Education Secretary Michael Gove announced last week that The Building Schools for the Future (BSF) programme - the large, government-funded initiative responsible for the replacing and renewal of hundreds of schools and academies in England and Wales - is to be halted, with all BSF programmes which had not reached financial close being cancelled.
The rebuilding/renewal of approximately 735 schools/academies has been cancelled, with the Government seeking to make savings of up to £5bn. A further 150 projects are under review, with 550 projects remaining unaffected. The Government also announced at the same time that funding would be withdrawn for the Commission for Architecture and the Built Environment Advice Service, whilst committing to a comprehensive spending review of all capital investment in schools, early years, colleges and sixth forms.
What to Note
The announcement will have a large financial impact, firstly, on councils who had already begun any procurement processes and, secondly, on contractors - and their suppliers - who incurred significant outlays in tendering for now-cancelled projects. Councils and contractors should therefore carefully analyse the published list to check how many projects they are involved in are affected. This is particularly important as the Government has revised the full list of affected projects a number of times, with more projects now cancelled than was originally stated.
A concise breakdown of how each local authority is affected is available by clicking here, whilst the full, in-depth list of every school affected is available from the Department of Education by clicking here.
Contractors and consultants should also be sure to check what potential rights and remedies are available to them in terms of recovering money spent in tendering for any affected projects. An estimated £160m was spent by councils in preparation for projects which have now been cancelled, and the cost to contractors in tendering for now-cancelled projects is also estimated to be millions of pounds. In some cancelled projects, where the procurement process reached as far as a preferred bidder being appointed, the costs to the contractor could amount to as much as £10m per project. A raft of litigation could therefore arise from the ashes of the Government announcement, and parties should be aware of their positions.
Looking for the Positives, if any
- All schools projects which had already reached financial close stage are unaffected. Whilst this may seem an obvious positive, it does mean that parties will be able to focus on these projects safe in the knowledge that they are going ahead.
- The comprehensive spending review, mentioned above, is due to report in time for the financial period 2011/2012 – 2014/2015. Although in the interim this causes uncertainty, once the result of the spending review is announced the hope is that it will make clear the path for future investment in education buildings, allowing councils to start re-procuring for education building work. This is made all the more tangible by Michael Gove's statement that spending on schools will continue. The door is therefore not entirely closed on future school building projects.
- School repairs and maintenance work is anticipated to dramatically increase over the next two months as schools seek short-term repair solutions to building infrastructure problems during the school summer holiday period. Contractors may therefore benefit from an increasing number of, albeit smaller, repair and maintenance contracts. This is doubtless scant consolation to those who lost large construction contracts, but it may offer some consolation nonetheless.
- Some consolation may also be found in the Government's new Free Schools initiative, which is expected to attract £50m worth of Government investment over the next year. This initiative is aimed at allowing parents to set up standalone "free" schools, and if successful during the next year could attract further government investment. Opportunities may therefore exist in this sphere for contractors and consultants.