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Dept for Education and Employment

Answer

Mr. Matthew Taylor: To ask the Secretary of State for Education and Employment what the net present cost is of the Birmingham LEA schools rebuilding project under the Private Finance Initiative; what the value is of the public sector comparators in (a) pre-risk and (b) risk-adjusted terms; and what risks are identified as having been transferred at (i) outline and (ii) final business case stage; and if he will make a statement. [132836] Jacqui Smith: The net present cost of the Birmingham schools' rebuild package is estimated by the local education authority to be £78 million, which includes the value of the risks transferred. The net present value of the risk adjusted public sector comparator is approximately £87 million. The value of the risks transferred to the private sector is estimated by the local education authority to be approximately £6 million. The risks identified for transfer at outline business case stage were: detailed planning permission; design; construction; financing; availability (of the school buildings); operating performance; operating costs; repairs and maintenance; damage and vandalism; security; new legislation; obsolescence of plant, furniture and fittings; and revenue from dual use and commercial activities. The risks identified as having been transferred at final business case stage were: planning--detailed planning permission; design and construct--satisfaction of design brief, quality and fitness for purpose, design development, cost increases, satisfaction of commissioning tests; delays--construction delays, insured perils, contamination from military use, unexploded ordnance, failure of utilities or other public sector bodies to carry out works or provide services, failure or shortage of power, fuel or transport up to 90 days, blockade or embargo up to 90 days, industrial action affecting the facilities management industry up to 90 days, site conditions at contract close, responsibilities under the Construction (Design and Management) Regulations 1994 and other health and safety responsibilities; operate--facilities management costs (including the risks associated with the repair, maintenance and security of the assets), responsibilities under the Transfer of Undertakings (Protection of Employment) Regulations 1981(TUPE), unavailability, under- performance, furniture and fittings, IT cabling, laboratory and workshop fixed equipment, energy and water consumption (part transferred), sub-contractor default; contract generally--vandalism, health and safety, equal opportunities and discrimination legislation generally, general change in law giving rise to revenue expenditure; and financial--insurance, third party claims, interest rates after year 20, third party income, inflation (part transferred), severance costs for staff employed in facilities management services at the end of the contract, force majeure (shared), contractor default. The key principle of risk transfer within PFI schemes is that risks are placed with the party best able to manage them. Local education authorities must always ensure that, in transferring any risk to the private sector, they are achieving value for money.

Secondary information

Type

Written question

Reference

354 c860-1W; 132836

Session

1999-00

Subjects

Contracts Costs Buildings Birmingham Private finance initiative Schools Repairs and maintenance

Contains statistics

Yes

Link

View this Written question on www.publications.parliament.uk