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Early termination of school PFI contract in Caerphilly raises concerns

MOVES by Caerphilly Council to buyout a schools PFI contract have been met with concern from governors.

Lewis Pengam School and Ysgol Gyfun Cwm Rhymni were designed and built by the private sector under a Private Finance Initiative. In return a 30-year contract was issued for the building maintenance, catering and grounds maintenance service for both sites.

The PFI contract held by the schools started on September 1, 2002, and was intended to continue until August 31, 2032. The council now wants to terminate this by July this year to save money over the remaining nine years.

PFIs were introduced in 1992 to encourage the private sector to tender to local authorities for provision of public infrastructure and services.

Mitie Facilities Management Limited has been the subcontractor since 2007, prior to this it was held by Wiltshier FM. The reports, which will be presented to council on Wednesday March 15 states that the two PFI schools are in generally good condition and the service provision by Mitie is to a good standard.

The council said the early termination of the contract would save “significant” money, but school governors have concerns.

In a letter to the council, chair of governors at Ysgol Gyfun Cwm Rhymni, Phil Bevan said: “We are not absolutely opposed to the proposed voluntary termination, but have concerns which have not been addressed.”

In a previous response, the school governors at Ysgol Gyfun Cwm Rhymni said they were concerned the termination would have “negative consequences” for the school.

Mr Bevan criticised the council’s consultation on the issue. He said it was not “fair”, because the governors did not have the opportunity to “adequately assess any impact on the school”.

Governors at Lewis School Pengam also expressed concerns at the “pace” of the process and said “it would have been beneficial if more time had been available for the consideration of the proposal”.

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The governors recognised that opportunities could arise from the new arrangement, such as community-use of the school, flexibility in budgetary pressures, and catering provision.

The report states the savings from the termination could be invested back into education.

A compensation sum will have to be paid for the early termination – the sum has not been revealed because it is “commercially sensitive”.

Stephen Harris, head of financial services and Robert Tranter, head of legal services, are expected to agree the final terms of the termination.

The council has said it has in-house capability to provide the services that are currently delivered under the contract. However, the schools have the right to choose whichever provider(s) they want.

The Welsh Government had requested local authorities review their PFI contracts to assess whether they continue to offer value for money

Cabinet members supported the termination of the contract at a meeting on Wednesday, March 8.