1. The schools PPP experience in the U.K. Javier Encinas October 2011
UNCLASSIFIED 1

2. Agenda PPP/PFI principles
PPP/PFI in schools : Jo Richardson Community School (JRCS)
UK PFI overview and lessons learnt
UNCLASSIFIED
UNCLASSIFIED

3. What are Public Private Partnerships?
‘Arrangements typified by joint working between the public and private sectors. In their broadest sense they can cover all types of collaboration across the private-public sector interface involving collaborative working together and risk sharing to deliver policies, services and infrastructure.’ (HMT, Infrastructure Procurement: Delivering Long-Term Value, March 2008)
The Private Finance Initiative (PFI) is one type of PPP and the most common form used in the UK. This involves the procurement of specified services on a long term basis.
Typically a private sector partner designs, builds, finances, operates and maintains an infrastructure asset to provide the service.
Public sector pays annual unitary charge for years for specified service quality.

4. International Context
Countries with active / developing PPP programmes include:
Australia, Austria, Brazil, Belgium, Bulgaria, Canada, Chile, Colombia, Cyprus, Czech Republic, Egypt, France, Germany, Greece, Hungary, India, Indonesia, Ireland, Italy, Japan, Korea, Malaysia, Malta, Mexico, Netherlands, Nigeria, Pakistan, Peru, Poland, Portugal, Romania, Russia, Saudi Arabia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Taiwan, Turkey, US and UK … and more ….
UNCLASSIFIED
UNCLASSIFIED 4

5. Common Sectors Transport Education Prisons Health UNCLASSIFIED5

6. Common Sectors (cont’d)
Defence
Leisure
Also
Housing
Courts
Technology
Government Offices
Waste Treatment
UNCLASSIFIED
UNCLASSIFIED 6

7. Distinction between Privatisation and PPP?
Where does accountability for
public services delivery lie?
UNCLASSIFIED
UNCLASSIFIED 7

8. Types of PPP Who pays? Concession User PFI model Public sector
Joint Venture*
Investment Programme Management
UNCLASSIFIED
* Partnerships UK is an example

9. Variants of charging, different tunes on demand risk
Types of PPPs…2
Variants of charging, different tunes on demand risk
e.g. real toll roads, airports, ports?
e.g. rail, water?
Feasibility of Full Economic Recovery in User Charges
e.g. schools, hospitals, solid waste?
e.g. street lighting, prisons!
Demand Risk Transfer
UNCLASSIFIED

10. PPP/PFI in the education sector Case study: Jo Richardson Community School
UNCLASSIFIED
UNCLASSIFIED

11. Types of school in England
25,000 state schools
Primary 5 – 11 years
Secondary 11 – 16
Technical colleges 16 – 18
Universities
2,500 private schools (6-7% of children)
State funded
UNCLASSIFIED

12. Schools PFI projects
Education (mainly schools) is a major component of the PFI programme:
approx. 225 projects signed;
total value approx. £10 billion.
Individual school projects too small to be economic as a PPP:
mostly for ‘grouped’ schools projects: can be 20 or more schools in one project – so U.K. has more individual school projects than any other type of PPP.
N.B.: A school is just one type of ‘accommodation’ PPP project: same principles can apply to, e.g., hospital, prison, offices. 
UNCLASSIFIED

13. Jo Richardson Community School (JRCS) - Background
Jo Richardson Community School (JRCS) is a PFI secondary school and community centre
It is the first new school to be built in over 40 years in Barking and Dagenham
Barking and Dagenham is one of the most deprived boroughs in London
JRCS currently has 1300 students, from 11 to 18 years old
80% of the students come from deprived backgrounds
Jo Richardson is much more than a secondary school. It has been widely hailed
as a model of ‘extended’ community provision and
as a catalyst for urban regeneration in the area.
Barking and Dagenham is one of the most deprived boroughs in London and use to have one of the worst academic attainment records in the country
UNCLASSIFIED
UNCLASSIFIED

14. JRCS – General Objectives
The school and community centre address two important objectives:
the delivery of a new pedagogy...
School and vocational education
...and the provision of cultural, leisure, health and learning resources for the wider community.
Adult education centre / Learning Village
Children’s Centre
Health Centre
Library
Sports and Recreation spaces
Performing Arts resources
Café
The school and community centre address two important objectives:
the delivery of a new pedagogy...
Focus on teaching and learning
through the development of new pedagogical methods developed from teaching models used in Switzerland, the Netherlands and the Scandinavian countries
Through the introduction of vocational/technical education for year olds
Vocational education prepares students for jobs that are based on manual or practical activities
Carpentry, plumbing, electricity, hairdressing
...and the provision of cultural, leisure, health and learning resources for the wider community.
To develop the extended school concept to meet key community objectives: adult education, social integration, health, recreation
The community school is designed for extensive out of hours use with public access to the performing arts, resource areas, sports and dining spaces. Jo Richardson School also incorporates a primary healthcare centre, a community one-stop shop and public library.
Extending the use of school facilities to the community is to be encouraged especially when you consider the amount of investment required to construct and run a school compared against the time available both within (i.e. when the school sports hall or the school theatre is not being used by pupils) and outside of normal school hours (i.e. school holidays, weekends and before and after normal school hours) for potential community use.
UNCLASSIFIED 14

15. JRCS - PFI Objectives
To procure facilities that secure the Council’s education strategy and its community development and regeneration strategy
To procure school facilities that help deliver the Council’s new teaching and learning approach in particular
The procurement team learns actively from traditional/and PFI recent experience
The procurement delivers well designed, durable (expected life 50+ years) and serviceable accommodation
To develop a PFI methodology that can be taken forward by the Council
High quality vfm on outcomes
UNCLASSIFIED

16. Project preparation process
Essential Preliminary Questions :
What are the project’s scope and requirements?
What is the best project option?
What is the best procurement option?
The Local Authority spent 18 months preparing the OBC for this project
The OBC ensures that the project:
Is social and politically responsible
Is legal and operationally feasible
Is financially affordable
Is managerially achievable
Is bankable
Achieves good risk allocation
Generates VfM
In UK, problem was linked to lack of investment in infrastructure, teaching quality was not a problem
Increase the utilisation of the infratsrcuture (Sweat the asset) and amortise the capital investment more efficently
UNCLASSIFIED
UNCLASSIFIED

17. Project design process
Design from the inside out (Design Council)
Design that ensures:
Efficient use of space
Management of people
Security
Accesibility
Client and end user involvement
The Authority appointed a CABE Enabler to give advice on the project. The advice was to appoint a client side design team to develop a full reference scheme. After a competitive process, Penoyre & Prasad Architects were appointed to work with the LEA and school community to develop a clear brief and a reference project to issue to PFI bidders.
At the same time, in order for the design advisor to better understand the new teaching pedagogy and its implications for the fabric of the future school, the project team visited a local primary school where it was already in operation. The pedagogy was inspired partly by a Swiss educational model which was initially developed in primary schools within the borough and is now being developed in the secondary sector. The team also visited three schools in Holland to understand the physical implications of the pre-vocational curriculum options.
UNCLASSIFIED
UNCLASSIFIED

18. Project procurement process
Objectives of a procurement process:
Run a transparent and open competition in a cost-efficient way
Select preferred bidder/partner
Achieve good outcomes
Key dates:
OJEU publication: May 2002
Contract signature: March 2004
School opening: September 2005
Procurement time: 22 months
Construction period: 18 months
UNCLASSIFIED
UNCLASSIFIED

19. Project procurement process
Briefing and feedback – contractors
Use of exemplar designs
Use of Design Quality Indicators in selection
Contract award to Most Economically
Advantageous Offer
UNCLASSIFIED
UNCLASSIFIED

20. JRCS - PFI private and public responsabilities
Local Authority (Barking and Dagenham Council) in charge of providing :
educational services to the students,
extended services to the community (adult education, social integration, health, recreation) and management of shared facilities;
“Soft Facilities Management” services (reception, cleaning, catering, ect) and
monitoring of the “Hard Facilities Management” services performance
Role of private sector partner in charge of:
Design & Construction (Bouygues)
Financing (BNP Paribas, DEXIA Group, NIB, Barclays Equity)
Maintenance of the infrastructure / “Hard FM” services (Ecovert)
· Building fabric maintenance
· Mechanical & electrical engineering
· Grounds maintenance
· Utilities management
· Health & safety management
· Lifecycle fund management
· Helpdesk
UNCLASSIFIED

21. JRCS - PFI Structure SPV BY Education (Barking) Ltd Insurance Lenders
BNP Paribas DEXIA Group NIB
Construction Contract
Bouygues UK
Hard Facility Services Agreement
Ecovert FM
SPV
BY Education (Barking) Ltd
Public Sector Entity
Barking and Dagenham
Council (Local Authority)
Barclays Equity
Ecovert
85%
Bouygues
25 year Service Agreement
Defined Risk Transfer
Output Specification
Only Residual Risk Transfer
15%
Financial Providers
Shareholders
UNCLASSIFIED

22. JRCS - PFI Risk Allocation 1/2
Risk transfer under a school PFI contract follows same principles as any PFI:
Design / construction risk to Project Company
So if the school is completed late or over budget no payments are made and the revenue is therefore lost.
Construction sub-contractor will pay penalties to compensate.
Most operating risks to Project Company:
High opex / maintenance / lifecycle, or payment deductions, reduce net revenues
Some risks / deductions may be passed down to soft FM contractor (as discussed), or building maintenance sub-contractor.
Macro-economic risks may be shared:
High interest rates reduce revenues (unless fixed or hedged).
Payment mechanism may hedge against opex inflation.
Insurance covers force majeure (Acts of God).
JRCS - PFI Risk Allocation 1/2
UNCLASSIFIED

23. JRCS - PFI Risk Allocation 2/2
Authority
Private Sector
Pupil numbers √
Detailed planning
Site availability
Design & construction
Force majeure
Vandalism
Availability
Inflation
Interest rates
UNCLASSIFIED

24. Horseshoe layout for general teaching classrooms
Doors located for teacher monitoring
of corridor
Clear sight lines
Overhead data projector controlled from teacher’s desk
Layout allows for students in wheelchairs
Desks in horseshoe layout
Resources stored in centre of class
Windows sited to rear for IT projection
Cill heights set to reduce distraction
As a part of its vision, the Local Authority (Barking and Dagenham) championed new ways of learning, by delivering the curriculum in larger than average (75 m²) classrooms with a 'horseshoe' shape seating arrangement.
Area of room 70 – 75m2
Gaps for good circulation
No student is at the back of the class – no student sits behind another
UNCLASSIFIED

25. Delivering educational innovation for the pupils
nursery entrance
Student Entrance
children’s centre
line of security
design tech
food tech
central street
school (shared) performing arts
science and art
school (shared) library & ICT
The school and community centre are organised around internal ‘streets’, accommodating a variety of uses and providing the principal social space for the student community.
At the new Jo Richardson School the community offices, library and resource centre are located at the intersection of the main student and public routes. With 1500 students the pastoral arrangement is particularly important and the planning provides a distinct hierarchy of inside and outside spaces to reflect this
general teaching and SEN
community entrance
external sports and play
general teaching and 6th form
school (shared) sports
UNCLASSIFIED
student entrance
UNCLASSIFIED

26. And extended services for the community
line of security
drop-in crèche
vocational teaching
café / restaurant
In main street
community use for adult education
performing arts
customer first
Library / ICT
learning centre
pitches
sports facilities used by local clubs etc
cafe
hard courts
sport
bikes
all weather floodlit pitch
car park
UNCLASSIFIED

27. JRCS - Benefits so far Construction on time and budget
Design fulfils the Authority's vision
Project delivers long term solutions
Authority has managed to establish good relations with private partner
Incentive on both sides to add value
Project delivers long term solutions for the Authority, the pupils and the wider community
UNCLASSIFIED
UNCLASSIFIED

28. JRCS - Challenges Defining needs appropriately User involvement
Long period and cost of procurement
UNCLASSIFIED
UNCLASSIFIED

29. Educational outcomes / results
% students gaining 5 or more grades A* - C GCSE
National B&D
+ 47% %
In secondary schools, (General Certificate of Secondary Education) GCSEs, are compulsory academic qualifications in core subjects taken by 14–16-year-old students
in England, Wales and Northern Ireland.
GCSE are a measure of academic attainment
In 2000, Barking and Dagenham had a 16 point gap in the GCSE results
In 2011, that gap has been reduced to only 4 points
UNCLASSIFIED
UNCLASSIFIED

30. The schools PFI experience in the U.K.
An enormous increase in school building.
approx. 225 projects signed worth approx. £10 billion
Difficult to imagine it could have been achieved in another way.
Some lengthy procurement periods.
Projects generally completed on-time and on-budget.
Exceptions relate to solvency of construction sub-contractors, but problems have been absorbed by investors / lenders, not public sector.
However → delays in delivery of completed schools.
Public sector needs to pay more attention to credit quality of major sub-contractors.
Design quality is adequate, but limited evidence of major innovation.
Good level of performance on availability (very limited deductions)
Some concerns on quality of soft FM, e.g. cleaning.
Concerns on long-term flexibility and the cost of change.
Much adverse publicity in newspapers and TV – importance of Government communication of the benefits of the PFI programme.

31. UNCLASSIFIED

32. The UK experience
UNCLASSIFIED
UNCLASSIFIED

33. Situation of the UK Infrastructure in the 1990s
Legacy of under- investment
Backlog of school repairs in 1997 estimated at £7billion
Backlog of NHS building maintenance over £3billion
Constrained capital budgets
EU Commission paper on PPPs: “Whilst the principal focus of PPPs should be on promoting efficiency in public services through risk sharing and harnessing private sector expertise, they can also relieve the immediate pressure on public finances by providing an additional source of capital.”
Balance Sheet Treatment
Cost overruns – conventional procurement

34. Faslane Trident Submarine Berth Faslane Trident Submarine Berth
Cost overruns
Guy’s Hospital
Outturn: £124m
Guy’s Hospital
Budget: £36m
Faslane Trident Submarine Berth
Outturn: £314m
Faslane Trident Submarine Berth
Budget: £100m
Scottish Parliament
Outturn: £431m
Scottish Parliament
Budget: £40m

35. UK Experience - PFI 964 £76 Billion PFI Contracts Capital Value Signed
+750 Projects now
operational
Source: HM Treasruy
UNCLASSIFIED

36. Signed Deals and Capital Value by Financial Year
In 2010, 33 projects worth £2.9 Bn closed
Source: PUK Projects Database
UNCLASSIFIED

37. Distribution of PPP Projects by Value
Capital value - £m
Total: £76.05 Bn
Source: PUK Projects Database
UNCLASSIFIED

38. Distribution of PPP Projects by Number
Total: 964
Source: PUK Projects Database
UNCLASSIFIED

39. Comparison with Conventional Procurement - Evidence
Delivery on time and on budget
2008
85% +
On time
On budget
2005
80%
45% +
On time
On budget
30%
Conventional
Procurement
PPP
Performance of completed projects – No. of Projects
Source: National Audit Office – UK Parliament – Expenditure Auditor
UNCLASSIFIED
UNCLASSIFIED

40. Operational Performance
users are satisfied with the services provided by PFI projects;
PFI is delivering the services required with over 90% of public service managers believing that services provided are satisfactory or better;
the incentivisation within PFI contracts is working with the payment mechanism improving the service being provided in the PFI projects
evidence that PFI projects can lead to better educational outcomes
UNCLASSIFIED
UNCLASSIFIED

41. Public Expenditure Context
PFI (PPP) represents approximately 11% of UK total public sector investment.
PFI (PPP) is an important technique for procuring public services but is only one of a family of procurement methods.
UNCLASSIFIED

42. P P P Service Requirement Service Delivery Public Sector Partnership
Private Sector
Service Requirement
Service Delivery
UNCLASSIFIED

43. Lessons Learnt Legislative framework Policy framework
Institutional reform
Capacity building:
Public sector
Private sector
Central support
Communications
Programme development
Quality Control
… and above all, Political Commitment
UNCLASSIFIED
UNCLASSIFIED

44. Infrastructure UK Contact:
44 (0)
UNCLASSIFIED