Academy sites - Direct delivery of capital projects

Revised date January 2020



An increasing number of schools in county are converting to academy status and this is encouraged by national and local policy.  Following conversion to academy status, academies access most of their funding through the Education Funding Agency (EFA) rather than the local authority in this case, Oxfordshire County Council (“OCC” or “the Council”).

There are two exceptions to this at present:

  • outstanding repair and maintenance works in the council’s published structural schools maintenance programme for the financial year of conversion; and
  • basic need projects to provide additional pupil places for which the council receives all funding for publicly maintained schools in Oxfordshire in order to commission places where required. This will include capital grants received by the council and funding negotiated from developers to mitigate the impact of new housing developments (often referred to as developer/S106 funding).

On the 17th November 2014 OCC set out the council’s policy regarding the procurement of basic need construction works on academy sites. This note seeks to explain why this policy is in place.

OCC letter to academys 17Nov2014

Key Issue

The key issue affecting both the Council and an academy (“the Academy”) relates to challenges faced when a third party (in this case OCC) commissions works on an academy site.

This issue is recognised by the EFA and has resulted in its bespoke contractual arrangement for the delivery of projects under the Academy Framework for new schools. In the circumstance where the council is responsible for delivery of a project on behalf of an academy it is delivered through a tripartite development agreement between the council (the sponsor), the academy and the design and build contractor.

EFA frameworks for smaller works on schools sites however expect direct contracting arrangements between a single party (the academy, because it is the end user) and the contractor. This reflects the contractual arrangements under conventional building contracts

Third Party Implications

If OCC was to commission work on an Academy’s behalf at the Academy’s site, it would effectively act as a third party agent. This would result in significant risk to both the Academy and the Council:

  • The academy would hold direct responsibility for management of the day to day operations upon the site but, with the Council having to commission works within the site, there could be a serious risk of split responsibilities which could bring major health and safety implications to pupils and teaching staff.
  • As the academy is responsible for insurance of its own buildings  there could be risk of uninsured elements. OCC’s insurance will not extend to the insurance of buildings owned by third parties and the excess levels would be very different. Where works involve alterations or extensions to existing buildings it is generally impractical for a building contractor to insure simply because of the overlapping insurance responsibilities.  Standard building contracts recognise this and require the works to be insured in the joint names of the building owner (usually the employer) and the contractor.
  • Should future claims relating to the works arise OCC would hold the direct contractual relationship with the designers and contractors. Whilst legally the academy could seek redress from the contractor/designers via  collateral warranties, the contractor or designer would assert claims against the council and could assert that decisions by the council resulted in the failure leading to the claim. Irrespective the academy as end user would understandably look for remedy.  This could present a major risk for both the LA and academy going forward creating unwarranted pressures upon the resources of both organisations.
  • Where the academy does not hold a direct contractual relationship, competing operational drivers of the academy can conflict with obligations under the contract to act reasonably in order to enable construction operations to take place.  In simple terms, if academy is the employer under the building contract, it must deliver up the site to the exclusive occupation of the contractor and must not hinder or prevent the carrying out of the works.  If the council is the employer this concept becomes strained. This could result in claims by the contractor for increased cost for which the council has no funding which in turn could bring pressure to compromise the scope of work, compromise the academy / LA relationship or in extreme cases bring forward claims against the academy.
  • Resolution of defects relies heavily upon the day to day knowledge of operations to ensure that the contractor deals with issues in an appropriate manner; satisfactory management of this is impracticable by a third party and brings risk to the academy that items of high priority to them are not properly addressed.
  • Professional certification of completion in light of contractual requirements does not necessarily match user perception; where a third party is ultimately responsible it can bring unnecessary difficulties
  • The duplication of a public client interface is simply unaffordable in current times of reduced public finance and ultimately would reduce the funding available to deliver the actual works to deliver the curriculum.

Risk to the Academy

The academy will inevitably have concern in respect of management of a major construction project.  This can be addressed in part through the appointment of professional support, both legal and construction related, which is a fully justified expense that would be funded within the overall project costs.

The council accepts that it must hold the ultimate financial risk regarding overspend of the project. This would be managed in the following way:

  • Any cost variations identified under the project would be managed by the academy’s appointed professional project manager (PM) whose services would be funded by OCC through the formal funding agreement.
  • The county council would put in place a funding agreement once it had completed a feasibility study that demonstrates that the project can be delivered and gives an indication of the likely costs and programme implications. The agreement would contain a staged process to determine the level of funding released to the academy
    • Stage 1 would provide sufficient funding to enable the  design work to be undertaken and tenders to be sought
    • Stage 2 would provide sufficient funding to enable construction to take place in light of tenders returned together with a contingency provision for unforeseen additional costs which might arise.
  • The academy’s PM would manage the contract within the approved budget. Should increased costs arise they will be allocated broadly into the following categories:
    • Cost escalation due to inadequacies of the design or construction solution by the contractor. The ‘’design and build’’ contract arrangement would ensure that such costs are borne by the contractor. This would be governed and administered by the academy’s PM
    • Cost escalation due to unforeseen circumstances. This would not normally be expected to be met by the academy where it has not sought to procure the works or pay for them.
    • Wherever practicable such increase in costs would be resolved through a reduction in specifications or scope of works, provided the core requirements of the project brief as agreed with the academy are unaffected. This is the approach taken in all EFA contracts. This would be administered by the PM on behalf of and in consultation with OCC (if appropriate) and the academy.
    • Where this is not practicable such costs would be borne by the contingency held within the project which would be administered by the PM on behalf of and in consultation with OCC and the academy.
    • Should this contingency not be sufficient to cover any unforeseen cost escalation, a variation to the contingency would be considered by OCC to cover any legitimate cost which could not have reasonably been foreseen at the point project start. Clearly any variation must be subject to OCC scrutiny and will be assessed on a case by case basis simply to ensure that the costs have not arisen due to failings by the design and build contractor where the Project Manager should be refuting the claim or through post contract variations to the scope of work instructed by the academy.

As with the case in all building contracts the client, i.e. the academy, may wish to make changes during the construction period.

Cost escalation due to design variations made by the academy would have to be borne by the academy. Construction contracts will enable the value of any such request to be estimated prior to work being carried out in order for the academy to make an informed decision.

OCC would not accept that costs of such changes could be set against contingency provisions or savings from provisional sums.


VAT is recoverable by academy providers so generally this would not present a risk.


Procedures and obligations between OCC and the academy trust would be defined within the funding agreements; these reflect the professional approach which the academy would equally no doubt wish to adopt to ensure:

  • The scope and quality of work will meet appropriate standards,
  • Inclusion of ‘gateway’ approval stages for OCC to review the project in support of the academy
  • Value for money,
  • Make adequate financial provisions for risk,
  • Suitable financial checks take place on the contractor to ensure financial standing

In addition OCC would also need to

  • Ensure appropriate governance approval is in place in line with OCC financial requirements appropriate to the level of investment.
  • Include measures where appropriate to recoup unspent contingency provisions at the end of the project
  • Meet any obligations of the funding stream such as Section 106 / grant (this may include OCC ‘cash flowing’ the cost of a project in advance of all developer/S106 being received)
  • Measures to ensure that where new accommodation fails to be delivered by the agreed date the academy include contingency measures to ensure pupil places are available
  • Collateral warranties are provided where the council expects to rely upon the professional service provided by consultants acting for the academy


Potential procurement routes available are:

a) Use of the Councils contractual arrangements with their property service provider through a framework agreement or direct appointment based upon such terms; this can help ensure that the funding levels set by the feasibility study procured by OCC are met by the contractor. It therefore reduces risk to both OCC and the academy.

 b) Use of the EFA regional framework; OCC would need to satisfy itself that it can rely upon the estimated costs arising from feasibility work

 c) Direct delivery by the academy through their preferred architect / contractor via a design and build solution; this could bring greater pressure upon resources to ensure appropriate standards are met within affordable cost constraints and would present challenge procuring the team in such a design and construct approach.

d) Direct delivery by the academy through their preferred architect / contractor via a traditional contract; this would bring greater pressure upon resources to resolve challenges upon responsibility for delivery to programme and split responsibility for design and workmanship.


That the interests of both the academy and county council are best met through direct delivery by the academy, with the cost of appropriate professional support; cost of the works; and risk of authorised overspend being met by the county council.

This approach should form the basis for delivery of construction works upon academy sites.