Agenda

1. Infrastructure Public Private Partnerships in the Education SectorPPPI WorkshopWorld Bank InstituteJune 18-20, 2007Cairo, EgyptNorman LaRocquenorman.larocque@xtra.co.nz

2. 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

3. Part I:Education Infrastructure PPPs in an International Context

4. 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

5. 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

6. 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.

7. 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.

8. IV Infrastructure PPPs (Cont’d) • 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.

9. 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.

10. 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.

11. VII (a) Private Finance Initiative (PFI), Britain • 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 • 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

12. VII (b) PPP for New Schools, Egypt • PPP to build 2,210 new primary and secondary schools in Egypt, in an attempt to meet President’s 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)

13. VII (c) Proyecto Prestacion de Servicios (PPS), Mexico • The PPS scheme is based on the UK’s 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. • 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.

14. 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).

15. 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.

16. 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.

17. 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 government’s PPP pilot project.

18. 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.

19. 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

20. VIII Infrastructure PPPs in the Education Sector (Cont’d) • 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 agency’s 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), 282–318.

21. IX Evidence on Infrastructure PPPs (Cont’d) • 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.

22. Value for Money Comparison: Public vs Private Sector, NSW New Schools II Project

23. Certainty of Delivery and Price: PFI vs Non-PFI Projects, UK Source: HM Treasury (2003)

24. 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 won’t work.