Until the beginning of 2004 Jarvis Plc had been extremely successful in winning PFI contracts, especially schools, thanks to a strategy of aggressive bidding. At the year end 2004 Jarvis was involved in 27 educational PFI projects with a whole life value of £3 billion. Typically Jarvis took the role of contractor and operator in these contracts and invested equity alongside a financial investor. However, this scale of activity stretched the construction company's operational capacity beyond its limits. Jarvis was forced to use subcontractors to fulfil its PFI obligations and construction costs began to increase way beyond what had been projected in its bids. From 2003, concerns were being raised about the quality of work done by Jarvis in its PFI business. In February 2004, Brighton Council branded Jarvis's work on four schools in a £105 million contract as "unacceptable". Several of its projects were not delivered on time and on others work had ground to a complete halt.
During 2004 Jarvis issued a series of profit warnings. This focussed attention on its PFI business, particularly how to fund the completion of those projects which were still in construction. The £120m funding shortfall - arising from the higher than expected construction costs - was filled by a variety of means, including around £60m additional contribution from the construction arm of Jarvis (funded by the proceeds of the sale of its Tubelines stake), additional senior debt and calls on bonds. The projects rescued in this way included Tyne and Wear fire stations, Lancaster University and Wirral schools. In each case the project was completed, albeit after delays, and the financial pain was borne by the major stakeholders - Jarvis as contractor, and funders, particularly equity.