PFI was first used by the Conservative Government in 1992 and has subsequently been championed by the current Labour Administration. Originally used in the building of new hospitals and prisons it was deemed that this type of contract could be transferred to the building of new schools.

Key features of a PFI contract:

• A single contract that encompasses design, construction, maintenance and other accommodation services, usually for 25 years or more.
  
  
• Usually this single contract includes buildings, furniture and grounds and includes services such as cleaning and catering. Usually these contracts do not include front line services such as teaching.
  
  
• A single predictable payment stream is made to the contractor throughout the life of the contract. This covers the costs of design, construction, maintenance and the other accommodation services. A portion of this payment stream is fixed and a portion is subject to agreed inflation indices.
  
  
• Deductions are made from the payment if the buildings or services are not available for use or are substandard at any time during the life of the contract. Up to 100% of the payment stream is at risk. This places an increased incentive on the contractor to meet the required standards throughout the life of the contract.

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