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Legal questions arising from halting of BSF

16 Jul 10 The decision to axe Building Schools for the Future has raised a series of contractual questions for clients, construction companies, and other parties involved in the programme. Pinsent Masons explains.

The cancelling of the Building Schools for the Future programme has created a mire of legal and contractual uncertainties for all parties involved in the development, construction and running of new schools.

The Department for Education (DfE) indicated that it was looking to "set out a clear way forward for prudent capital investment in education", but in the short-term at least, for local authorities and bidders alike have been provided with a range of questions that need to be addressed.

A review of the affected schools listed out indicates the scale of the problem. In total, the DfE has identified over 1400 schools, in no fewer than 140 different localities. These schools have been categorised as "stopped", "unaffected" or "subject to review".

"Stopped" schools

Both local authorities and private sector companies will have spent millions of pounds in developing plans and bids for schemes in respect of these schools. Many will have been at the point of submitting bids or signing contracts and will be wanting to know how, when and whether the costs which have been wasted in this can be recovered.

Stakeholders will want to know that if schemes are being scrapped then new capital investment will be put in place, and how much of the hard work in design and planning that has already been undertaken can be saved and used in future.

Likewise for these schools there will be broad supply chains of companies who will have committed time, expense and employees in supporting these bids. The decision will put the future of many of these employees and even the organisations themselves in doubt. It will be a paradox if claims of costs savings are swamped by abortive development money, claims and litigation.

"Unaffected" schools

What does "unaffected" mean? A cornerstone of BSF (and major source of criticism for its complexity) was the creation of a private/public joint venture, the local education partnership or LEP. It was the LEP's role to map out the development of future schemes for local schools over the ten years following its creation.

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If these future schools are "unaffected", can those involved in the LEP be confident that they will retain responsibility for the development of those schools? Does the DfE's announcement mean that the timing for availability and funding in respect of these schools will have to change?

Schools "Subject to review"

The position of the LEP is also important for these schools. The DfE suggests these will be determined "in recognition of local need" – however, it would appear that the majority of these schools are those which are at "preferred bidder" stage – that is to say: a local need has already been clearly identified by the local authority and a private sector partner has been selected to form a LEP. As with the "stopped" schools, this process will have involved many months of expensive competitive tendering.

Previously, both private sector partner and local authority properly expected that they would imminently be entering into contracts. If the suggestion now is that the private sector partner is only going to be entitled (effectively) to develop one or two schools, as opposed to a number of schools over the succeeding ten years, important questions of procurement law will need to be addressed – not least, the disproportionate cost that the local authority and private sector bidder will have been required to incur relative to the number of schools which it will finally be entitled to develop after completion of the review.

There will also be the question of those other disappointed organisations which may previously have taken the decision not to bid the project, given the demands of a complex ten year workstreams, but which would have chosen to bid for the development one or two schools.

Conclusion

The impact of the announcement on all those who have been involved in BSF over the last few years cannot be underestimated. While there has been a general consensus in positive comments about the need to remove the red-tape and box-ticking of BSF, a vacuum has been created in its place.

This vacuum includes not only the communities and stakeholders expecting to see new schools being developed for their children, but also those companies investing in education, wanting to understand how to retain their skills and to build upon the hard-won investment that BSF has demanded.

Whilst the desire for the major review being implemented by DoE is entirely understandable, to pull down one model of procurement without having a clear understanding of what is to replace it is in danger of having a very harmful effect – and should be addressed rapidly. 

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MPU

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