CY/09/70
CABINET
1 September 2009
BUILDING SCHOOLS AND COMMUNITIES FOR THE FUTURE
Report of the Executive Director of Children & Young People's Services
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Recommendations: that Cabinet notes
(i) progress in preparing Devon's 'Readiness to Deliver' submission;
(ii) the accelerated timescale;
(iii) the revised financial requirements of the BSF programme;
(iv) the considerable opportunities presented by entry to the BSF programme;
(v) the financial risks associated with joining the programme;
(vi) the very broad level of engagement within all Directorates of the Council and the wider group of stakeholders and other statutory service providers across the county.
(vii) that 1.0 million will need to be allocated from the Council's revenue budget in 2010/11 to enable the continuing development of the programme, targeting the First Wave schools.
1.0 BACKGROUND
1.1 Since the launch of the Building Schools for the Future (BSF) programme nationally in 2004 there has been considerable development of a number of public policy areas which strengthen or overlap with and of the Government's specific educational aims and priorities, including Every Child Matters, the Primary Capital Programme, personalised learning, Extended Services in and around Schools, school federations, Trust Schools and the sustainability agenda. These and other strands were brought together, developed and clearly laid out in the Children's Plan of December 2007. The Plan and subsequent announcements from both the Department of Children, Schools and Families (DCSF) and Partnerships for Schools (PfS)1 have highlighted that BSF investment is expected to contribute to other policy areas, for example economic and social regeneration, community cohesion, co-location of services and much greater community access to school buildings.
1.2 In July and October 2008, the Corporate Management Board (CMB) considered whether the Council's BSF programme should be advanced, noting that a project delivery team and appropriate resources would be needed. The Executive considered BSF in November 2008 (CY/08/92: text only) and April 2009 (CY/09/47: text only | pdf 58Kb | supplementary information 121Kb CY/09/47 ) and confirmed its commitment to promoting Devon's entry to the programme, and also its recognition of the capital and revenue resource implications (see Appendix A for Executive resolutions).
1 PfS Partnerships for Schools is a non departmental public body commissioned to deliver the BSF programme on behalf of DCSF and from the 1 October 2009 to manage all school capital funding allocations.
They also formally endorsed the appointment of the Senior Responsible Owner, the BSF Programme Director and the BSF Project Manager, who would develop the Council's "Readiness to Deliver" submission.
1.3 To demonstrate the Council's "Readiness to Deliver", the submission to Partnerships for Schools must include a decisive narrative on:
an educational Strategy for Change;
promotion of self-governing schools, including Trust Schools and Academies;
estate strategy and development;
commitment to the BSF model
Leader and Chief Executive endorsement;
acceptance of PfS/DCSF decision making on project value for money;
procurement via the default Local Education Partnership (LEP) model;
inclusion of hard facilities management services, chiefly building maintenance;
use of an integrated managed ICT network;
senior Member governance;
Project Board / Director / Team structure and support network;
corporate capacity - especially for change management;
stakeholder consultations;
risk management;
consideration of joint authority working.
Recurring themes in discussions with Partnerships for Schools are that participating authorities must:
ensure that a dedicated programme/project team is established;
ensure that adequate financial resources are deployed to deliver the programme;
be realistic about timescales;
communicate widely.
1.4 The experience that the Authority has gained, and the organisational learning from the Exeter Reorganisation Project and the Bideford BSF Pathfinder, have placed the Council in a good position to submit a high quality 'Readiness to Deliver' statement using predominantly in-house resources. It is intended that the Council continue to build internal capacity and competence to deliver all BSF waves, drawing in external consultants only for audit or very specialist services.
2.0 CONTEXT
2.1 On 15 July 2009 the Secretary of State and Partnerships for Schools announced that six Authorities had been invited to join the BSF programme and suggested that another eighteen would be invited to do so before the end of the fiscal year. It is now understood that twelve Authorities will join before the end of March 2010.
2.2 Because of uncertainties about the availability of public sector funding under the next Comprehensive Spending Review (which will cover the period 1 April 2011 to 31 March 2014) it is felt that every effort should be made to ensure Devon joins the national BSF programme in this bidding phase, subject to the programme being demonstrably acceptable from a finance perspective.
3.0 TIMESCALE
3.1 Reports to the previous Executive proposed that the "Readiness to Deliver" submission be made at the end of October 2009. However, on 10 August Partnerships for Schools formally advised the Council that all authorities wanting to bid for BSF this financial year must submit no later that 17 September.
3.2 We expect an announcement of new entrants to BSF to be made in the late Autumn 2009 or early in 2010. It will take a year to develop the Outline Business Case and perhaps eighteen months to procure the Local Education Partnership. Construction works could reasonably be expected to start late in 2012.
4.0 PROGRESS TO DATE
4.1 Following the initial establishment of the core project team in July 2008, formal management and governance arrangements have been put in place and resources allocated. Considerable progress has been made in addressing the published "Readiness to Deliver" Guidance, with workstreams defined for all areas. In addition to the intensive work that has been undertaken to consolidate Devon's vision for educational transformation, all Directorates have engaged in identifying how BSF can accelerate progress towards strategic targets that have already been established corporately. Existing networks and forums have also enabled engagement with statutory service providers and stakeholders across the wider community to identify similar opportunities.
4.2 Corporate Management Board (as the BSF sponsoring group) and the BSF Programme Board meet monthly to receive reports and review progress. Both are pleased with progress. They have also considered the impact of bringing forward the Readiness to Deliver submission date: they are satisfied that the Council has the competence, and can allocate the necessary capacity, to work towards the accelerated timescale without significantly compromising the quality of the submission.
4.3 In addition to the expected workstreams the project team has established a Procurement Advisory Group to advise on procurement options and to comment on any impact these might have on pre-existing strategic partnerships. This advisory group will report in time for a verbal update to Cabinet on 1 September.
4.4 Because of the pace in all activities, a verbal update will also be provided on any pertinent issues which may have arisen since this report was circulated.
5.0 FINANCE
5.1 To set out the overall scope and impact of BSF, reports to the Executive stated the financial requirements after making broad assumptions about inflation over the twenty year life of the BSF construction programme. Considerable further analysis has been undertaken over the last four months to refine the financial model based on external and internal review of the original assumptions.
5.2 In order to identify more precisely the financial impact of the programme, particularly of the first wave, this report uses funding figures based on the 2008/9 prices which are used by Partnerships for Schools in their funding assessment model (FAM). It is presumed that all figures will be inflated in line with normal government practice when funds are advanced to the Council.
5.3 The following summarises the scale of the BSF investment programme for Devon:
The total inward capital investment expected under the programme is 696m.
It is intended that the affordability gap will be managed so that it does not exceed 10% for contracts procured through conventional 'design and build' contracts.
It is intended that the affordability gap will be managed so that it does not exceed 5% for contracts procured through the Private Finance Initiative (PFI).
Of the 696m investment it has been assessed that 246m will be 'design and build' and 450m will be PFI (excluding the affordability gap).
The affordability gap in capital terms for the whole programme is 47.1m.
The total BSF investment being made in Devon will amount to 743.1m.
Equity investment in the delivery joint venture company is required this will amount to approximately 5m.
The total County Council capital contribution to the programme is therefore 52.1m.
Some of this will be funded from the CYPS capital programme over a 15 year period and from Devolved Formula Capital from the beneficiary schools: over all waves this is expected to be 26.2m.
The net local authority capital requirement for the programme is therefore 25.9m.
The inward capital investment for the First Wave schools (Ilfracombe, Chulmleigh, Marland, Tiverton, Dartmouth) is 74m.
It is anticipated that all First Wave schools will be funded through PFI.
The 5% affordability gap for the First Wave schools will therefore be 3.7m: it is proposed that this will be funded from resources within the current CYPS Capital Programme.
In order to manage the BSF programme as a whole, a revenue sum equivalent to 3% of the capital costs needs to be identified. In total, taking account of the likely affordability gap, this will amount to 22.3m and will be expended over 40 years. These costs are necessarily weighted towards the start of the programme because they need to cover the costs of procuring and setting up the joint venture delivery company. It is expected that the revenue requirement in the first four years will amount to 5m.
5.4 Whilst it is expected that the principles of investment will be agreed as soon as the announcement of the new entrants to BSF is made, a final decision on the level of funding, and indeed the means of funding, will probably not be made until a year later, after the Council has completed its Outline Business Case.
6.0 RISKS
6.1 A Risk Register is actively maintained by the project team, which reports monthly to the Programme Board, which in turn reports monthly to the sponsoring group (CMB). The following are the major issues relating to financial risk management:
(a) Capital to be provided by the County Council: the liabilities across the programme are set out above. External validation of the assumptions has been undertaken and they have been shown to be sound. In view of the scope and complexity of the project, Finance Services propose to undertake independent financial review of BSF programmes in other Authorities, to inform affordability assumptions.
(b) Programme management revenue to be provided by the County Council: 3% is a nationally recognised standard and has been cited in the Readiness to Deliver guidance. Because Devon has eight BSF waves it is envisaged that internal capacity and competence will be developed to limit the need to procure external consultancy.
(c) Competence and capacity within the authority: an initial self-assessment has been undertaken and there will be an external assessment in September. Delivery of BSF is complex and challenging, requiring a broad spectrum of competences, determined leadership, very substantial engagement with partners and stakeholders, a thorough understanding of a multitude of inter-related issues and dependencies and the effective deployment of major capital and human resources. CMB is satisfied that internal competence levels are appropriate for the current phase of work; a re-appraisal will be undertaken (following the submission of the Readiness to Deliver) taking account of the external skills audit.
(d) The delivery process (a joint venture company): the Procurement Advisory Group will report to the Programme Board on procurement and delivery options. Partnerships for Schools have indicated that the authority must commit to the default delivery model which is the establishment of a joint venture "Local Education Partnership".
(e) Private Finance Initiative (PFI) contracts: the County Council has considerable experience in procuring PFI contracts and is well placed to ensure that future arrangements reflect the needs of the authority and its key stakeholders.
(f) Managing the affordability gap for PFI contracts: although there is evidence that PFI contracts can generally be managed with no affordability gap, a prudent approach is being taken that considers the financial impact of a 5% gap. External sources have confirmed that this can be funded from capital rather than having to be converted into a mortgage-type repayment which would be a call on revenue.
(g) Financial commitment: figures have been provided (above) for both the whole programme and the First Wave. The authority's Readiness to Deliver submission needs to articulate the strategic objectives for the programme as a whole; but the financial commitment is required per wave. The initial commitment is therefore for the First Wave only. If at any time it was felt that resources were not available to support a future wave, the authority could opt not to submit a future 'Readiness to Deliver'. It should be noted, however, that Partnerships for Schools' expectation is for continuity (subject to the availability of resources nationally) and a break in waves might undermine the confidence that PfS has in Devon, and in the economic health of the joint venture delivery company.
6.2 Other (non-financial) risks have been identified that may impact on the ability of the authority to make a sound 'Readiness to Deliver' submission: these are being actively managed through professional channels. For example, contributions towards PFI unitary charges will be required from delegated school budgets. Agreements will need to be drawn up and confirmed by the County Council and Headteachers/Governing Bodies at an early stage to ensure that costs, contributions and possible variations are understood and accepted.
6.3 Recent experience in the authority has shown that financial control over large projects requires discipline and resolve, and Devon has the benefit of experienced staff and organisational learning to enable it to manage a programme of this scale and complexity.
7.0 A WHOLE COUNTY APPROACH
7.1 There will be engagement with a broad spectrum of stakeholders through the Devon Strategic Partnership, Local Strategic Partnerships, the Children's Trust and local Children's Trusts. We anticipate that these forums, along with planned community consultation events and roadshows, will enable the potential of BSF to be harnessed to the benefit of the whole county.
7.2 Devon Education Forum (the statutory Schools Forum) and the School Organisation Forum (a Standing Group of the former) have both endorsed the proposal that the Council should seek advancement of its place in the BSF programme. These groups represent not only educationalists but also a range of other sectors including economy and employment, healthcare, youth, justice and community representatives. It is evident from stakeholder discussions, seminars and other feedback to date that BSF as a corporate initiative has very broad support for BSF as a corporate initiative which has the potential to deliver wide benefits across the county.
8.0 SUSTAINABILITY CONSIDERATIONS
8.1 The proposed BSF capital investment will undoubtedly have a positive impact on the carbon footprint of the Council. No detailed quantitative assessment of this has yet been undertaken but it can be presumed that because much of the new construction will replace ageing building stock the impact will be considerable.
8.2 During the life of BSF a further Department for Children, Schools and Families initiative, for all new school buildings to be zero carbon by 2016, will have commenced. Currently briefing for major projects continues to aim for a Very Good rating under the Building Research Establishment Energy Assessment Method for Schools but it is anticipated that BSF funding will aim for "Excellent".
9.0 EQUALITY CONSIDERATIONS
9.1 The planned investment for First Wave schools has been specifically targeted at communities where deprivation may be having a negative impact on life chances. Investment in BSF infrastructure in these areas, along with the opportunity to co-locate other service providers and provide local integrated services, will enable early intervention to support vulnerable individuals and groups.
9.2 The greater accessibility of schools as social enterprise hubs, equipped with new technologies and part of the social fabric of a community, will provide educational and social opportunities not just for children and young people but for the whole community, and especially those who might be experiencing rural isolation.
10.0 LEGAL CONSIDERATIONS
10.1 Once a Readiness to Deliver submission is accepted a Remit Meeting will follow, at which point the authority undertakes to commit its resources to the First Wave of the BSF programme; and Partnerships for Schools commits, in principle, to providing the funding for the First Wave.
10.2 We expect that a formal Memorandum of Understanding will be agreed between the Council and the governing bodies of proposed BSF schools, setting out the expectations of the BSF collaboration.
10.3 The default procurement model, a Local Education Partnership, would result in the establishment of a Joint Venture Company, which would be a distinct corporate body.
11.0 CONCLUSIONS
11.1 The capital and revenue implications of the Building Schools for the Future programme are significant and so is the potential positive impact on the County's education, social fabric and economy.
11.2 The Council is well placed to submit a high quality Readiness to Deliver submission to Partnerships for Schools on the 17 September 2009.
Anne Whiteley
Executive Director for Children and Young People's Services
ELECTORAL DIVISION: ALL
Local Government Act 1972
Background Papers:
Contact for enquiries: Vic Ebdon Tel: 01392 382232
Cabinet Member for Schools & Skills: Councillor Christine Channon
APPENDIX A
Previous Executive resolutions
CY/08/92 (November 2008)
It was moved by Councillor Smith, seconded by Councillor Greenslade and resolved:
a) that approval be given to the groupings of projects identified in Appendix 1 to report CY/08/92 - text onlyCY/08/92;
b) that approval be given to the proposed timing for joining the main Building Schools for the Future Programme and in the interests of pushing ahead with this programme as quickly as possible, the Executive note that the indicative dates shown in the column entitled Potential Start on Site would not form part of the final submission to the Department for Children, Schools and Families;
c) that the potential impact on the Medium Term Financial Plan of joining the Programme be noted together with the requirement to demonstrate the availability of resources and capacity before being allowed to enter it;
d) that the Council continue its efforts to achieve the earliest possible delivery of those schemes listed in Appendix 1 to report CY/08/92 - text onlyCY/08/92 reflecting the Council's perception of the needs of schools, including those with poor buildings or split sites.
CY/09/47 (April 2009)
It was moved by Councillor Smith, seconded by Councillor Greenslade and resolved:
(i) that the scale of the Building Schools for the Future programme and the investment it would bring to the county be noted;
(ii) that the proposal that Devon should join the Building Schools for the Future programme as soon as possible be endorsed;
(iii) that the impact that the programme would have on capital and revenue
resources be acknowledged; and
(iv) that approval be given to the revenue funding, governance and management
arrangements set out in report CY/09/47 - text only | pdf 58Kb | supplementary information 121Kb CY/09/47 for the Readiness to Deliver phase of the programme.