BSF exclusivity agreements: More punishment to come

Those whose sample schemes survived the drastic cuts to the Building Schools for the Future programme face a new threat. Recent reports suggest that the latest correspondence from Partnerships for Schools, the quango set up to deliver the BSF programme, has put the remaining private sector partners on notice that the education secretary will consider the appropriate structure for each sample scheme on a case-by-case basis.

If this is the intention, it will drive at the heart of the exclusivity arrangements enshrined within the strategic partnering agreement which is undertaken by the Local Education Partnership (LEP) and the public sector participants at financial close of the sample schools within a BSF programme.

At the moment, under the terms of the standard strategic partnering agreement, the LEP is granted an element of exclusivity over future projects. The finer details of the arrangements, such as the appropriate financial trigger thresholds, are decided on a project-specific basis. But the general position is that the LEP will (subject to the new project approval procedure, which seeks to ensure the requirements of the public sector participants in such projects are met) be granted exclusive right to undertake any project involving the construction or repair and refurbishment of a secondary school in the relevant area, and to deliver any related project services.

Ever since the release of the government’s now infamous BSF cuts list, analysts have been trying to predict the scale of the overall negative effect on the private sector. Recent figures suggest as many as 68,000 construction jobs could be lost and that the cuts are responsible for an 11.5% increase in architectural redundancies.

The private sector has been keeping its powder dry in terms of legal challenges to the BSF cutbacks. The loss of exclusivity arrangements could change all that

Until now, the exclusivity arrangements have provided one remaining ray of light for those companies that have at least managed to hold on to their sample schemes. One of the major criticisms of the government’s approach to date has been that, despite it being clear that the schools infrastructure cannot continue indefinitely without investment (much of it is already well beyond the end of its anticipated design life), the BSF programme was cancelled without confirmation of a clear successor. Yet, whatever form that successor eventually takes, it had seemed clear that the remaining LEPs would have exclusive claim to be the relevant delivery vehicle.

Recent developments throw more uncertainty on an already clouded situation. Local authorities will rightly be cautious about incurring further material costs on their schemes until the form and extent of any additional changes to the partnership structure have been confirmed - and may actually be counselled against doing so.

Even after such confirmation, the time required to change previously agreed positions to reflect the government’s proclamations will doubtless have an adverse impact on project timetables, potentially putting key milestones at risk. Yet the position also raises more fundamental questions - what is the point of the strategic partnering agreement? What is the point of the LEP?

If the LEP is to become nothing more than a single-scheme delivery vehicle for a design-and-build contract or ICT contract, then there seems little point in entering into the strategic partnering agreement, even in stripped-back form.

Such departures from the standard position would seem to bring a number of procurement issues, not least whether the bidding process (which in BSF relies so heavily on partnering requirements) is now so detached from the final position as to render it fundamentally flawed.

Until the Comprehensive Spending Review in October and an official decision from the Department for Education, it is difficult to determine the nature and extent of any potential implications. To date, the fall-out from the BSF cutbacks does not seem to have extended to the private sector mounting legal procurement challenges. However, if the promise of exclusivity in respect of the successor to BSF was one of the reasons that the private sector was keeping its powder dry, then it is by no means certain that it will continue to do so.

One thing is certain: the removal of exclusivity rights at the end of the expensive and time-consuming BSF bidding process will be yet another blow to the already punch-drunk private sector.

John Bruce is an associate at Pinsent Masons