Those who can, build

9 Jun 09
Reports of the problems facing the Building Schools for the Future scheme have been exaggerated. But successful partnering strategies are vital to help the programme thrive in a harsh financial climate, argues David Padwick

 By David Padwick

8th May 2009

Reports of the problems facing the Building Schools for the Future scheme have been exaggerated. But successful partnering strategies are vital to help the programme thrive in a harsh financial climate, argues David Padwick

Building Schools for the Future – the government’s ambitious programme to rebuild or refurbish every English secondary school by 2020 – has always been in the spotlight. Interest in the programme increased with the publication of the National Audit Office review in February. This did, of course, include some salutary reminders about the overly optimistic targets set when the BSF programme was first launched, but in most senses the NAO acknowledged the good progress being made locally and nationally.

Two observations are particularly noteworthy. The first is that 75% of councils surveyed said that the BSF programme was leading to more strategic procurement of infrastructure projects. The second is that there is now early evidence that the first operational Local Education Partnerships (public-private partnerships developed to ensure the building of the schools) are beginning to produce successes. But there is no room for complacency.

To some extent, reports and coverage of the BSF programme – usually focused on the costs and the time taken to plan and procure – have probably given way to economic stories that cut across programmes and sectors. Examples of these include: the unavailability of cash in the finance sector to lend to Private Finance Initiative projects; the high margins being charged by lenders to projects; and the Treasury’s announcement that it will provide debt funding to PFI projects that are unable to secure commercial borrowing. The problems in project finance funding markets have of course been challenging for both Partnerships for Schools and local authorities and their partners trying to close projects over recent months and weeks.

But these problems have not brought the BSF programme to a halt. One of the points of PPPs is that they create approaches that can deal with difficult issues. A local BSF programme is a ten-year partnering relationship – and at some point each local programme will have complex issues to resolve.

The NAO made a further interesting observation. Early operational LEPs found it difficult to establish effective working arrangements and relationships between the local authorities and the private sector partner. In other words, although partnering agreements had been signed, this, of course, did not establish partnership working.

Partnerships for Schools recognised this in June 2008 when it commissioned PricewaterhouseCoopers to review the 11 operational LEPs. PwC was asked to identify what had worked well and what the practical difficulties were with partnership working. The review has been fascinating because of the access and insight it has provided across the national programme.

Perhaps the main issue that the review highlighted is that partnership working cannot be prescribed. The partnering experience for each LEP is different and reflects the nature and outlook of each organisation involved, the experience and expertise of the people working day-to-day on BSF projects and the governance and processes put in place to support them. The organisations and the individuals that they employ need to understand the value in partnering and want it to work.

Successful partnering between organisations is therefore complex, with many local variables. There is no simple ‘manual’ that can be followed to make it work. However, this means that the approach does need to be hard-edged. Its scope needs to be planned through a thoughtful and careful process; it needs to be supported by people who know what they should be doing; and it needs to be focused, monitored and managed. All of these things are unlikely to happen overnight or by chance. An effective LEP will therefore come about incrementally.

The principal focus of the PwC review has not therefore been setting out the perfect template for the perfect LEP. It recognises that an operational LEP will become effective over time as it starts to go about its business and that this is a local process.

The review has tried to accelerate the speed at which this happens and condense the time taken to do it, as far as possible, through a series of nine Practitioner notes. These each identify a set of issues that will have to be addressed at some point if the LEP is to achieve its local objectives.

Many of the important activities and actions are actually for the organisations in the pre-procurement phase of the process. First, the local authority must identify the scope and profile of activities that it wants the LEP to undertake and how much it is prepared to pay for this. Secondly, bidding consortiums should identify their strengths and weaknesses so that they can communicate as effectively as possible with local authorities and schools during the procurement phase.

We found that LEPs that were performing well had addressed these issues in some way. Those performing less well had probably missed a few of them. The Practitioner notes are designed to provide guidance, highlighting the important areas, identifying some options around a particular issue. But most of all they are supposed to act as a catalyst for discussion between partners and potential partners.

In this context, the formal procurement phase of a BSF project is fundamental to the partners because it is where the decision to form a partnership with a specific consortium is made. The partnership is local and the procurement process needs to reflect this, and certainly, in terms of the long-term partnering elements, be structured accordingly.

Procurement of a long-term contract requires assessment of the ability of organisations to work together effectively based on a specific scope, the strengths and weaknesses and the resources of the organisations. If the LEP is to mobilise effectively and efficiently, it is during the procurement stage when the governance, decision-making, performance management and value-for-money processes, among others, need to be agreed.

There is another equally, if not more, important outcome that needs to be reached in the procurement phase. Too often, public sector procurement can feel like a process in which one organisation ‘does’ to another. The partners in a BSF programme need to agree explicitly how they will work together to resolve issues and what they expect from each other. Individuals and organisations, in that order at first, need to create rapport, develop understanding and build trust.

The procurement stage therefore needs to be structured in a way that allows a three-way process between the local authority, a private sector partner and BSF Investments (the national investment arm of the BSF programme) to evolve so that all are confident that they can work with each other through the LEP model.

In the difficult financial climate at the moment, effective partnering will not resolve the challenging technical problems that some PFI projects face in terms of the ability to access debt funding. However, ineffective partnering attitudes and behaviour will make the fallout from such an issue significantly worse. Local BSF programmes are therefore beginning to provide evidence and know-how as to how major public-private sector partnering initiatives can work well in practice so that they not only survive, but thrive on the issues that they work through.

David Padwick is a partner at PricewaterhouseCoopers

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