History
PFI stands for Private Financing Initiative, the concept started for the first time in the UK back in 1992. I do not propose to go through a catalogue of success or failures of the concept here in this blog.
LBC has a very large portfolio of social housing stock with a mix of street properties of varying ages of around 90 years and 40 to 45 years for the concrete “estates” popular during the 1960’s.
In common with much of local authorities around the country these properties have not seen major refurbishment since having been built.
When government funding become available under the terms of PFI schemes, there was a headlong rush by many local authorities around the UK to enter into pilot schemes to test the water.
Islington PFI being one of the first in London to do so and Camden soon following close behind; there were discussions and meetings between Islington and Camden to explore common ground issues.
Whereas Islington PFI ventured a radical approach to outsource not only the construction and maintenance but also the day to day management of the social housing stock, Camden PFI on the other hand elected a more conservative approach of retaining full control of management of the housing stock and only outsourcing the “major refurbishment and maintenance” aspects to a PFI scheme.
The “Chalcots” was selected as being prime for the PFI pilot, due to the fact that the property was largely untouched and not re-furbished since being built in the period of 1965 to 1968.
The Chalcots historically comprised Dorney, Bray, Burnham and Taplow and was originally designed and built by the same group of property developers as the other Chalcots “town houses” which have always been private. It had been the original intention that the four “towers” would be luxury apartments with only three “large” apartments per floor.
However, during the building phase of these properties the “Ronan Point” collapse disaster happened 16th May 1968, concrete high rise become a dirty word and the “luxury” high rise funding went pear shape. Camden on the other hand was crying out for more housing stock and was offered to take the four “towers” over with minor conversions being conducted to the original three apartments per floor to the current seven properties per floor, made up of “two” three beds, “three” two beds, “one” one bed and “one” studio flat.
Blashford on the other hand was always conceived and built by the local authority and was not originally part of the “Chalcots” estate at all, only later was it appendaged onto the Chalcots “four” to become the Chalcots “five”
This therefore, is a quick summary of the history of the Chaclots estate.
PFI experience so far on the Chalcots
PFI started in early 2006, with the creation of PFIC (Partners For Improvement in Camden Ltd) Notice the similarity to PFI which many people mistakenly believed stands for PFI in Camden which is true except that Partners is a different beast all together to “pure” PFI.
The difference is in the small print. Partners have at its centre an executive management where Camden (the local authority) is ONLY the client.
In essence the concept is to outsource all refurbishment and property maintenance for the next 15 years of the scheme. Within the business contract agreements Camden the local authority approved an “output specification” which is the main driver for the project for the next 15 years.
Output specification
Before moving on any further it is important to understand exactly what “output specification” is and what it means for the every day lives of the residents of the Chalcots.
In simple terms the client has stipulated that all social housing stock is to be brought up to a standard consistent with the “decent homes” guidelines. How the principal partner contractor achieves that is a matter for the contractor to sort out using a combination of “best practice” and “value for money”
Herein is the first “key” problem, which is loss of control for the local authority, since in all cases that have been examined so far with resident property works related issues have all, centred on this lack of control.
However, due to the very large size of this PFI project (around £150 millions over the 15 year contract) an Independent Certifier (IC) has been commissioned.
Naturally, most people both at the local authority and the residents were made to understand that the principle role of the IC was to “check” and “pass” as fit all said works in a process what has come to be known as “signing off” a property.
Role of the Independent Certifier (IC)
Herein is the second “key” problem, this time born out of a “total” misapprehension of the role of the IC process and more importantly what the IC was commissioned to achieve on the “Chalcots” PFI.
So what went wrong here in this fundamental miscommunication that persisted for more than “one” year and the entirety of the “Dorney” episode.
It was assumed that the IC when inspecting properties checks quality of finished product, compliance to known building regulations, known H&S issues and adherence to the submitted building plan. Whether knowingly or unwittingly this understanding persisted for one year.
The reality is rather different, the true and principle function of the IC is to inspect around 10% of all properties to make sure that the delivered components such as new windows, central heating, kitchen, bathroom and toilet fixtures are in place to sign off the property on this basis for the release of what is known within the local authority finance circles as a “unitary charge”
In other words the IC is acting as a broker between the “Bank” of the PFIC and the principle contractor to receive its funding in a timely fashion but not before the said work is completed.
Completion and the “sign-off” stage of a property are the next issue that will be discussed.
Sign-off and snagging
What is sign-off if it does not refer to a completed product?
Herein is the third “key” problem, when is a property complete if not at the IC stage. This brings us to snagging.
It is normally understood that snagging is a part of the construction and building cycle. It is expected that when a rebuild of a property is undertaken such as installation of new windows, central heating, kitchen, bathroom and toilet that snagging will pick up faults that occur after sign-off that went undetected, that could not reasonably have been foreseen.
However, experience has shown on the Chalcots especially at Dorney, which has been signed-off that this is not the case.
It is demonstrably seen to be in fact standard practice to only install all said components of the re-build into a property seek an early sign-off and then deal with all commissioning and testing to final finish in the “snagging” stage.
Motivations
It is known that sign-off generates real money in the form of the unitary charge release (which has been estimated to be on average around £80,000 per unit tenant property, less for leaseholds), clearly it serves the principle contractor well to bank this money fast. 10 to 15 flats alone will generate nearly £1 millions and the daily bank interest yields here are considerable.
The construction phase accounts for nearly half of the £150 millions PFIC project the remaining half is for the maintenance part going up to the end point of the 15 year contract.
By allowing lots of sub-standard properties to be released (signed-off) means that more of this precious maintenance fund will be used at a “faster” burn rate into the early years of the maintenance cycle of the contract.
Therefore, there is a high probability and risk that the monies will run out well ahead of the 15 year contract (the phrase do it fast and get out fast has been in common day use by a multitude of people involved in this project).
Summary
Three main problem areas so far highlighted are;
1. Output Specification
2. Role of the Independent Certifier (IC)
3. Sign-off and snagging
Only the misapprehension of the role of the IC has now been addressed by direct communication to all at a recent Operational Meeting (OPFOR).
It is hoped that with the correct levels of “direct” management pressure will the other issues be addressed too.
Originally published by Nigel RUMBLE on 4th July 2008
