The production of standard form documents for the
Building Schools for the Future (BSF) Programme continues to be
progressed although with some concerns on the detail of the
proposed model being revised by the private sector.
The BSF Programme is one of the Government's
recently announced flagship programmes. This contemplates the
public and private sectors setting up a joint venture delivery
vehicle (the Local Education Partnership, or LEP) on a 20-80%
ownership basis to coordinate the procurement.
This will be through a traditional PFI structure, design and build
structure or otherwise, of the capital investment and ongoing
services necessary for selected schools. The
intention is that the LEP will enter into a 10-year Strategic
Partnering Agreement (SPA) with the relevant local authority,
which, amongst other things, sets out the regime that governs the
LEP's rights to exclusivity in relation to subsequent projects.
The PPP Forum, the industry body sponsored by 93
organisations that play a leading private sector role within the
PFI/PPP industry, has recently provided comments on the draft
standard form documents (comprising a SPA, Shareholders' Agreement
and Project Agreement, as well as a number of ancillary documents
and sub-contracts) issued in August 2004 by Partnerships for
Schools (PfS) in relation to the BSF Programme.
Acknowledging that exclusivity significantly
enhances the attractiveness of the programme, concerns have been
voiced that although the LEP's exclusivity to undertake any
approved project extends to the 10-year term of the SPA, after the
5th anniversary, its preferred supply chain must be
mandatory market tested. The reality is that the private sector
partner in the LEP may only have a 5-year exclusivity period. While
the private sector understands the need for the public sector to
show value for money, it is concerned that the suggested approach
may not be appropriate and would seek an alternative and more
balanced methodology.
Further criticism was also levelled against the
"New Project Approval Procedure" as set out in the SPA. The
proposed payment structure means that the LEP would not recover any
costs incurred during the approval process until financial close of
the relevant project when such costs would be remitted to the LEP
by way of a management fee. This raises questions as to how a LEP
would fund such costs which could be extensive given the detail
required for the proposals. The logic of a 2-stage process has been
questioned and the need to address the LEP's recovery of costs in
more detail.
Comments on the Shareholders Agreement, including
in relation to the public sector pre-emption rights, evidenced
certain concerns about the potential for 100% ownership by the
public sector of the LEP, as well as issues in the secondary
markets. Detailed response was also provided in
relation to certain of the entrenched minority shareholder rights,
which the public sector would hold.
PfS is currently consulting with a number of
interested private sector participants, as well as liasing with the
Forum in relation to its comments, with a view to producing
redrafts of the standard form documentation thereafter.
For more information on this topic please
contact Jonathan Beckitt on +44(0) 207 367 2113 or at [email protected], Nancy Eller on +44(0)
207 367 3412 or at [email protected] or Carina Radford on +44(0)
207 367 2536 or at [email protected]