PSB0023

Written evidence submitted by Wates

Background on Wates Group

Wates Group is a family owned, construction focused business in its 118th year of operation. Wates works nationally from 16 regional offices and has an annual turnover of around £1bn. Education is a core sector for the business and represents 40% of Wates Construction’s turnover. We built our first school in 1961, and each year we typically deliver around £200m of education projects benefitting 13,500 students annually.

Our recent relevant experience in school construction includes:

Building Schools for the Future

• Luton Building Schools for the Future £182m (15 schools) plus £80m of housing and community projects
• Stoke and Bradford BSF programmes £91m (seven schools) as construction partner
• Unsuccessful bidder on Ealing BSF participating in the full procurement process

Priority School Building Programme

• Midlands Batch £45m (six schools) including Whitmore Park the first completed PSBP school
• East of England Batch £33m (six schools)
• North West 4 Batch £40m (four schools)
• Camden Batch £55m (five schools)
• Barking and Dagenham Batch £75m (three schools)
• Unsuccessful bidder in the full procurement process on East of England 2 and Nottinghamshire capital batches and Herts, Luton & Reading PF2 Batch

Purpose of this paper

We have been asked to reflect on our experiences on the Priority School Building Programme and other education projects; this paper provides our point of view on the following key issues as requested:

1. How the allocation of funding under the Priority School Building Programme has affected schools, including those who were due to receive funding under the Building Schools for the Future programme
2. The impact on schools in need of repair or rebuilding that have not received funding
3. The experiences of schools who received funding under Phase 1 of the programme
4. The value for money of the PSBP compared to Building Schools for the Future

1. How the allocation of funding under the Priority School Building Programme has affected schools, including those who were due to receive funding under the Building Schools for the Future programme:

Because of the varying criteria used on each programme to determine the priority of which schools to fund, their allocations affected different school types. Table 1 highlights the main allocation criteria of each programme and the outcome they had for different school types.

Table 1 – funding selection criteria by education programme, showing who benefitted and who didn’t

With the cancellation of the BSF programme, all follow on schools and in some cases sample schools that had not achieved financial close were stopped mid-way through the process. Following an extended period with no policy to replace BSF, many of the cancelled schools have ultimately gone on to be delivered as part of the 261 schools on PSBP 1.

However, for some cancelled BSF schools, the change in funding allocation criteria under PSBP 1 may have essentially sent them to the back of the queue as they no longer qualify as a ‘priority’. This is not necessarily a bad thing as it means money is spent where it is needed most but for the schools affected it must be devastating. 

The Priority School Building Programme essentially ‘does what it says on the tin’ in that it targets the schools in the worst condition. The criteria have been refined on PSBP 2 to ensure schools with significantly sub-standard blocks/buildings are not disqualified as a result of recent improvements elsewhere on the same campus.

From our experience visiting many of the schools that have received allocations under PSBP, we would support the allocation methodology. Each school’s definition of ‘poor condition’ and ‘priority’ will vary greatly, as it is subjective. Many are dealing with on-going maintenance issues and aging campuses which they consider a ‘priority’ but compared to other schools they are far better off. PSBP is targeting the schools that are in a truly terrible state and need immediate attention.

2. The impact on schools in need of repair or rebuilding that have not received funding

In early February 2015, the 277 PSBP 2 schools were announced, we understand that the approved schools do not yet know how much budget and for what scope they have been approved for, but at least they know their condition will be addressed.

The schools that have yet to get any PSBP funding allocation appear to face a long wait with PSBP 1 set to finish in 2017 and PSBP 2 in 2021 it is unclear when the next programme will come along. Recent history could suggest nothing until 2019.

The absence of any longer term commitment means that unapproved schools are frustrated and face years of uncertainty, scratching around for funding from their local authorities to keep their schools running via the School Condition Allocations.

Meanwhile many of them are being required to accommodate pupil rolls in excess of their capacity and/or are being forced to compete with new nearby Free Schools that receive capital funding to ensure their facilities are fit for purpose.

3. The experiences of schools who received funding under Phase 1 of the programme

We believe that the experiences of the schools that have received funding under Phase 1 of PSBP can be summarised as follows:

• lowered aspirations
• less budget resulting in:
• smaller schools
• lower quality specifications
• good quality fit for purpose buildings
• a quicker process
• less involvement and influence on the design
• overall satisfaction with their new school

PSBP 1 is delivering 261 schools including many of the cancelled BSF schools. The programme set significantly reduced budgets contrasted against a backdrop of BSF level-expectations.  These aspirations came from:

• seeing the prior and on-going completion of BSF’s approved exemplar architectural school designs around the country, often in the same or surrounding authorities
• the feasibility work that had already been done on many of the cancelled schools
• design focused evaluation on the prior Academies programme

This has resulted in frustrations around a two-tier estate and a perceived effect on a PSBP school’s attractiveness to new pupils and staff compared to BSF and Academy programme schools. But the main issue was the stakeholder expectations in what their school should look like, how it should be designed and how much they influenced the process.

The EFA have developed baseline school designs and related funding levels which they feel essentially determines what makes a good school design and what it should cost.

This means that the EFA does not need as much input from the school; they only really need the school’s buy-in on a high-level plan of how the spaces are arranged internally and externally and aesthetic finishes such as colours, furniture etc. As a result compared to BSF, the school representatives are far less involved on PSBP.

BSF procurements typically took up to 18 months including six to eight, 3½ hour meetings led by the local authority or school to discuss and develop the design. They also participated in separate ICT and FM related meetings that further influenced the design.

Under PSBP, which typically takes 28 weeks, they attend six one-hour engagements with both contractors to agree the design including ICT plus a maximum of five further one-hour meetings with the successful bidder to input into the completion of design information and discuss and agree phasing, working arrangements and safeguarding during delivery.

Our experience is that schools feel like they are being kept at arm’s length and find the process quite demanding. They are non-construction professionals expected to participate in multiple engagement sessions; FF&E, colour and RDD meetings, legacy decant studies etc. all while continuing to do their day job.

Some express frustration at not being able to change things and feel that they receive a lot less guidance and support under PSBP than was provided on BSF, which combined with the quicker timescale of PSBP leaves them feeling somewhat rushed into making decisions on things they do not feel totally comfortable with.

The school representatives are education professionals that will probably only go through the process once, what they think is good school design will be based on their own experience teaching in their current and previous schools. The schools we are building under PSBP will out-last all current staff and most of the teaching methods so while it is important to take on board their point of view it is important to maintain the future proofing of the school as much as possible. Therefore a balanced amount of school involvement is required to get the decisions needed but needs to be carefully managed as this can be a source of frustration and friction between the school, EFA, the local authority and the contractor.

What this requires is strong alignment between the EFA and contractor to manage the school’s expectations within budget and within the agreed timelines.

Overall while some schools may be frustrated that they do not get as much under PSBP as nearby schools may have received under BSF, they acknowledge that they are better off than those still waiting for funding.

Once they move into their new good quality fit for purpose PSBP School and consider the conditions they were operating in previously, our experience is that in the whole they are absolutely delighted.

4. The value for money of the PSBP compared to Building Schools for the Future

It is difficult to compare the true value for money of both programmes as they represent the delivery of two different ideologies:

• BSF was based on the thinking that inspirational buildings would raise the aspirations of pupils and staff and drive increased progression and attainment
• PSBP is founded on the belief that good teachers can teach in any conditions and that all we need to provide is a good quality fit for purpose environment

To highlight the major differences between the programmes Table compares our experience of the major elements of each:

Table 2 - a high levlel comparison of BSF and PSBP

In order to give an opinion on Value for money we have compared both programmes on the following issues:

• Construction costs
• Added value initiatives
• Procurement process and bid costs

Construction Costs

To make a comparison on build costs we have compared a BSF school that we have the data on and demonstrated what the PSBP equivalent would be based on the current design and funding criteria.

Table 3 - secondary school comparison BSF vs PSBP

Clearly PSBP is delivering ‘compliant’ schools for significantly less money than BSF did, but it must be remembered that BSF schools answered a different question on compliance. While much of the savings result from a more efficient use of space and a streamlined process, some compromises (including some of those shown in Table 2) have been accepted in meeting the reduced funding parameters. Whether these compromises are acceptable depends on which programme’s ethos you agree with.

In BSF competitions there were typically no extra marks for being under the affordability level, so to win contractors tried to incorporate the most ‘extras’ to score higher marks. This took many forms including extra floor area, grander entrances with triple storey heart spaces, community use areas, wider corridors, multiple breakout spaces, responses to specific client requests and enhanced externals. While the school benefitted from the ‘extras’, ultimately the local authority was left with an unfunded but increased long term maintenance expense and the ‘extras’ were paid for with money that could have gone back into the public coffers.

Our opinion is that PSBP delivers better value in this regard. To get appointed to the framework contractors competitively bid against the EFA’s prescribed expectations which they have predetermined to be the minimum requirement. This has resulted in significantly lower building areas and cost per m2.

Furthermore, on each project contractors still bid in competition and must deliver compliant designs against the EFA requirements, with efficient designs and where possible deliver savings against the budget to score added marks.

The EFA uses a formulaic funding allocation to budget projects. One challenge that this approach poses is that all budgets are set using allowances of 12% for external works and 5% for project abnormals irrespective of project specifics.

What this essentially means is you get the same budget for the same sized school, irrespective of the project challenges and schools with less challenging sites may get better schools whereas schools with challenging project issues will have to accept compromises. Budgets should be set using an independent cost expert’s assessment of the external and abnormal costs following the feasibility study rather than fixed with a formula before the project is even looked at. This is the main issue with PSBP project budgets.

A lesser issue is that the furniture, fixtures and equipment allowances in the formula are fixed and neither adjusted for project location or inflation which means that currently:

• schools nationwide get a varying quantum of actual FF&E
• the later in the programme a school is the less FF&E it gets
• in time even the absolute minimum FF&E requirement will be unachievable for the budget

Added Value initiatives

In addition to the ‘extras’ above, which are often referred to as added value, BSF programmes also included a wide range of specific added value and partnering initiatives, which were designed to benefit the wider community and local economy, not just the school. In comparison PSBP delivers added value limited to the project under its KPIs and with the exception of apprenticeships does not explicitly promote the local agenda. There are no more requirements under PSBP to deliver wider added value commitments.

Procurement process and bid costs

On BSF procurements, local authorities spent 12 months developing their BSF Outline Business Case, including fully designed schools as part of the feasibility studies, and then typically took at least twelve months to select a preferred bidder.

Following an initial stage where up to six bidders developed outline proposals, two bidders were selected for the final stage of competition. Both were required to develop detailed plans on how a Local Education Partnership would be established and operate with the local authority as well as developing complete designs and delivery strategies for two schools.

Once appointed it then took the preferred bidder a further six months to reach financial close and commence construction work on site. 

For the two bidders that got through to the competition stage this meant risking between £2.5 to 3m in bid costs to secure two sample projects averaging £50m and exclusivity over a further £150 to £200m of construction turnover.

In addition to the contractor’s costs the process caused both the local authority and the central body (Partnership for Schools at the time) to incur significant costs. They had a large team that spent a year developing the OBC and essentially man marked the contractors’ teams on all aspects of the project attending multiple meetings with both bidders for each of the work streams (including design, FM, ICT, financial, commercial/legal and partnering).

By contrast PSBP follows a process which is a lot more efficient.

The EFA expects their feasibility study and approvals to be achieved within ten weeks, allowing projects to get to market much quicker. All nine framework contractors are invited to tender and are given one week to submit an initial response. Typically two to four respond incurring costs of circa £15k each; the EFA team then shortlists two bidders who engage in six weeks of design engagements before submitting their bids, typically incurring further costs of around £200k each. The selected bidder then spends around 16 to 20 more weeks finalising the design and achieving financial close before commencing on site.

Overall at an average of 38 weeks in total, PSBP projects take under 30% of the time BSF procurements took at 130 weeks. They also require contractors to bear a risk to reward ratio that is about one third of what it was under BSF.

Not only are PSBP timelines shorter, but the project teams on both contractor and authority sides are also much leaner, thereby reducing the costs associated with the procurement further. This ultimately means that more money is spent on bricks and mortar rather than being diverted into delivery costs that provide no benefit to the education of children.

Conclusion

While Wates is not best placed to comment on which of the two ideologies behind the programmes is right and/or more effective, in terms of the built environment elements we consider that PSBP delivers significantly better value for the taxpayer’s pound.

While the programme’s funding and timeline principles were initially met with a sense of disbelief, contractors have been challenged to develop better, more efficient ways of working and procuring construction work. We believe that the principles of PSBP are sound and it not only correctly targets the schools in most need, but causes contractors to focus the spend on exactly where it is needed.

This opinion is demonstrated by our on-going commitment to the education sector in general and specifically the centrally funded schools programmes.

However we do feel that the PSBP programme needs to be refined to reflect the changes in the construction marketplace that have developed since the programme was introduced.

The programme faces challenges from the re-emergence of the construction economy within the UK meaning EFA projects are competing for resource and bid budgets against more attractive projects that offer far more beneficial risk/reward profiles to contractors.

With the success of the programme and the ever increasing number of projects the EFA faces the challenge of ensuring sufficient resource and funding is available to invest in developing robust project feasibility studies to set accurate budgets and achievable timescales and while facilitating the successful management of the programme.

We trust that this paper has been informative and provides you with a different viewpoint to that of your own. We are very proud of the work we do in education and are committed to supporting the EFA in their continuing efforts to deal with our aging education estate and the growing demand for pupil places.

March 2015