ONE of the country’s leading education entrepreneurs has lifted the lid on the “huge problems” that face companies if they seek to take over struggling education services.

In a vivid summary of the difficulties that have beset a flagship government policy, Henry Pitman said that firms were putting their reputations on the line by getting involved.

They faced fierce resistance from unions, parents and councils unhappy that the process had been forced on them. Negotiations over contracts were tortuous and firms were being asked to turn around failing services without any extra funds.

Worse, they were unlikely to make much money, even if successful. In these circumstances, Mr Pitman said, it was unsurprising that some privatisation projects had not worked out as ministers intended. His own firm, the Tribal Group which runs teacher training and inspections, had bid unsuccessfully for contracts in Bradford and the London boroughs of Waltham Forest and Haringey.

“There’s huge problems with the contracts, and massive reputational risk in bidding for them,” Mr Pitman told business leaders at the third annual conference of the business of education forum, organised by corporate finance house Capital Strategies.

“In areas such as north London, you are up against the local Labour party, the Socialist Labour party, the unions, and increasingly, also groups such as Parents Against Privatisation.

“The Government is forcing the process on the authority, so the authority is going along with it very reluctantly. This is inevitably a difficult situation in which to work.”

“It’s made clear that there’s not going to be a penny more for the services, meaning that service development and capital investment has to come out of the same, very tight budget.”

Richard Cuthbert, director of WS Atkins, admitted that some of his board members had questioned whether the company should run services in Southwark, south London. But he was heartened by Southwark heads’ support.

The market is changing. Many speakers predicted few future contracts where privatisation was forced on a failing council, because ministers had already dealt with the worst authorities. Instead, authorities would volunteer to contract out work, or firms would offer services directly to schools.

Nord Anglia, the profit-making education company, has won a seven-year contract for Abbeylands comprehensive in Addlestone, Surrey.

Labour has promised a change in the law to make it easier for companies to take over failing schools under contract for profit. But Education Secretary David Blunkett suggested on Wednesday that enthusiasm for privatisation might be limited.

“Companies do not control and take over the running of the school. It is very important that accountability lies with those who must account to parents for what they are doing.”

Leader, 22

Charter schools, 26-27

Privatisation: a good thing?

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GONE PRIVATE...

MAJOR privatisations so far in local education authorities:

HACKNEY:

Nord Anglia running school improvement and ethnic minority support services for the borough ince July, 1999. Mixed reviews in OFSTED inspection last November.

ISLINGTON:

Cambridge Education Associates one year into an pound;11.5 million a year, seven-year contract running most services. Positive OFSTED report in March said that the “tide had turned” since CEA’s arrival.

HARINGEY:

Full-scale privatisation collapsed in January after Government said the three bids, by CEA, Ensign and Serco-QAA were not good enough. Capita now providing management support and the council’s director of education.

WALTHAM FOREST:

Nord Anglia has won a pound;15m a year contract to run many services from September.

SOUTHWARK:

WS Atkins began a pound;28 million-a-year, five-year contract to run almost all school support services in April. The contract could last 10 years if the company hits its targets.

LEEDS:

Partnership between council and Capita, run through a company owned by the council. Capita is providing a management team and consultancy, at a cost of pound;3.7m over five years.

BRADFORD:

Serco-QAA in final negotiations with the council after being selected for a pound;210m (pound;30m a year), seven-year contract to run many services from summer 2001. Contract is believed to be the largest in the country.

KEY PLAYERS

CAMBRIDGE EDUCATION ASSOCIATES:

Small firm employing mainly ex-local authority staff, set up by a former deputy chief education officer. Has been administering the threshold performance-related pay scheme.

CAPITA:

FTSE 100-listed company which had a turnover last year of pound;453 million and made a pound;53m profit. Provides management software to thousands of schools as well as finance, ICT, property consultancy and personnel support to councils and schools.

Has set up a troubleshooting team of ex-LEA officers, led by former Newham director of education Ian Harrison, to support struggling authorities.

ENSIGN

A venture between the Tribal education services group and security and prisons firm Group Four. Tribal runs teacher training and school inspections. Floated on the alternative investment market in February it has seen its share price nearly double. Group Four is a multinational with an annual turnover of pound;1.25 billion and 115,000 staff. It also manages the reception centre for asylum seekers in Oakington, Cambridgeshire.

NORD-ANGLIA:

One of the largest education companies, and listed on the Stock Exchange, with a reported turnover of pound;62m in 1998-99 and 1,816 employees. Runs private schools, language schools and consultancy services, plus facilities and financial management and personnel support for schools and colleges. Teamed up with construction giant Amey for successful Waltham Forest bid.

SERCO-QAA:

Serco is a major “outsourcing” facilities management firm with 20,000 employees and a pound;455m turnover. Has won many Private Finance Initiative contracts to run prisons, young offenders’ institutions and hospitals. Also runs London’s Docklands Light Railway. Bought QAA, a school inspection and consultancy firm, for pound;2.5m last December.

WS ATKINS:

Engineering and facilities management firm, with 13,000 staff and pound;650m turnover. Runs hospitals, owns the country’s first private road and was selected to run some London tube lines. Major player in the market for PFI contracts to refurbish and maintain state schools.