Coming from a family of teachers, I know that teaching is still as much of a vocation as it has ever been. However, a recent meeting, at which I was advising a specialist timber frame company that designs and builds school buildings, demonstrated that running a modern school is as much about business as it is about education.

In one contract planning meeting, we had to satisfy more than a dozen stakeholders from different departments of both the local authority and the private sector partner running the school (some of whom disagreed with their departmental colleagues), while the head teacher trod a delicate line seeking the best building possible on a limited budget. This experience highlighted the juggling act that school leadership teams have to perform in order to deliver new buildings or refurbishment projects and the pitfalls they must negotiate in the process.

Understand your objectives before you start

It is human nature to select what appears to be the least expensive option. Unfortunately, prospective cost savings often turn out to be illusory as the inherent risks that underlie all construction projects bubble to the surface. The starting point for every headteacher, bursar or school business manager must be to think very carefully about the end result: once the construction contract is signed and work begins, changes can start getting very expensive. A small change to one aspect can have large consequences. If possible, consider delaying the tender or pushing the start date back to allow building users to comment and the design team to work out the best compromise, rather than changing things as you go. If you race to start in order to meet a term date, and delay decisions in the interest of speed, it will cost you more.

Balancing time, cost and risk

In the longer term, consider what the running and refurbishment costs will be; cutting costs at the outset might result in more expensive maintenance down the line. In addition, can the building be designed so that it can be extended or adapted in the future to accommodate new facilities? It would be unrealistic to try and cover every eventuality, but a thorough, wide-ranging review of current and future needs will help to crystallise thoughts, resulting in a tighter brief that will ultimately save money and time. Schools and colleges have specific operational needs (site opening times, exam periods, etc.), safety and security needs (DBS checks and access controls) and financial needs (multiple approvals for release of payment, designing the premises to provide an income stream through community use) – all of those can be reflected in a contract. Lawyers can assist in making sure the contract does what you want, not the other way round, by understanding your risk profile and output requirements and allocating risk appropriately. For example, the general law allows a builder freedom to decide when and in what order he builds the works, with extra time and money for client interference – but a school might need to stipulate what is permitted and when.

To project manage, or not to project manage

There is a tendency to assume that having direct control of the design process will result in more flexibility in the event of changes being made as the project progresses. While this is true to a certain extent, there are a number of risks associated with this approach and contractors can take advantage of an inexperienced project manager. The government has actively endorsed NEC contracts for schools because they tend to be more collaborative in nature and allow time and cost management. However, because of this flexibility, there is more emphasis on real-time decision making creating deadlines that you miss at your peril resulting in deemed actions/decisions that may or may not help you, so these contracts really need experienced project management otherwise you run the risk of spiralling costs. The commonly used alternative is a JCT contract that allows a final balancing process at the end of the job. JCT contracts allow full risk transfer (design and build) or workmanship only (traditional). 

Using the contract

As a result of the compulsory statutory framework that sits behind construction contracts, that cannot be avoided even by agreement between the parties, they are difficult for non-specialists to negotiate; for example failure to follow the right procedures within the prescribed time frame, such as issuing instructions, or approving designs, or deducting LADs without the correct notices, or serving a payment notice or pay less notice at the correct time or in the right format means that you are much more susceptible to challenge (often by adjudication, which is a short but intense formal  dispute process that applies to all construction contracts). Maintenance contracts can pose similar problems for schools. The number of provisions contained in a standard contract means that the likelihood of something going awry is high – that is compounded by parties applying complicated payment structures with deductions based on performance KPIs judging quality and responsiveness, which are difficult to operate in practice. Bear in mind that the law requires you to serve a zero notice, even if everyone knows that it is obvious that no payment is due. It may not be appropriate to consider full-scale partnering where all parties share the risk but a two-stage tender process with early contractor involvement, or a pre-construction services agreement, might be one way to find the most effective balance of time, cost, and risk. With clear objectives and early legal advice to avoid contractual pitfalls, school management teams will be able to address risks before they occur an avoid hidden surprises.

Short term pain, long-term gain

In terms of whole life costs, school management teams will be looking for buildings that are easy and cheap both to run and maintain. This means that some initial decisions may seem counterintuitive if budgets are tight, for instance using a more expensive flooring material in the initial build may save money in the long run if it has a longer shelf-life than a cheaper alternative. If the decision is to refurbish rather than rebuild, a similar decision-making trajectory is required. For instance, schools have to weigh up whether it is worth continuing to maintain equipment or whether a replacement would be more cost-effective. I recently had a situation where boiler, heating and water systems were so old and had been patched up so many times that the outsourced maintenance cost was so prohibitive that it required greater initial expenditure but was cheaper in the long term to replace the system rather than try and keep the old one going.

Early decisions lead to better outcomes

Navigating through a construction contract, whether for a new build or a refurbishment project is not for the faint-hearted. The temptation to use a contract for the supply of goods and services rather than a statutory construction contract should be avoided at all costs.  The clauses in the former will not comply with the statutory regime and will be automatically struck out, leaving a contract that you didn’t expect and a claim that you might not be able to defend.  Involving lawyers at the beginning of the negotiation process to review the terms of a building or refurbishment contract against the school’s objectives can go a very long way to help to mitigate potential problems. By using the contract systems properly, the school management team can deliver an effective, valuable end result that enhances the learning environment both now and for the future.

About the author

Michael Hiscock Partner

Michael specialises in construction and engineering procurement, advising on a wide variety of works contracts (e.g. JCT, NEC3, MF/1, ICC, PPC2000), professional terms of appointment (e.g. RICS, ACE, RIBA) bonds, guarantees and ancillary documentation.