Infrastructure Public Private Partnerships in the Education Sector PPPI Workshop World Bank Institut

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Infrastructure Public Private Partnerships in the
Education SectorPPPI WorkshopWorld Bank
InstituteJune 18-20, 2007Cairo, EgyptNorman
LaRocquenorman.larocque_at_xtra.co.nz
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Agenda

• Introduce notion of infrastructure PPPs in
  education
• Review international examples of infrastructure
  PPPs in education
• Examine a number of technical issues in education
  PPPs
• Concluding comments

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• Part IEducation Infrastructure PPPs in an
  International Context

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I Public-Private Partnerships Defined

• No fixed definition of PPPs
• Definitions differ in terms of scope and
  formality of arrangements.
• Various definitions
• risk sharing relationship based upon an agreed
  aspiration between the public and private sectors
  to bring about a desired public policy
  outcome.
• Commission on UK PPPs
• cooperative venture between the public and
  private sectors, built on the expertise of each
  partner, that best meets clearly defined public
  needs through the appropriate allocation of
  resources, risks and rewards.
• Canadian Council for PPPs

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II Forms of Public-Private Partnerships
Service Delivery Initiatives
Infrastructure PPPs
Demand Side Finance Initiatives
Strategic Partnerships

• Private management of public schools
• Contracting with private schools for education
  delivery
• Before and after school care
• Private information/ testing services
• Private sector review
• Outsourcing of non-core functions
• Outsourcing of delivery by public tertiary
  institutions

• Private Finance Initiatives - finance,
  construction and maintenance of core and non-core
  educational assets
• Private leasing of public school/ tertiary
  institution facilities
• Equipment and maintenance of IT laboratories

• Publicly financed vouchers and scholarships
• Privately financed vouchers and scholarships
• Publicly provided student loans
• Subsidies for private schools

• Private involve-ment in curriculum development
• Private sector involvement in quality assurance
• Adopt-a-school initiatives
• Research PPPs
• On-job-training
• Public/private tertiary institution affiliations
• Social marketing

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III Public-Private Partnerships Common Elements

• Formal arrangement with contractual basis
• Involve public and private sectors
• Whole of asset life consideration
• Outcomes focus
• Sharing of risks/rewards between public and
  private sectors
• Recognise complementary role of public and
  private sectors.

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IV Infrastructure PPPs

• Increasingly common form of contracting for a
  range of public services eg. transport, water,
  telecommunications, etc
• Less common, but increased use as a form of
  procurement for educational infrastructure
• Used in a range of developed and developing
  countries school construction, classroom
  blocks, hostels, IT, laboratories, etc
• Different types of infrastructure PPPs, each
  exhibiting varying degrees of private sector risk
  assumption and responsibility DB, DBFO, BOOT,
  BOO, etc.

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IV Infrastructure PPPs (Contd)

• Private sector partners invest in school
  infrastructure and provide related non-core
  services
• Government retains responsibility for the
  delivery of core services such as teaching
• Government/private sector arrangements governed
  by long-term contracts 25-30 years
• Contracts specify the services the private sector
  has to deliver and standards to be met
• Service contracts often bundled finance,
  design, building, maintenance and employment of
  non-core staff
• Payments are contingent upon the private operator
  delivering services to an agreed performance
  standard.

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V Potential Benefits of PPPs

• Improved timeliness and efficiency in delivery of
  educational infrastructure
• Improved efficiency and quality in delivery of
  post-construction services
• Secure specialised skills that may not be
  available in sector
• Overcome public service operating restrictions
  obsolete salary scales, restrictive civil service
  work rules
• Address infrastructure gaps more quickly than
  under traditional public procurement
• Allow government agency to focus on functions
  where it has a comparative advantage (ie. core
  business)
• Overcome corruption
• Make the cost of services more visible.

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VI Infrastructure PPPs Summary Examples

• Bulk of PPPs in education are at the school level
  UK, Ireland, Australia, Nova Scotia, Germany,
  Netherlands, Ireland, Hungary, Finland, Denmark,
  Japan, Korea
• Some tertiary education examples of PPPs
  Australia, UK, Mexico
• Found in developed and developing countries
• Private Finance Initiative (PFI) in UK is largest
  PPP education programme
• Australia making increasing use of PPPs in
  education New South Wales, Victoria, Queensland
  
• Proyecto Prestacion de Servicios in Mexico,
  schools in Egypt
• Other countries looking at education PPPs
  Botswana, Alberta (Canada), Colombia, Belgium,
  Austria and the Czech Republic.

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VII (a) Private Finance Initiative (PFI),
Britain

• PFI part of broader policy of public service
  modernisation in Britain began early 1990s,
  renewed emphasis in 1997
• Context big backlog in school repairs (7
  Billion)
• 144 signed projects for Department of Education
  and Skills 4.1 billion (13 of total)
• 30 PFI deals in progress in the Higher/Further
  Education sector, with a capital value of 630
  Million
• Typically 30 of costs are for caretaking,
  maintenance and other services
• Decision to use PFI based on Value for Money, not
  accounting treatment

• Building Schools for the Future programme
• 15-year investment programme 2.2 billion
  capital investment per year
• focus on secondary schools
• Local Education Partnerships (LEPs) work with
  Local Authority and Partnerships for Schools to
  develop infrastructure strategy
• LEP contracts to deliver the investment through
  PFI and conventional procurement

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VII (b) PPP for New Schools, Egypt

• PPP to build 2,210 new primary and secondary
  schools in Egypt, in an attempt to meet
  Presidents target of 3,500 new schools by 2011
• Initial project started in late 2006 300
  schools in 23 governorates
• Response by private sector led to expansion in
  early 2007 to include a further 1,910 schools
  around the country
• Government provides land, while private sector
  designs, constructs, finances and furnishes
  schools and provides non-educational services
  under 15-20 year agreements
• Value estimated at LE11 Billion (approximately
  US2 Billion)

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VII (c) Proyecto Prestacion de Servicios (PPS),
Mexico

• Government contracts with private providers to
  design, finance, build, operate, and maintain
  assets and services in health, education, and
  transport.
• Twenty-eight projects are being developed in
  these three sectors, including 5 polytechnic
  colleges.
• Currently, the Government is piloting PPS to
  build a new campus for the University of San Luis
  Potosi, with an expected US30 million
  investment. The project is expected to expand the
  enrollment capacity of the university from 1,500
  to 5,000 students by 2010.

• The PPS scheme is based on the UKs PFI model,
  and is oriented to the provision of services of
  social infrastructure
• Under the programme
• private sector partners invest in school
  infrastructure and provide related non-core
  services
• the Government grants a long term contract for
  the provision of services
• assets can be owned by either the government or
  private investor
• payments are for services delivered and are
  subject to performance standards.

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VII (d) New Schools PPP and New Schools PPP II,
New South Wales (Australia)

• PPP for finance, design, construction and
  operation of public schools in New South Wales,
  Australia.
• PPP involved 9 public schools built between 2002
  and 2005 and a further 10 public schools from
  March 2006.
• Long-term contracts 30 years.
• Private sector finances, designs and builds
  schools. It also provides cleaning, maintenance,
  repair, security and other services to schools
  under long-term contract (until 31 December
  2032).

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VII (e) Offenbach Schools and Cologne Schools
Projects, Germany

• 92 schools in Offenbach County and 7 schools in
  Cologne with capital value of over EUR900
  million.
• Government contracting for the finance,
  renovation and operation of public schools in
  Offenbach County and refurbishment and operation
  of schools in Cologne.
• Private sector partners will operate schools for
  15 years in Offenbach County and 25 years in
  Cologne.

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VII (f) Public Private Partnerships (P3) for
Educational Infrastructure, Nova Scotia

• Plan for 55 schools to be built under P3
  programme in late 1990s.
• Schools are financed, built and operated by the
  private sector.
• Government leases schools for 20 years.
• Incentives built in to contract to ensure quality
  construction and maintenance
• Cancelled after 33 schools built cost overruns,
  gold plating poor project monitoring, increased
  specifications.

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VII (g) National Maritime College, Ireland

• National Maritime College, County Cork
• 58 Million capital value
• designed, built, financed and operated by Focus
  Education
• 25 year contract
• facilities for 750 full-time equivalent students
• Infrastructure includes classroom, laboratory and
  workshop facilities and specialised simulation
  equipment
• Operational from 2003
• Third education project included in Irish
  governments PPP pilot project.

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VII (h) Swinburne University of Technology
Infrastructure PPP, Australia

• Swinburne University of Technology (SUT) PPP
  involves
• accommodation for 300 students
• school of Information Technology
• redevelopment of the northern part of the campus
• SUT located in the State of Victoria.
• First infrastructure PPP by an Australian
  university
• Development financed by Rothschild on
  university-owned land
• Rothschild assumed ownership and development risk
  and receives a rental payment in return.

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VIII Infrastructure PPPs in the Education Sector

• Education is well suited to infrastructure PPPs
• Stable/slow changing sector and technology
• Strong private involvement in other sectors such
  as construction
• Services can be relatively easily defined,
  contracted and measured/monitored
• Long planning horizons known demographics
• Some special challenges in the education sector,
  particularly in developing countries
• Weak capacity in education departments to
  implement contracting initiatives and
  infrastructure PPPs
• Politicisation of education/corruption
• Decentralised nature of education in many
  countries
• Small project size for infrastructure 28 M vs
  115 M/project for transport under UK PFI
• Education seen as public in nature
• Policy risk effect on investment intentions

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VIII Infrastructure PPPs in the Education Sector
(Contd)

• Contracting is likely to be better than in-house
  provision under the following circumstances
• the more precisely a task or result can be
  specified in advance
• the more easily performance can be measured and
  evaluated
• the more competition there is among potential
  providers
• the less the activity is core to the agencys
  mission
• the more the demand for service varies over time
• the private providers can hire people with the
  needed skills more easily than government can
• the private providers have greater economies of
  scale in producing the service.

Source Steven J. Kelman, Contracting, in
Lester M. Salamon, ed., The Tools of Government
A Guide to the New Governance (New York Oxford
University Press, 2002), 282318.
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IX Evidence on Infrastructure PPPs (Contd)

• Limited evidence on impact of infrastructure
  PPPs.
• Available evidence shows lower costs and more
  timely delivery of PPP infrastructure projects
  compared to traditional methods of procurement.
• United Kingdom
• 88 (National Audit Office) and 76 (Treasury) of
  PFI projects were delivered on time or ahead of
  time compared to 30 under pre-PFI experience
• 79 (National Audit Office) and 80 (Treasury)
  were delivered at or below the agreed price
  compared to 27 under pre-PFI experience.
• New Schools Project (New South Wales, Australia)
  infrastructure delivered 2 years earlier and 7
  cheaper than under traditional procurement
  methods.

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Value for Money Comparison Public vs Private
Sector, NSW New Schools II Project
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Certainty of Delivery and Price PFI vs Non-PFI
Projects, UK
Source HM Treasury (2003)
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X Conclusion

• Many examples of infrastructure PPPs across
  education sector in both developed and developing
  countries
• Infrastructure PPPs can play an important role in
  improving the quality of inputs and the
  efficiency of delivery in the education sector,
  but affect only non-core business, not core
  business
• Potential third way for improving
  efficiency/performance in education sector
• Recognise implementation capacity too complex
  wont work.