THE Prime Minister’s plan to bring private-sector capital and expertise into further education colleges is about to come to a grinding halt, experts warned this week.

The new threat comes, not from the recession, nor from the Taliban, but from a bureaucratic missile from Brussels, aimed at the Mafia in southern Italy, which is heading instead for Britain’s private-sector partnership schemes (PPPs).

The European Commission’s latest “procurement directive”, which is due to come into force in 15 months time, is intended to curb favouritism and corruption by banning the use of “preferred bidder” contracts negotiated with private-sector developers.

At first, the Whitehall mandarins at the Treasury thought they could get round the ruling and keep the established bidding procedure, as used, for example, in the London Underground modernisation scheme. But Brussels lawyers have already fired a shot across their bows by challenging a development scheme at Pimlico School and a community centre in Ipswich.

Now, in an effort to make the procedures more flexible, Brussels bureaucrats have tied the red tape even tighter: all big and complex contracts will have to be negotiated with several private bidders, not just one, they have decided. “This will kill the Government’s present PPP policy stone dead,” predicts Richard Upton, managing director of Cathedral Group, which has financed several private partnerships in FE and higher education. “No developer is going to risk two years or more of development work in order to get onto the shortlist and then lose the contract.”

A spokesman for the Learning and Skills Council thought the new rules would have relatively little impact on the FE sector. “The rules only apply to contracts over pound;5 million and most FE projects are much less than this. Only two colleges have topped this amount so far - a relocation scheme at Newbury and and a large development at Canterbury.” The present Brussels interpretation of the rules was still only an opinion and had not been tested in the courts, she added.

However, Alan Erwin, a partner and head of projects with solicitors Fladgate Fielder, said the extra costs involved in bidding would deter many firms from tendering and drive up costs. “PPP schemes have never fitted easily into the EU straitjacket.

“While it appears that Brussels has acknowledged the different patterns of public procurement here, they still remain unsympathetic to the basic culture of PPP.”

Helen Randall, a partner in Nabarro-Nathanson’s public-sector law practice and author of a guide to purchasing, said the new rules would be a barrier to effective partnerships and would militate against efficiency and value for money. “Although they will not kill the PPP policy stone dead, they will add to administrative costs and planning schedules. To say that they will have a relatively low impact on FE would be over-simplistic,” she said. “They will have a major impact on both FE and university building programmes.” The rules would cover all schemes with an aggregate cost of more than 5 million euros (pound;3.5m), she added.

Arthur Cotterell, principal of Kingston College, which has just signed up to a pound;30m PPP scheme, said the rules were difficult enough in their current form without making them even more complex. “The result will be that college governors will be put off taking risks and there will be less money for FE colleges than ever. Important community projects such as fitness centres, internet cafes, creches and beauty salons will never see the light of day.”

The Association of Colleges is sponsoring a conference in London next month to explore the implications of the new rules and lobby against the tightening noose of Brussels red tape.