol which is £2.45, although the trading with schools portfolio is almost entirely universal infant free school meals, where a much higher level of meals are guaranteed, so not directly comparable. *Our Bristol Schools Ltd Project include 1x Primary site, 4x Secondary sites and 1x Secondary SEND site North Somerset non-PFI £3.50 Somerset PFI Secondary A £2.95 Somerset PFI Secondary B £2.95 Worcester PFI Secondary A £2.95 Worcester PFI Secondary B £2.95 Bristol Schools Ltd Secondary £2.50*proposal Bristol Schools Ltd Primary £2.40*proposal Bristol Trading with School Secondary non PFI £2.45 Bristol Trading with School Primary non-PFI £2.35 South Gloucester Secondary non-PFI A £2.25 South Gloucester Secondary non-PFI B £2.25 Schools & Academies will need to fund the increase to their free school meal funded pupils. Cash sales to non FSM pupils, staff and visitors will need to fund this themselves. The price increase implementation date will be agreed with each School, which shall be no later than 1st Sep 2021. The increase should be considered in the context of the annual UC saving of £98k of the contract. The catering service provision currently offers a wide selection of food and beverages, to meet the dietary needs and preferences of the various groups serviced, including healthy and nutritional meals, medical diets, ethnic, cultural, vegetarian and vegan options. At all times the service must offer good quality, safe, wholesome and nutritious meals, snacks and beverages in compliance with requirements of all food safety legislation and standard as laid out in National guidance, including the Nutritional Guidelines for Schools Catering. Food must be presented in an attractive manner which offers customers a choice, including vegetarian and vegan food alternatives with particular attention paid to appearance, taste, texture, portion control and nutritional value. This proposal does not aim to, nor be able to deviate from these regulated standards. Appendix E – Equalities screening / impact assessment of proposal, includes consideration of the impact of the price increase in relation to Protected Characteristics under the Equality Act 2010 and wider social and economic effects, together with mitigations. Under the terms of the Academy Schools Agreements and Principal Agreements, the Council is obliged to notify DFE and the relevant Academy school of changes affecting the school’s / DFE’s financial contributions to the Unitary Charge and/or where an Authority Notice of Change is required, and, where required under the terms of the Academy agreements, to obtain consent from the school and/or DFE (as applicable) before affecting such change. Cabinet Member / Officer Recommendations: That Cabinet: - 3 Version April 2021 1. Note the outcomes of soft services benchmarking exercises undertaken on the Bristol Schools Ltd PFI contracts. 2. Authorise the Director of Finance, in consultation with the Deputy Mayor and Cabinet member for Finance, Governance & Performance to accept, subject to complying with obligations in the Academy agreements, the proposal to reduce the annual unitary charge by £98kpa, (1.07% of the total contract value of £9,142,964.55 for 2021/22, which is subject to RPIX) (a whole life contract saving of £1,010,243.56 (subject to RPIX), and instruct the necessary financial adjustments to bring into effect all associated savings.
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