College go-ahead breathes new life into education PFI

Lawyers are hoping the education private finance initiative (PFI) blockage will be freed up with the first signing of a further education project this month.

Robert Pirrie, head of the PFI unit at Scottish firm Maclay Murray & Spens, believes the deal he helped structure for Falkirk College will act as a blueprint for other education PFI deals across the UK. the deal involves a consortium of private companies designing and building a £3.6m further education college in Stirling and operating it for 25 years.

Schools, colleges and hospital PFI schemes have lagged behind roads and prison schemes because they are the responsibility of individual local and health authorities, rather than a central government agency like the Highways Agency, which awards road PFI tenders.

In an attempt to speed up the process the government last month published guidelines for agreeing PFI deals, drawn up by Simmons & Simmons partner Edwin Godfrey, the newly-appointed joint deputy-chief executive of the PFI Panel, and Baker & McKenzie partner Tim Steadman.

Education projects are difficult because most have a low capital cost of a few million pounds. One construction company, John Laing, has refused to consider tendering for deals worth less than £30m and there has been talk of combining education projects to increase the total value.

But Pirrie said the Stirling project “demonstrates that these PFI deals can be done even with a low-value capital project. Although it is small in size, this is the project that everyone has had their eye on.”

The deal was a long time coming. Maclays was instructed by Falkirk College two years ago and before giving the college the go-ahead to seek tenders, the Scottish Office had to check that the projected costs of the scheme under PFI would be lower than those of building it as a public sector investment.

The project was also unusual, said Pirrie, in that no site had been identified in the invitation to tender. “There were a lot of complications evaluating tenders when the bodies were not all putting forward the same site,” he explained.