Profit margins threatened by council demands for fixed-cost ceilings, say senior facilities managers.
Senior facilities managers were summoned to a meeting this week to discuss problems on council projects with the government body promoting local authority private finance initiative schemes.

Serco, WS Atkins, Symonds and Rotch were among the firms at Monday's meeting with the DETR-run Public-Private Partnership Programme unit.

The main issue on the agenda was the level of risk that facilities managers are being asked to take on when they take over the running of local authority buildings.

Facilities managers say it is impossible for them to give guarantees of what they will charge for the running of a local authority building in 20 or 30 years' time because wages for staff such as cleaners and security guards can fluctuate wildly.

But councils argue that regulations oblige them to secure best value from providers and that facilities managers must agree a figure.

Other PFI projects, such as hospitals, are less vulnerable to the problem of rising FM costs because clients have more flexibility than councils in striking deals.

FM providers are particularly concerned about the ramifications of agreeing fixed figures because local authority projects are smaller than ventures such as hospitals, which means they have little scope to reduce smaller profit margins.

Can the government excite enough private sector interest to convert planned PFI projects into deals?

Peter Fanning, chief executive of the Public-Private Partnership Programme – known as 4Ps, said: "One issue that came up is the extent to which the current framework of regulation is supportive of facilities management in local authority PFI.

"Local authorities are governed by statute and some detailed points of law need to be discussed. A core issue is the extent to which capital finance regulations are a problem.

"But these are all issues of degree. There are already 20 local authority PFI deals signed, and we are always looking at ways to improve the process." Fanning said 4Ps has now set up a facilities managers forum to discuss council PFI regularly.

Facilities managers also said at the meeting that they are concerned about rules governing the transfer of council staff to them under PFI deals.

In addition, one source said that bid costs are an issue, as the cost of entering a competition for a small project vastly outweighed its potential rewards.

He said: "There are a lot of local authority PFI projects planned, but whether the government can excite enough private sector interest to convert them into deals is another thing altogether." Another issue arising on local authority PFI deals is that of latent defects. Contractors are concerned that they may be liable for problems that date from long ago.