Unrestricted. 1.1 This report informs the Cabinet of the progress of the grouped schools and Mulberry School PFI contracts.

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1 Committee: Cabinet Date: 5 November 2008 Classification: Unrestricted Report No: CAB 068/089 Agenda Item: Report of: Title: Corporate Director Children s Services Originating officer(s) Pat Watson, Head of Building Development Grouped Schools and Mulberry School PFI Schemes Progress Report Wards Affected: All 1. SUMMARY 1.1 This report informs the Cabinet of the progress of the grouped schools and Mulberry School PFI contracts. 2. RECOMMENDATIONS Cabinet is recommended to:- 2.1 Note the contents of this report. 1 1

2 3. BACKGROUND 3.1 A report was received by Cabinet in May 2005 to confirm that the restructure of the grouped schools PFI contract had been successfully concluded. 3.2 Mulberry School construction was completed and operational by September PRESENT POSITION Grouped Schools Contract 4.1 All the initial capital improvement and new build works included in the grouped schools contract are now complete. A number of additional capital projects have been and will continue to be implemented at the schools in the contract where there is funding available to do so. These projects in the main will be for new education initiatives or for further improvements to areas not included in the original works to accommodate new curriculum or other education initiatives. These have included, for example, the works to create the Ocean Children s Centre, the parents centre at Lansbury Lawrence School and the Children s Centre at Olga School. 4.2 Tower Hamlets Schools Ltd (THS) the delivery company will continue for the life of the contract to be responsible for all maintenance and life cycle works. Life cycle includes major planned maintenance and replacement works and the annual programmes are agreed with the Authority and schools. A schedule of the life cycle works (in excess of 1m) completed to date in 2008 is attached as appendix A. 4.3 The grouped schools contract has now moved into the Operational Phase (facilities management phase) for the remainder of the contract term, the said contract term coming to an end in August The Authority s client monitoring continue to work very hard THS to ensure full performance of the contract obligations. 4.4 In accordance with the contract, the first benchmarking exercise has been completed with THS and was formally signed off through delegated authority by the Service Head Resources in July The benchmarked services are soft FM (premises management, cleaning, security, the helpdesk and other associated services). This exercise resulted in an increased (indexed) annual payment of 243k (8.5% for the 5 year period) from June The most significant element of this increase relates to improvements in the pay structure for cleaners working on this contract. Global Solutions Ltd. (GSL), the FM subcontractor of THS is implementing a pay review that will move its operatives closer to the London living wage and the cost of this is 210k pa. The progress of this improvement will be closely monitored to ensure compliance. Aside from the cost of these cleaning improvements, there is a negligible increase of 33k to cover improvements to the out of hours security service and to the helpdesk 2 2

3 operation. The other FM service elements were either unchanged or showed small reductions. 4.5 Council officers meet regularly with officers from other Local Authorities in networking sessions facilitated by the 4Ps (a local authority organisation which assists and promotes good practice in PFI and other major projects) and benchmarking is a regular topic of discussion. Other authorities are facing very large increases (some as high as high as 40%) resulting from their benchmarking exercises and the opinion of the networking group and the 4Ps is that the agreed benchmarking increase for the Grouped schools contract was very competitive when compared to other authorities facing the same exercise. This is due in some part to the good relationship that the Authority has developed with THS and our joint approach in scrutinising and questioning the FM provider. 4.6 Annexed to the benchmarking exercise was an agreement between THS and the Authority to compensate for failure to properly record events (and evaluating appropriate contract deductions) on the helpdesk. The value of the compensation is 206k and relates to all events up to and including 31 st January All helpdesk reports from February 2008 will be reviewed in line with the improvements to the helpdesk software and event analyses. It is expected that this exercise will generate further contract deductions. All service specific contract deductions are credited back to the schools where the service failures occurred together with their proportion of the compensation sum. Mulberry School 4.7 The significant improvements achieved within the Grouped Schools contract monitoring and service delivery have been shared with D4E, the PFI contractor and Parkwood, the FM provider, in order that those successful processes and procedures can be introduced into the Mulberry School contract. 4.8 There have been inconsistencies in the quality of cleaning services to Mulberry School. These failings were slow to be addressed by D4E, the main contractor. Improvements have continued and the service was restored to the required standard in March Monitoring by both the school and the Authority showed that these failings were not being properly recorded on the contractor s helpdesk and consequently contract deductions were understated. Negotiations on an appropriate compensation sum are continuing. 4.9 There are ongoing discussions with D4E about the provision and quality of the catering service. As with the cleaning performance earlier in the year, it does not appear that the catering performance has been appropriately monitored or recorded through the contractor s helpdesk. The Council are actively seeking a resolution to these issues and compensation for any failures subsequently identified The Council have received a benchmarking report from D4E that recommends no increase on the annual contract payment. Whilst this presents a favourable outcome for the Council (and school) this recommendation has not yet been 3 3

4 accepted pending the provision of further information. Formal agreement will be given when this has been scrutinised and approved A significant amount of the school was redecorated under the annual lifecycle plan by Miller UK, the hard FM contractor, and the school are very pleased with the results. The school intend to supplement these works by commissioning further redecoration during the October half term. Progress Reporting 4.12 Annual reports will continue to be provided to Cabinet. 5. MONITORING 5.1 All monitoring is now undertaken by the internal team of 3 officers dedicated to the 2 PFI schemes. All monitoring costs were kept within the limits reported in the last report. The project construction phase for both contracts is complete. Regular monitoring of the contractors performance in FM service delivery is undertaken. 5.2 The detailed monitoring of the monthly contract reports for the Grouped schools project and the detailed analyses revealing incorrect event classification and rectification dates was the basis behind quantifying the compensation sum outlined in paragraph 3.5 above. 6. COMMENTS OF THE CHIEF FINANCIAL OFFICER 6.1 This report informs Cabinet of the progress of the schools PFI contracts. 6.2 Inflation still remains the biggest risk to affordability. This is a risk that the public sector faces in all services, but with PFI contracts there is less flexibility to make savings to reduce costs as the contract specification is very precise and changes can be costly. 6.3 A small contingency of 200k exists for both projects for the remainder of the contracts. This appears to be small, but all construction is now complete and it is unlikely that any significant items will need to be met. Major building failures should be covered by insurance. Contingency budgets are managed through the PFI project team and regularly monitored under the responsibility of the Service Head, Resources. 6.4 The additional costs relating to the delayed demolition of the former Bonner School are included within the contingency as are the costs for the Osmani sports hall refurbishment. Both of these items arose due to changes brought about by issues outside the control of the PFI contract parties. 4 4

5 7. CONCURRENT REPORT OF THE ASSISTANT CHIEF EXECUTIVE (LEGAL) 7.1 There are no immediate legal implications arising from the recommendations of this report. 7.2 The operational phase of the project has commenced,it is imperative that the 3 Monitoring Officers continue to have the capacity and the resources to proactively manage the performance of the 2 PFI scheme and ensure that the payment mechanism and performances measurement systems are used to incentives the PFI providers and improve service levels. 8. ONE TOWER HAMLETS CONSIDERATIONS 8.1 The purpose of the contract is to secure improvements to the education environment which support improved attainment. 8.2 Strategies to raise educational attainment, including improving quality of school buildings, support students moving into employment. 9. SUSTAINABLE ACTION FOR A GREENER ENVIRONMENT 9.1 The contract works aim to improve and preserve the quality of the building stock. Sustainability considerations, including energy efficiency, are applied as far as possible to design and materials used. 9.2 The Mulberry School has a school (pupil) eco committee and the LEA & FM contractor will involve this committee in the setting of energy targets for the next five years of the contract. 10. RISK MANAGEMENT IMPLICATIONS 10.1 The robust client side monitoring of the contract aims to ensure that any risks to the Authority and to schools is minimised. The major construction works are now completed which has reduced the risk of further delay and contingency costs to the Authority Inflation still remains the biggest risk to affordability. This is a risk that the public sector faces in all services, but with PFI contracts there is less flexibility to make savings to reduce costs as the contract specification is very precise and changes can be costly. 11. EFFICIENCY STATEMENT 11.1 The contract documentation includes requirements for benchmarking. Both schemes have been through this process and will do so again in Energy targets are included within both contracts whereby the PFI contractors manage 5 5

6 base consumption risk with the project schools meeting tariff changes. This should lead to improved energy efficiency over time. Local Government Act, 1972 Section 100D (As amended) List of Background Papers used in the preparation of this report Brief description of background papers None Name and telephone number of holder and address where open to inspection. 12. APPENDICES Appendix A Grouped Schools Life Cycle Works

7 GROUPED SCHOOLS LIFE CYCLE WORKS 2008 School Type Location/ Item Description Bow Boys Main Building Pupil Toilet Refurbishment Ground Floor Bow Boys Flooring Main Building Pupil Toilet Paint and Deep Clean First Floor Bow Boys Main Building Pupil Toilet Paint and Deep Clean Second Floor Appendix A Bow Boys Windows Heritage Block South Replacement of 26 no. existing single glazed hardwood timber sash windows with double glazed hardwood timber sash windows. Building in conservation area and planning application for use of UPVC windows was rejected. Continuation works from summer 2007 Bow Boys Windows Main Building Replacement of 36 no. aluminium frame windows with Silver Aluminium Laminated/ Toughened safety glass with argon soft coat Foundation Girls Foundation Girls Foundation Girls Foundation Girls H&S Electrical 3 classrooms S23, S24 and S25. Fire Door Replacement Preliminary estimate based on fixed wire inspections to date Ground Floor Office Carpet Flooring Tiles Clara Grant 1 classroom and 2 staff rooms Clara Grant Flooring G21 Columbia Mkt Columbia Primary Boilers 2 no. burners Replacement of 2 no. Unigas GP burners with smaller burners. The existing burners are 16 years old and oversized for the boilers causing repeat lockouts. Burner model to be confirmed Columbia Primary 1st floor main hall and 2nd floor classroom College Terrace Polysafe to corridor. Price included in CFGS Foundation Girls Flooring estimate Harbinger Rainbow Room & East Staircase Harbinger Flooring Early Years Unit Langdon Park Science Lab Flooring rooms 5 and 8 Langdon Park Flooring Lab 7 - Science Block Langdon Park Windows A Block West Replacement of 19 no.single glazed timber sash units with double glazed timber sash units including Ventrolla draft prevention system. Refurbishment of existing timber frames 7 7

8 Langdon Park Lansbury Lawrence Primary Lansbury Lawrence Primary Lansbury Lawrence Primary Marion Richardson Marion Richardson Old Church Old Ford Tarmac and Paving Nursery Main Corridor, Primary School Dining Hall Boilers 1 no. boiler Replacement of 1 no. Strebel RU15-4 boiler with new Strebel boiler. Model to be confirmed. Roof Corridor Rooflights Replacement of 5 no. bespoke georgian wire reinforced glass dome rooflights with identical units. Glass failed due to age (approx 50years). School is grade II listed which restricts replacement material Stairwell B 5M -2nd Floor Roof Works, Staff room & corridor adj pupil w.c. Ground and 1sr floor corridor doors Olga Kitchen & office Osmani Fire Fire System Replacements Replacement of obsolete two wire manual call point fire alarm system with Gent fire panel, 80 smoke detectors, 6 heat detectors, 26 manual call points and 60 sounders to L2 Osmani Flooring Redlands Nursery Flooring Redlands Primary Gnd Floor Nursery & Green Class Stepney Green Main Hall Stepney Green Flooring Stepney Green Lifts Ropes and gears Replacement of 2 no. lift ropes and 2 no. gear systems serving the 2 no. passenger lifts. Stewart Headlam Water Tank replacement & 2 x classrooms Thomas Buxton Done Last Year Infants External Thomas Buxton External fascias Infants Thomas Buxton External fascias Juniors Virginia Staircase Wellington Primary Windows Main Building Replacement of selected timber DG windows following Easter Survey 11 schools External Playground Markings External Playground Markings works Various H&S Asbestos Removal 8 8