Firms bidding for work through Pf2 programme to face three week “boot camp” to finalise their bids with clients
Contractors tendering for work under the £700m privately-financed element of the Priority School Building Programme will be forced to enter a “bidders boot camp” as part of the Education Funding Agency’s (EFA) attempts to streamline the procurement process.
Speaking this week Sara Humber, commercial manager in the private finance team at the EFA, said the entire procurement process from issuing of the OJEU to financial close would take a maximum of 68 weeks for each of the five privately-financed batches announced earlier this month.
Humber said the EFA had totally reformed the procurement process used for PFI schools under the Labour government’s Building Schools for the Future (BSF) programme, which has been criticised as expensive and wasteful. She said that after pre-qualification three contractors would be invited to enter one round of competitive dialogue, lasting a maximum of 18 weeks. This compares to two phases of competitive dialogue under BSF.
At the end of the competitive dialogue bidders will be asked to commit to a three week “boot camp” to finalise their bids through interaction with clients. Humber said: “All the people will need to be available to discuss all issues.”
A single selected bidder will be named no later than week 36 of the process.
Humber said contractors would be “actively discouraged” from submitting any additional or expensive design work beyond that required for the sample schools under the process: “It’s all about limiting the amount of design done during the dialogue process. The big criticism before was that contractors were haemorrhaging cash doing far too much design.”
Humber also said bidders will have to achieve investment grade credit ratings of Triple B minus on the schools projects in order to participate in the PF2 scheme.
Richard Threlfall, UK head of construction at KPMG, said the news meant bidders would have to spend thousands of pounds getting at least two ratings agencies to review the projects, and would have to buy “letters of credit” – effectively insurance – from banks guaranteeing to back the schemes in the event of contractor collapse.
He said this would be “a material cost to the bid, adding a “few percent” to the cost of finance.
PF2 to cost more
Government infrastructure minister Lord Deighton has admitted that the cost of finance under the government’s revised private financing system, PF2, was likely to be more expensive than under the much criticised PFI system.
Facing MPs on the Treasury select committee, Deighton said that other costs such as construction would be reduced. He said: “I think what everyone’s trying to accomplish, is that actually we have a procurement model and contract structure, which enables us to continue to drive them [other costs] down to a more efficient level.”
At the same hearing Infrastructure UK chief executive Geoffrey Spence said that just between five and 10 projects were likely to be funded through PF2 “in the short term”.
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