The Private Finance Initiative (PFI) was introduced in the mid-1990s as a means of bringing private sector funding and expertise into the running of public services. It was initially introduced in health and transport but now covers most public sector activities, including schools.

The principle underlying the PFI is that the risks and responsibilities associated with running a public service should be placed where they can best be managed. Teachers are trained to teach and the focus of a school's activities should be on teaching, learning and achievement. It is not appropriate for head teachers and their senior managers to be spending time and effort dealing with building related matters. Under a PFI arrangement all those activities that do not relate directly to the needs of pupils and the delivery of education become the responsibility of a private sector provider.

A PFI contract covers not only the design and construction of the new facilities but also the continuing provision of services that are needed to allow the school to function. A typical contract is for 25 years and the services provided include building and grounds maintenance, utilities, catering, cleaning, caretaking and security. The risks associated with these services are ones that the private sector is better able to manage than either the school itself or the Local Authority. The performance of the provider is judged against an agreed set of standards with financial penalties flowing from poor performance.

PFI v traditional procurement

Procuring a new school building under PFI differs from the traditional approach because the Local Authority enters into a contract for serviced accommodation, not simply for a new building. Under traditional procurement, an Local Authority pays for a new building using borrowed funding that has been approved by central government and/or its own reserves. The building is designed by the Local Authority's own architects with private sector involvement limited to bidding for a building contract.

PFI procurement is a negotiated process. The broad cost parameters are established at the outset and consortia then negotiate all aspects of the design and service provision within a financial framework.

The Local Authority has looked at funding all or part of the project in Bassetlaw by other means. It is not possible to generate sufficient capital resources either from ‘traditional’ sources or the County Council’s own reserves to fund these proposals. We believe that delivering its proposals through the PFI route will offer value for money and be affordable. We also believe that the delivery of these proposals by the PFI route will bring other benefits in terms of better maintenance of the building fabric over the long-term and by reducing the time spent by school managers on addressing building and service related issues.

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