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LSC Further Education Capital Programme letter
Letter on FE capital sent out to all College Principals on 1 June.
Dear [To all college principals by name]
The LSC Further Education Capital Programme
I am writing to bring you up to date with how we are progressing with the LSC capital programme and to inform you of the next steps in the prioritisation process both immediately and over the summer.
I wrote to you on 24 April with the good news that the Budget confirmed the availability of sufficient funds to enable around £750 million of new projects to be agreed. It is important to remember, however, that the costs of projects in development are very much greater than that, and that consequently we will need to very strictly prioritise according to need which cases can go forward at this stage. In that letter I explained how we intended to use newly determined needs based criteria to do that. I also set out the approach we intended to take in prioritising projects for the next spending review period.
We have made excellent progress since that letter, supported by colleges and key stakeholders. I have been heartened by the positive and constructive approach colleges are taking to supporting this process. This has been clear in the conversations I have had with many of you, but I do not underestimate the depth of concern that also exists. We are committed to a transparent and robust process and the support and input we have received has helped us on the way to achieving this, for which I am grateful.
Let me explain in more detail where we are in the process.
Prioritisation Criteria
I enclosed an LSC Council report (including the draft criteria) with my letter of 24 April. We have since consulted with the Regional Development Agencies, the Local Government Association, representative sector bodies and, of course our own non-executive members of the LSC Regional Councils, the Capital Committee and National Council, all of which have some members drawn from the college sector. In particular we had an extremely useful and constructive discussion with the newly established Capital Reference Panel.
The Capital Reference Panel was rapidly established with the help of the AoC. It includes representatives from every region as well as from the Sixth Form Colleges’ Forum, the 157 Group and the National Association of Specialist Colleges. The Panel met with senior LSC staff on 29 April with DIUS and DCSF representatives in attendance. The meeting outcomes included constructive comments and advice on the prioritisation and selection criteria, the processes to apply these and other relevant issues. It will meet again on 15th June. The minute of the meeting is on our and the AoC’s websites.
Attached to this letter is a short paper setting out the prioritisation criteria we have arrived at. You will see that the criteria reflect the Foster Review recommendation that we move to a needs-based approach with explicit priorities and choice criteria.
For this round of prioritisation we will also pay close attention to the urgency of some projects to proceed. Across each of the criteria, there may be reasons of urgency which will help a project score highly. For example, health and safety issues might score highly on condition of the estate. Other examples may be dependency on another infrastructure development, or loss of 3rd party income.
Next Stages in the Process
We recognise the need to approve the projects that are the most urgent and of greatest need as soon as possible. This is because some colleges are in a time constrained position, and because of the overriding need for national fiscal stimulus that was a key reason that funding for this year and next was provided by the Government.
To achieve this we have, as you know, considered readiness to start building as a key factor in our assessment of the projects, along with the other needs-based criteria. By readiness we mean projects that can begin building within the next three months or so. My thanks to those 200 or so colleges that returned the project questionnaires to our property consultants Lambert Smith Hampton. Those projects assessed as ‘ready’ are now being assessed against the prioritisation criteria using a methodology and process designed by independent consultants PricewaterhouseCoopers (PWC).
But we also need to drive down cost as far as possible to ensure the maximum number of projects in greatest need can be funded. As stated in my letter of 24 April, we had originally intended to have identified new projects to take to the Council meeting on 3 June for approval. However, many more colleges have put forward a case for their projects to be considered as “shovel ready” than expected, and so unfortunately we are not in a position to ask the Council on 3 June to approve individual projects. The Council will instead consider the evidence from PWC regarding the readiness assessment and the prioritisation process to inform a judgement about which colleges will advance. Therefore, no immediate announcements will be made as to which colleges have gone through to the next stage of the process; we will make that announcement later in the month.
As I explained in my last letter, that next stage will be a tough value for money challenge to the colleges that come out of the prioritisation process as those with the greatest need. To ensure the largest number of colleges can still benefit from these funds, more colleges will be chosen for that stage than can be funded according to the size of their original bids. The challenge for colleges will therefore be to radically reduce the cost and the scope and sourcing of the funding of their projects. Revisions to the scope of projects could include rethinking or deferring whole projects, or components of projects, in favour of a contribution to costs incurred to date and/or funds for refurbishment. We will only consider funding complete re-builds where they are absolutely necessary, which should be in only a few cases. Many colleges might want to come back to us with more modest proposals in order to maximise their and other colleges’ chances of being funded. The more colleges can reduce scope and costs, the more of them will be able to secure funding. If they come back with more or less the same bids, we will be able to fund far fewer projects than we would have hoped.
This challenge is a vital element of the process. We want to be confident that each project is only as big as it needs to be to achieve the necessary impact. Also, we will want to ensure that every college is achieving the best possible price from their contractors and that the cost and extent of loan or other sources of finance (e.g. local or regional funding) are at optimum levels.
We will expect all colleges on the short list to come back with revised bids and plans by the end of the month, which will need to be capable of implementation this autumn, quickly. Depending on the cost and quality of the revised plans, we expect to start making decisions on urgent cases very soon after responses are in. We do not expect colleges undertaking revisions to incur significant extra costs in producing revised bids during this exercise, but we are willing to fund reasonable requests.
On the issue of costs already incurred, as explained in my first letter, we and the independent property consultants are working with colleges to assess the nature and extent of these using information supplied in the questionnaires and from discussions with our regional property advisers. We intend to come to grips with this in the next few weeks and may need to contact some of you for further information as part of the process. For those projects that will not be taken forward in this stage, we will consider maximising the longer term value of costs incurred, the accounting implications, borrowing flexibilities and other ways to help resolve problems. The latter will include pursuing with stakeholders whether there may be a role for the LSC in encouraging discussions with the sector and private sector financing partners. I reiterate that the LSC will ensure that no college is unable to meet its financial obligations as a result of decisions on these capital projects. We will address this issue very quickly after the final decisions are made on which projects will go forward this year.
Finally, we will come back to the process of funding projects in future years, which will be based on the outcome of the next spending review, as soon as possible after we have finalised discussions with those going forward this year.
Conclusion
We have set ourselves a difficult and demanding task in trying to bring forward projects for approval in a relatively short timescale to ensure that we can access and make full use of the additional funds that have been announced. We can only achieve this with the continued active participation of all parties.
I recognise that the LSC is not in an ideal position in relation to this issue, so I want to thank all of you for your understanding and cooperation in helping us to take forward these challenging and urgent tasks.
Yours sincerely
Geoff Russell
Chief Executive
Please see the attachment setting out the prioritisation criteria
