Location: Birmingham, UK
Opex was commissioned by Equans to undertake a Benchmark of their PFI schools in the West Midlands, providing like-for-like financial data for comparison against the host scheme(s).
The contracts cover primary and secondary schools across different sites in the West Midlands.
The objective for the project was to identify the market price for the services by comparing with other similar organisations with similar services and contract conditions. Benchmarking is a contractual requirement on most PFI contracts, with the usual frequency of five years. The results of the Benchmark Exercise, if agreed with the Authority, are used to set the prices for the next five years. The Parties benefited from Opex’s independent and impartial service, which follows government guidance, to produce the Benchmarking Report.
Opex’s Benchmark process runs in stages:
- Scoping – including a stakeholder meeting to agree the process.
- Request for Information – working to gather relevant contract, financial and operational data about the sites from FMCo.
- Analysis – Opex develop bespoke comparator sets from actual FM cost data, stored in Opex Vault. Adjustments are made, where relevant, to produce truly like-for-like comparators.
- Benchmarking Report – Opex produce an independent and impartial report, all assumptions and adjustments are clearly stated to aid the Parties in understanding the output of the report.
- Post Report support – Opex attend stakeholder meetings to discuss and explain the report, and are on hand to answer queries.
The main challenge in Benchmarking is achieving like-for-like comparators. Opex Vault includes detailed information at the contract level, allowing for detailed adjustments to comparator sites to be made.
An unforeseen challenge for older PFIs is how to maintain viable contracts in the face of the above-inflation National Living Wage requirements. In many PFI schemes, the contracts were written prior to NLW being introduced, and so the contracts do not recognise the large cost burden to FMCo’s.
Opex has developed an adjustment to take this into account on labour-intensive service lines (e.g. cleaning), bringing data from previous years in line with current wage rates to give a cost closer to if the service were market-tested.
Opex have produced an independent and impartial report which can be presented to the Authority. The nature of the report allows discussion around the pricing agreement, without accusations of bias towards FMCo.
Opex are market leaders in PFI Benchmarking. If you would like to take advantage of our experience, please click here.
Image: Daryan Shamkhali