29. Central programme management has helped to deliver the programme more effectively. The decision to establish Partnerships for Schools has created central leadership for the programme, single point accountability for delivery and implementation, a conduit for learning and knowledge sharing, as well as a central pool of expertise to administer the programme, provide support to the Department and help local authorities.45
30. It took time to establish Partnerships for Schools as an effective organisation and to put in place the right leadership, creating at least a year's delay to the programme and contributing to problems with the early projects.46 In addition, Partnerships for Schools has focused insufficiently on achieving the intended benefits of operational LEPs and the intended educational outcomes in schools.47
31. Although strong central programme management can be helpful to local projects, too much central control undermines local autonomy. Some local authorities felt forced to adopt a LEP against their own judgement of what produced the most value for money.48 The Department and Partnerships for Schools have said that local authorities are free to choose their procurement approach so long as they can demonstrate that their alternative will be value for money. So far, nine local authorities have done so.
32. Schools are also strongly encouraged to adopt the builders and managed service contracts for maintenance and information communication technology chosen by their local authority. Although they can opt out of the local authority's procurement approach as long as they can demonstrate that their alternative will be value for money, no schools have done so.49
33. The Department and Partnerships for Schools spend £20 million a year on the administration costs of the central programme management. At 1% of the programme's overall annual expenditure, this is comparable to similar programmes with central administration and devolved spending.50
34. Partnerships for Schools' staff costs (salary, pensions and national insurance) are high, double those of the Department's BSF staff. This cost difference reflects Partnerships for Schools use of specialist staff with skills needed to deliver the programme. These skills include professional procurement, project management, commercial, legal and Information Communication Technology skills, which are all in short supply across the programme.51
35. Despite this high level of central resources, the Department and Partnerships for Schools paid £11.1 million to private consultants up to March 2008.52 The Department and Partnerships for Schools believe that these consultants have provided invaluable expertise in taking projects forward. They could, however, have reduced this expenditure by planning the level of skills and resources required to deliver BSF at the beginning of the programme and ensuring that private consultants did not undertake work that could be done in-house.53
36. In perhaps the worst case of using consultants, the Department did not foresee that it would need its own in-house commercial expertise to provide oversight of the programme. So instead of employing someone directly on a full time basis, it became dependent on a single consultant, and ended up paying £1.35 million to KPMG over three years for this person.54
37. The joint venture funding arrangement for Partnerships for Schools is designed to motivate Partnerships UK to provide top-level attention and greater in depth support and commitment towards BSF.55 Under the arrangement, the Department and Partnerships UK share the costs of funding Partnerships for Schools and, in return, the Department pays Partnerships UK a performance related return, which will cost the taxpayer up to £24 million over the programme. This payment represents a return to Partnerships UK of up to 13%, on top of its charge for providing staff and accommodation to Partnerships for Schools.56
38. Partnerships UK's financial return of up to 13% is dependent on the programme meeting certain key performance indicators. If projects are delayed, the rate of return is expected to fall.
39. The risk transfer to Partnerships UK is, however, incomplete. Although Partnerships UK's payment is linked to the programme's risks, this has not taken away the Department's exposure to the risks or reduced the likelihood of them happening. For instance, the Department paid Partnerships UK to adopt the risk that the Department would cancel the programme, instead of agreeing to refund Partnerships UK if it did choose to cancel the programme. Most delay is in local project planning and procurement, and is unrelated to the quality of Partnerships UK's advice.57
40. The Department believes that it gets more from Partnerships UK under this approach than it would if it paid Partnerships UK through a straightforward fee arrangement.58 But it should not be necessary to pay Partnerships UK over-generously to give BSF sufficient attention. Partnerships UK is 49% owned by the Treasury and Scottish Ministers, and has a mission to support programmes of this type.59
41. Furthermore, the Department has not been able to enforce the link between the return and the programme risks. Despite the programme being 21 months delayed against the timetable that was based partly on Partnerships UK's advice, Partnerships UK is due to be paid a return of 12.8% for its work so far, because the Department agreed to rebase the programme's timetable in 2005.60
42. The cost of remunerating Partnerships UK through an equity-style return is therefore unnecessarily high.
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46 Qq 65-72; C&AG's Report, Appendix 2
47 Q 10; C&AG's Report, para 16
49 Qq 9, 48-50; Ev 15; C&AG's Report, para 1.18, 3.13
50 C&AG's Report, para 4.5, Appendix 2
51 Qq 22-23, 57, 91-93; C&AG's Report, paras 3.8-3.12, 4.6, Appendix 2
52 Qq 21, 29; C&AG's Report, para 4.7
54 Qq 7; C&AG's Report, para 4.8
55 Qq 89-90; C&AG's Report, paras 4.15-4.16
56 C&AG's Report, paras 4.15, 4.17
57 Qq 89-90; C&AG's Report, paras 4.15-4.17
58 Qq 89-90
59 Q 74; Partnerships UK, Annual Report 2008, http://www.partnershipsuk.org.uk/