Let the little ones join in: primary schools funding

Until now, education work has been dominated by the £45bn Building Schools for the Future programme to renew every secondary school in the UK. Given the size of the programme, many councils have chosen to bundle together large numbers of schools and procure them as a single package. This is good news for those contractors large enough to bid for them, but bad for those SMEs that used to regard patching up the odd comprehensive as part of their bread and butter workload.

Happily, the government has had some good news to give those firms. In April it announced that it would invest £1.9bn by April 2011 under the first part of its Primary Capital Programme (PCP). This is part of the last Comprehensive Spending Review, and the money is guaranteed for the next three years. There is scheduled to be a further injection of £5.1bn to complete the programme, under which at least half of the country’s schools will be renewed over the next 14 years, but that is looking more doubtful owing to public spending contraints (see box). However, it is a well established principle in construction that firms that get a foot in the door early are well placed to win the work that does materialise.

These projects range from extensions and refurbishments to complete schools, but they will be well suited to regional firms. Here we take a look at the procurement routes and the technical challenges – as well as a selection of projects in the pipeline.

Ashmead School in south-east London

Funding

Of the £1.9bn to be spent, £150m has been allotted to the 23 pathfinder authorities, a further £650m is allocated for 2009/10 and £1.1bn is earmarked for 2010/11. Theoretically, after this, £500m a year will be on offer, although this will be subject to future public spending reviews.

So far 148 local authorities have applied to take part in the programme. Because the projects do not rely on PFI funding they are more protected from the recession than other work streams; however, councils are expected to supplement the funding with capital raised from other sources, such as the sale of land, and in the downturn this is proving a challenge for some. Schools that don’t directly benefit from the PCP will continue to receive money from targeted capital funding.

The type of work

The PCP isn’t on the same scale as BSF. The range of projects starts with £100,000 refurbishments and goes up to £4-8m for a new school. A typical project might involve upgrading the teaching spaces and providing extra classrooms, storage and sports facilities, or extending kitchens or staff rooms. “You are much more limited in what you can do,” says Nick Gibb, preconstruction director of Willmott Dixon Contracting. “The work tends to be bespoke solutions with little scope for rolling out standard solutions across several projects.”

Where new build is necessary, schools are much smaller than secondaries and don’t have specialist teaching spaces such as science labs. A one-form entry school (that is, one that admits only one class a year) without a nursery typically comprises seven classrooms and accommodates about 210 pupils. More common are two-form entry schools, and three and four-form ones aren’t unknown.

Procurement routes

In June it was announced that Partnerships for Schools (PfS), which is responsible for delivering the BSF programme, will take over responsibility for the PCP from 1 October.

No procurement route has been agreed for this work yet, but Tim Byles, the chief executive of PfS, has expressed the need for a flexible approach and a range of procurement routes. These include:

• Regional frameworks. These would be good for those smaller contractors that may have missed out on BSF work procured through local education partnerships (LEPs).
• LEPs. Some councils are looking to bundle the schools with their secondary school projects to save time and money.
• The second academies framework, which will be split into two geographical areas with 12 contractors for each region is likely to be extensively used. This doesn’t mean the door is closed to smaller designers and contractors, though – the supply chains will be set up to reflect the size of each project.
• Other routes, such as one-off procurement and PFI, haven’t been ruled out.

Cost drivers

Since 2001 schools have fallen under the requirements of Building Regulations and regulatory changes such as the proposed updates to Part L and F are driving up specifications. This, combined with the expectation of what new schools should be like, is pushing up costs.

Nick Jones, a partner in Davis Langdon, calls this the Laurence Llewelyn-Bowen effect. “Seven or eight years ago, people didn’t think twice about using fair-faced blockwork walls but now it has to be a swanky design and the BSF schools and academies have also raised expectations of what a learning environment should be like.” So, a degree of expectation management is called for.

For new builds, the smaller size of schools means they tend to be one and two storeys, which can lead to disproportionate costs for foundations and roofs compared with three and four-storey secondaries. There are also a disproportionately large number of toilets. “Whereas a secondary school might have a toilet block serving a big proportion of the school, in a primary you have a toilet block serving a pair of classrooms”. Large overhangs to shelter children in wet weather, increased site security and drop-off areas for parents can also drive up costs.

ICT isn’t the dominant force it is with secondary schools: the general assumption is that one computer for every eight pupils is enough. However some schools take a more radical approach. “We’re working on one scheme where the school is looking at providing tablet PCs for all pupils,” says Michàl Cohen from architect Walters and Cohen. This means a great many power and data sockets are required.

Environmental issues are also rising up the agenda. Most councils are looking for BREEAM “very good” or “excellent” ratings for new builds along with a requirement for a percentage of on-site energy generation. Unlike the the BSF and academies programmes there is not the additional £50/m2 funding available towards reducing the building’s carbon emissions. On the plus side, the smaller size and single-storey nature of the buildings makes natural ventilation and daylighting easier to achieve.

Credit: HLM architects

The Whitleigh community primary school in Plymouth

Skills

One of the things that differentiates this sector from commercial projects is a need for greater liaison with the clients. Jones says: “Contractors need to be letting them know almost on a daily basis what is happening and health and safety needs to be taken to a whole new level.”

Flexibility is also a must, as contractors often need to work extended hours to fit projects into holidays and avoid clashes with school timetables and exams. “It’s common sense but it needs microplanning,” says Jones.

Often, of course, the site is still occupied. Continuity of education is important, says Cohen and students are only decamped as a last resort, as it is extremely expensive. “If it’s unavoidable we try and give them good quality accommodation for the shortest period possible.”

Off-site construction might seem an option, given its speed and health and safety benefits. “We’ve looked into using it but often it doesn’t work, particularly when it’s a refurb with a bit of new building. It doesn’t give a very integrated solution,” says Caroline Buckingham, director of HLM Architects.

Willmott Dixon has used timber off-site solutions for a number of new builds. “It does lend itself well in certain cases. But a lot of projects are one-offs and you have to balance the cost with the size,” says Gibb.

Project teams also need to be prepared for high levels of community engagement. “You need to make sure you get buy-in from the teachers, pupils, parents and locals,” says Gibb. “This means attending evening events to explain the project and getting the pupils involved, whether it’s tours of the site to explain the health and safety issues, getting them to design artwork for site hoardings or incorporating it into their curriculum.”

At the moment schools are one of the few sources of work out there for contractors. “We are getting some very keen pricing back on tenders, which is indicative of the state of the market,” says Jones. “It’s definitely a good time for local authorities to commission schools.” And of course it could hardly be a better time for small contractors and designers to build them.

A removable feast: How long will the funding last?

Noble Francis, economics director of the Construction Products Association, looks at what the UK’s escalating debt means for public spending

Noble Francis

The education sector is one of the areas to have remained buoyant during the recession. Capital funding has increased fourfold since 1997/98, putting it at just over £4.1bn. Altogether, the education sector is providing £6bn a year for construction through public funding and indirectly through the PFI. These workloads are likely to continue to grow at least until the end of next year, after last year’s pre-Budget report and this year’s Budget allocated increased spending during 2009/10 and 2010/11.

However, the state of the government’s finances means there must be a serious question mark regarding the long-term future of large public programmes such as Building Schools for the Future (BSF) and the Primary Capital Programme (PCP). April’s Budget highlighted the fact that public borrowing is expected to hit £175bn in 2009/10 and £173bn in 2010/11; this amounts to about 12.4% of GDP and a fourfold increase on the figure just three years earlier. To put this into context, the EU has regulations for countries in the euro zone that state that public borrowing should not exceed 3% of GDP. The UK’s public borrowing in the first two months of 2009/10 was £30bn, which contrasts sharply with 2006/07, when borrowing for the whole year was £35bn. This is unsustainable, and there will have to be sharp cuts in spending after the next election, whoever is in power.

Furthermore, the Treasury’s public borrowing estimates assume that GDP will fall 3.5% in 2009 and rise 1.25% in 2010, which is more optimistic than all other forecasts. If the chancellor has been too optimistic, then revenue from income tax, VAT and stamp duty will be lower, with increases in unemployment leading to rises in social security payments. This will increase borrowing towards £180bn or 14% of GDP. With public borrowing at these levels, capital expenditure will have to fall sharply and the chancellor has already stated that it will fall 17% a year over the next five years, which means that in five years’ time, it will be less than half the current level.

The obvious question is where the education sector is heading in the near and medium term. It is unlikely that spending is going to be cut in such a high-profile area so close to an election, which must happen before next June. Near-term prospects for publicly funded education work are relatively bright. New orders increased throughout 2007 and 2008, suggesting good workloads for the industry throughout 2009 and 2010, especially with a continuing programme of works among all three major programmes: BSF, the PCP and Building Colleges for the Future.

However, new orders fell 17% during the first half of 2009 and this suggests that medium-term prospects could be at risk from post-election cuts. The project most at risk is likely to be the BSF programme, which according to the latest estimates from the National Audit Office, is expected to cost £52-55bn. It is unrealistic to expect that level of spending on one programme given the severe funding constraints on central government. Neither will the PCP or Building Colleges for the Future be immune from government spending cuts, although it is difficult to envisage that projects on site will be stopped. It is more likely that after the election projects that have been signed will continue, but relatively few new ones will be signed.

PFI-funded education work peaked at almost £2bn in 2006. However, the fall in credit availability from the recession led to a 34% fall in work and although it remains at historically high levels, both output and new orders fell during 2008. Furthermore, new orders during the first half of 2009 fell 23% compared with a year earlier. As a consequence, prospects for additional growth in PFI-funded education work are not particularly bright. This is unlikely to change until there is a significant increase in credit availability.

Overall, the high workloads in the education sector are insulating some contractors from the recession and this should continue for the next 12 to 18 months. After that, it is likely that the funding constraints will mean that workloads on BSF, the PCP and Building Colleges for the Future will be curtailed. However, it is critical that the government focuses what money it has on areas of long-term significant benefit to the economy – which also provides the benefit of creating and sustaining employment. Improving the state of the educational environment will be one way of doing this.