About PFI

Many schools are in urgent need of new or refurbished buildings, either to replace existing ones or to meet increases in demand for places. Public private partnerships (PPP) and private finance initiatives (PFI) offer an innovative solution for procuring and maintaining refurbished or new schools.

Traditionally, when building a new school, the local authority (LA)—or the diocese and the school itself in the voluntary aided sector— would specify exactly what was needed from the private sector contractor. It would then be the LA (the public sector) that would carry all of the risks such as costs incurred from delays. With PFI, the private sector partner carries many of the risks; indeed, no payment is made until the school is up and running.

With the traditional procurement method, once the school was built, the maintenance and other services such as catering would be provided either by a range of private companies under contract to the LA or by the LA itself. In contrast, by using PFI, just one private sector partner is commissioned both to design and build the school and to provide and operate the subsequent maintenance and other services—although that one partner may comprise a consortium of organisations, working together and co-ordinated under one umbrella, but governed by a single contract.

Benefits of using PFI include the following:

Experience has shown that where PFI has provided a service or package of services to a school, the burden on school management can be eased considerably. The school has therefore more scope to concentrate their teachers and staff on delivering the curriculum and on raising levels of educational achievement.
As no payments are made by the public sector until service commences, the private sector partner has an incentive to finish construction on time, to budget and to the agreed specification.
The governing body, the school and the LA can benefit from the commercial, financial and technical expertise of the private sector partner. Risks can be allocated to those best able to manage them—and act as an incentive for solutions that give consistent value for money.
A constant and much higher level of service than was previously possible can be provided throughout the lifetime of the contract.
As the number of schools built and operating under the PFI grows, previously unforeseen benefits of the partnering arrangements have been observed, eg: increased community use of the school and the new facilities;private sector sponsorship more readily available for new initiatives such as specialist college status; greater sense of ownership and community and pride in the environment.
At the end of the contract (normally 25 years) the school is returned to the LA in prime condition.