1.14 Under BSF, Local Authorities take the lead as planners, procurers and clients of projects. The programme uses private finance in a number of ways:
i Partnerships UK (PUK) jointly funds PfS with the Department so that it can support the management of the programme.
ii PFI is used to deliver new build schools. Local Authorities are encouraged to use PFI with the aim of providing better project management and maintenance of schools facilities.
iii To create a framework for long term partnering LEPs are usually established. These are joint ventures between the Local Authority, consortia of supply chain and finance companies, and Building Schools for the Future Investments (BSFI).
iv BSFI, itself a joint venture between the Department and PUK, invests in the equity of LEPs and PFI projects to provide additional national influence over local projects.
1.15 The Department established PfS with the help of PUK to coordinate BSF and provide support to Local Authorities. It also hoped PfS would help Local Authorities to improve their procurement processes. PfS scrutinises Local Authorities' business cases before the Department provides funding.
1.16 All the main bodies involved in BSF and the principal funding flows are set out in Figure 6 on pages 16 and 17. It shows that under a joint venture agreement PUK provides funding for half of PfS's operating expenditure and the Department pays PUK a return, passed through PfS, based on the performance of the programme. The Department and PUK also jointly fund the investment activities of BSFI, with the aim of providing a rate of return of at least 12.5 per cent. BSFI typically invests as a 10 per cent equity shareholder in a LEP, with the Local Authority (10 per cent) and a private sector partner (80 per cent).
1.17 The LEP is contracted by the Local Authority to scope projects and integrate a complex array of contracts to deliver school buildings and services. The LEP also sets up and manages PFI project companies which are contracted to build and manage new school buildings. The LEP and PFI project companies sub-contract to a private sector partner, which is typically the consortium of supply chain and finance companies that invests in the LEP and PFI project company.