1. OVERVIEW ON PPP IN EDUCATIONBy
Dr. Vincent K. Fabella

2. Outline of the Presentation
Background and rationale
Defining Public-Private Partnership
Opportunities in PPPs in Education
Education PPP Models for SHS
Challenges of structuring education PPPs

3. Background

4. Background
Deepening partnerships with the private sector is becoming a reliable way of financing quality education and making it accessible especially to the poor. (World Bank)
The 2013 Philippine Budget has been designed to enable public-private partnerships (PPPs) for the delivery of social services.

5. PPP in Education
Private investment imperative to expand infrastructure and provide greater access to all forms of education
PPPs a good way to attract private investments
Concept of PPP and its applicability to education not new (our ESC program is recognized abroad)
Requirement is to accelerate the pace and develop new models of participation

6. KEY EDUCATION REFORM AREAS:
Expanding the basic education cycle from 10 to 12 years,
Filling the gaps in the system of classrooms, books and teachers,
Expanding education service contracting.

7. School-community partnerships on the ground have shown the way forward in making schools perform better.
Government and the private sector must ensure that these islands of excellence become the norm for all by scaling up these successful initiatives.

8. Public-Private Partnerships or PPPs must indeed become part of our education reform effort.

9. Considerations for PPP in Education:
(Usec Francis Varela)
Expands access to basic education, especially in areas not reached by the public school system
Promotes the provision of quality basic education
Offers cost-effective solution for government
Must cater to target clientele of government

10. Defining PPPs in Education

11. Defining Public-Private Partnership
Relationship where government contracts out to private providers the supply of a particular service of a defined quantity and quality at an agreed priced for a specific period of time.
Maximizes the use of its skills, resources and capacities to deliver services in a more efficient manner;
PRIVATE SECTOR:
generates new business.
Enables public sector to focus on delivering other critical functions and services;
GOVERNMENT:
promotes certainty and predictability in spending.
Win-win arrangement

12. PPPs in Education
Definitions differ in terms of scope and formality of arrangements.
Common Elements:
Formal arrangement with contractual basis
Involve public and private sectors
Outcome focus
Sharing of risks/rewards between public and private sectors
Recognize complementary role of public and private sectors.

13. Financing of Education
Provision
Private
Public
Private schools
Private universities
Home schooling
Tutoring
User fees
Student loans
Vouchers
Contract schools
Charter schools
Contracting out
Public schools
Public universities

14. Opportunities for PPPs in Education

15. OPPORTUNITIES FOR PPP IN EDUCATION
Expanded ESC
K+12 Senior High School PPP Schemes

16. ESC Expansion

17. 2013 GASTPE Budget Php 7.0 billion in 2013 vs. Php 6.3 billion in 2012
2013 budget sufficient for 1 million grantees (DepEd)
Source: Usec Varela’s PPt Presentation: “Enriching PPP in Education”

18. Win – Win Solution (DepED’s Perspective)
Proper Grantee Selection
Additional Enrollment for Private Schools
Increased Revenues for Private Schools
Decongest Public Schools
Source: Usec Varela’s PPt Presentation: “Enriching PPP in Education”

19. PPP Opportunity: K to 12 Senior High School

20. PPP The Logic Have classrooms,
NEED classrooms. Teachers and expertise for Grades 11 and 12
Have classrooms,
teachers and expertise for Grades 11 and 12
Public
Private
PPP

22. PPPs and the K to 12 Reform Senior High School Program
Projected total enrollment : 1.1 million by 2016
Offer Senior High School License: enables not only private secondary schools but also private high education institutions to participate
Some public Junior High Schools will expand to offer Senior High School
Some public Junior High Schools will become stand alone Junior High Schools
Some public Junior High Schools will be developed into stand alone Senior High schools

23. The Challenge of Bro. Armin Last October 26, 2012
Of the projected 1.1 million SHS students, how many can the private sector absorb?
SY : 400,000 (Grade 11)
SY : 800,000 (Gr 11 and 12)
How many can you absorb during the transition?
What are your plans for after the transition?

24. PPP Models for SHS

25. Three Models Expansion of Current ESC Program Voucher System
Variant: tiered vouchers
“Concessions:” Individual contracts with schools
Government will pay per student, may provide capital
schools deliver enrollment and quality targets at agreed-upon price

26. Expanded Education Service Contracting
3 Models, Con’t
Tiered Voucher System
Expanded Education Service Contracting
Flat grant to selected non-DepEd schools
Government allocates the number of grants allocated per school based on need
Eligible schools are selected based on certain enrollment and quality targets.
Concessions
100% Supply: individual negotiations with non-DepEd schools
Government provides lump sum capital and operating funds, and schools commit to deliver certain enrollment and quality targets
100% Demand: free exercise of market choice by students and their families.
Universal: all public elementary graduates receive a voucher which will be honored in any DepEd or non-DepEd school.
Tiered: amount of government subsidy linked to students’ capacity to pay.
Some of the schemes being considered to implement the provision of Senior High School through HEIs using public financing include a tiered voucher system, an expanded education service contracting system and the concept of charter schools. These modes are also being studied closely to determine the proper arrangements that would be most beneficial to government and the partner HEIs that will be participating in the program.
Source: DepED’s PPt Presentation to Congress, 15 Oct 2012

27. Education Service Contract (ESC) scaled up and improved
3 Models, Con’t
Option 1:
Education Service Contract (ESC) scaled up and improved
Option 2:
Vouchers
Option 3: Concessions
Infrastructure PFI- Service
Management Contract
Country
Philippines
Netherlands (no top-up) Chile (top-up)
UK/USA
Description
Government contracts directly with private schools to pay for agreed volumes of places for low income students in areas where there is a shortage of public school places
Government directly subsidises private schools according to enrolment numbers. Private schools allowed selective student admissions. All education publicly financed (Netherlands); Universal vouchers, switching between public and private schools (Chile)
Government gives concession to private consortium to build, finance and maintain school buildings over long time frame. Separate school management and educational delivery contracts are tendered, which are competitively bid on over much shorter time frames.
Market effect
"Managed Market – school by school"
"Managed market – funding follow pupil”
"Private build-operate-concession, government owns"
Case study
ESC-FAPE
“Bijzondere “or special schools (N)
Sectarian PPP schools (Chile)
UK: Building Schools for the Future - Private finance initiative
USA: Seattle school district management contract to EMOS
Pros
DepEd retains control over supplier base & student volumes
Existing governance structure & political consensus in place
Allows free market response to demand
Consumer choice drives quality competitiveness
Increases access and new creation
PFI off balance sheet pre-finance & improves overall quality of infrastructure
Management contract competitive & shorter term to raise quality standards
Cons
DepEd has to contract with every single supplier
Implies existing school base, not new place creation
No consumer choice
Not means-tested, so not optimising benefit to lower-income families, but also benefiting those who could afford to pay anyway
Race to the bottom on price amongst private suppliers
Separates management from asset generation (2 different contracting streams)
No Primary quality levers
Into 1 slide: Options 1, 2, and 4

28. Challenges in implementing ppps in education

29. KEY CHALLENGES IN STRUCTURING EDUCATION PPPs
Initial structure and prioritization of objectives
Government priorities (meets DepEd mandates)
Private participant priorities (price, demand stability, financial viability, performance targets)
The bidding process
Capacity building
Regulatory and legal issues

30. SELECTION CRITERIA OF PPP PROJECTS
Project Readiness/Preparation
2. Responsive to the Sector’s Needs
3. High Implementability (bankable, no major issues)

31. Thank You

32. SCHOOL VOUCHER (also called an education voucher)
is a certificate issued by the government, which parents can apply toward tuition at a private school (or, by extension, to reimburse home schooling expenses), rather than at the state school to which their child is assigned.
An alternative to the education voucher is the education tax credit, which allows individuals to use their own money to pay for the education of their children or to donate money towards the education of other children.
Under non-voucher education systems, people who currently pay for private schooling are still taxed for public schools; therefore, they fund both public and private schools simultaneously. Via offsetting the cost of private school tuition, vouchers and tax credits are intended to allow students and families to choose the school that best fits their needs. Opponents of school vouchers say allowing families the option of both public and private schools undermines the public education system through threatening its funding and enrollment.
Source: Erica Cordova. "School Choice: Vouchers". Ncsl.org. Retrieved

34. 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 collaborations
On-job-training
Public/private tertiary institution affiliations
Social marketing

35. Typology of Forms of Contracting in Education

36. Two other contract types
Auxiliary Services/Professional Services: involve contracting the private sector to undertake education-related functions such as school review, schooling improvement or curriculum development.
Public Private Partnerships (PPPs) for educational infrastructure: involve contracting the private sector to design, build, finance and operate educational infrastructure such as classrooms and school hostels.

37. Regulatory Differences Among Charter Schools, Contract Schools and CPS Performance Schools, Chicago Public Schools
Source:

39. Five Types of Contracts in Education

40. TWO WAYS OF GIVING PUBLIC FUNDS
FOR PRIVATE OPERATION
Supply side financing
Demand side financing
Examples
Aided schools, India
Concession schools, Columbia
Charter Schools, US
Voluntary Aided schools, UK
Voucher schools, Colombia
Voucher schools, USA
Voucher schools, Chile
Voucher schools, New Zealand
Funding of school
By public sector
Operation
By private sector
Who receives the resource
The schools directly
Families, as a voucher
Is funding provided on a per pupil basis?
Not necessarily:
Block grants in India
Per student grant in UK, USA
Necessarily per student

41. Six Models – Three for Discussion
Improved ESC
Vouchers – Universal
Vouchers – Targeted
Concessions
Charter Schools
Others

42. Some PPP Models for SHS Provision in the Philippines
Option 1:
Education Service Contract (ESC) scaled up and improved
Option 2:
Vouchers – Universal
Option 3:
Vouchers – Targeted
Country
Philippines
Netherlands (no top-up) Chile (top-up)
Colombia
Description
Government contracts directly with private schools to pay for agreed volumes of places for low income students in areas where there is a shortage of public school places
Government directly subsidises private schools according to enrolment numbers. Private schools allowed selective student admissions. All education publicly financed (Netherlands); Universal vouchers, switching between public and private schools (Chile)
Vouchers made available to students from low income families attending public schools but who have been accepted into private schools. Renewable contingent upon students academic performance
Market effect
"Managed Market – school by school"
"Managed market – funding follow pupil”
“Managed market – funding follow pupil”
Case study
ESC-FAPE
“Bijzondere “or special schools (N)
Sectarian PPP schools (Chile)
PACES – Plan de Ampliacion de la Coberatura de la Educacion Secundaria
Pros
DepEd retains control over supplier base & student volumes
Existing governance structure & political consensus in place
Allows free market response to demand
Consumer choice drives quality competitiveness
Increases access and new creation
Increase access to secondary schooling for children from low income families
Cons
DepEd has to contract with every single supplier
Implies existing school base, not new place creation
No consumer choice
Not means-tested, so not optimising benefit to lower-income families, but also benefiting those who could afford to pay anyway
Race to the bottom on price amongst private suppliers
No quality lever
Demand for vouchers can outrun their supply

43. Some PPP Models … continued
Option 4: Concessions
Infrastructure PFI- Service
Management Contract
Option 5:
Charter school license
Option 6: Others
(CSR, payment by results)
Country
UK/USA
USA
Philippines, UK
Description
Government gives concession to private consortium to build, finance and maintain school buildings over long time frame. Separate school management and educational delivery contracts are tendered, which are competitively bid on over much shorter time frames.
Government provides funding to schools, attended out of choice, without direct control
Addopt-a-school: corporation support public schools
Dept. for Work and Pensions- back to work schemes by NGO providers (social enterprise)
Market effect
"Private build-operate-concession, government owns"
"Funding follows the pupil"
a. School-by-school; b. results based financing
Case study
UK: Building Schools for the Future - Private finance initiative
USA: Seattle school district management contract to EMOS
Edison - For-profit
KIPP - Non-profit
Adopt a school (Philippines),
DWP (UK)
Pros
PFI off balance sheet pre-finance & improves overall quality of infrastructure
Management contract competitive & shorter term to raise quality standards
Increase diversity of for-profit & not-for-profit supplier base
Increase consumer choice
Decrease number of failing public schools
Direct engagement of businesses
Risk transfer to provider
Cons
Separates management from asset generation (2 different contracting streams)
No Primary quality levers
No consumer choice
Slow build-up, marginal system-wide effects (USA: 15+ years, charters only about 6% of system)
Failing charters difficult to close
Limited Scalability
High risk
Remove 5 and 6

44. Six Dimensions – Two for Discussion
Quality
Access
Equity
Pricing and Financing
Business Arrangements
Policy Environment

45. Comparing PPP Models for SHS
Dimensions
Indicative Fungible Mechanisms
Indicative Key Performance Indicators
Quality
Performance based incentives
Performance based contract renewal
Accreditation of private providers
Student Learning Outcomes
Access
Region based coverage
Bundling highly desirable and less desirable areas
Transition rate from grades 10 to 11
Equity
Targeting
Formula-based funding
Graduation rates for low income students

46. Comparing PPP Models for SHS … continued
Dimensions
Indicative Fungible Mechanisms
Indicative Key Performance Indicators
Pricing and financing
Tiered pricing
Formula based pricing
Flat fee plus inflation factor
Private finance with government subsidy
Pre-finance investment (off balance sheet)
Renewable management contract with performance outcomes
Sustainable, transparent, and predictable public expenditure on non DepEd providers including whole lifecycle costs
Lifecycle price per student at or below agreed price point
Business Arrangements
Time-bound contracts
Decentralized
Centralized with regulator
One model plus limited pilots
PPP administration and management within DedEd’s current institutional capacity
Fair playing field for long-term investment by private providers

47. COMPARING PPP MODELS FOR SHS
Dimensions
Indicative Fungible Mechanisms
Indicative Key Performance Indicators
Quality
Performance based incentives
Performance based contract renewal
Accreditation of private providers
Student Learning Outcomes
Access
Region based coverage
Bundling highly desirable and less desirable areas
Transition rate from grades 10 to 11
Equity
Targeting
Formula-based funding
Graduation rates for low income students

48. Comparing PPP Models for SHS … continued
Dimensions
Indicative Fungible Mechanisms
Indicative Key Performance Indicators
Pricing and financing
Tiered pricing
Formula based pricing
Flat fee plus inflation factor
Private finance with government subsidy
Pre-finance investment (off balance sheet)
Renewable management contract with performance outcomes
Sustainable, transparent, and predictable public expenditure on non DepEd providers including whole lifecycle costs
Lifecycle price per student at or below agreed price point
Business Arrangements
Time-bound contracts
Decentralized
Centralized with regulator
One model plus limited pilots
PPP administration and management within DedEd’s current institutional capacity
Fair playing field for long-term investment by private providers

49. DepED PRESENTATION TO CONGRESS (OCTOBER 2012)

54. THANK YOU!

55. EXTRA SLIDES

56. Background
The Philippines has over 20 years experience in Private-Public Partnerships.

58. DETERMINING THE RIGHT MIX OF PUBLIC AND PRIVATE INVOLVEMENT IN INFRASTRUCTURE FINANCING AND DELIVERY

60. Role of Government in Education
Rationale for government involvement in education:
Externalities
Capital market imperfections
Agency concerns
Equity
Information asymmetries
Government has a variety of policy instruments at its disposal in order to meet its policy objectives:
Ownership/Delivery
Funding
Regulation/Information
PPPs recognize that governments can meet their policy objectives using different service delivery models – not just ‘traditional’ public finance/public delivery model.

61. Challenge for 2013 and Beyond:
Will there be a 20% increase in the enrollment of private schools?

62. Issues in the GASTPE Expansion
Demand vs. Supply Issues
Distribution among schools
Appropriate grantee selection process
Will it increase enrollment in private schools?
Source: Usec Varela’s PPt Presentation: “Enriching PPP in Education”

63. Government Objectives in Expanding GASTPE
Decongest public schools
Minimize cost of expanding education services
Improve quality of education for beneficiaries
Improve quality of education for non-beneficiaries by improving conditions in the public schools.
Source: Usec Varela’s PPt Presentation: “Enriching PPP in Education”

64. HOW IS THIS PUBLIC-PRIVATE PARTNERSHIP PROGRAM BEING DONE?
The public-private partnership program of the government will help solve the shortage of classrooms in our basic educational system.
Question is:
how is this PPP modality being done and implemented?
How is the distribution of the school buildings being done—will it be concentrated in the urban centers like Metro Manila and others to the prejudice of the rural areas which need more of these classrooms as those in Metro Manila?
The urban centers are being provided with assistance by the local government units which have some resources/some remittances to augment the funding of the Department of Education for the basic educational requirements of our students.

65. Wrong Grantee Selection Will Not Help Private Schools
Inappropriate grantees are those students who would have enrolled in a private school, even without government subsidy.
If subsidy is given to these students, the enrollment in private schools will not increase.
The revenue to the school will remain the same. Gov’t subsidy will be enjoyed by private households.
Source: Usec Varela’s PPt Presentation: “Enriching PPP in Education”

66. Critical Factors for Success
Quality advantage of private schools
Appropriate Amount of Grant
Calibrated to target household belonging to certain income groups.
Source: Usec Varela’s PPt Presentation: “Enriching PPP in Education”

67. PPP Objectives (as articulated by DepED Usec. Varela)
Minimize the burden for expanding the public schools.
Provide opportunity for HEI’s to make use of available capacity that would be underutilized as a result of the loss of college students during the transition years.
Provide opportunities for other private schools to expand programs and increase enrollment.
Allow for greater diversity in program offerings, particularly in the context of the varied curriculum tracks for senior high school.

68. ISSUES TO BE RESOLVED
Which schools can participate? How will they be selected?
Which students would be entitled to benefit from the program? Among those who will enroll in private senior high schools, who among them will receive government support?
How will the students be divided between those who will remain in the public schools and those who will be encouraged to go to the public schools?
What price will we set for these arrangements? Will this price be the same for all or will it vary depending on the place, type of school, and income background of the beneficiary?
What will happen to the current GASTPE program?
How do we ensure that the participating private schools deliver high quality programs?

69. THE AIM OF PPPS
to promote improvements in the financing and provision of services from both the public and private sectors but not to increase the role of one over the other; and
to improve existing services provided by both sectors with an emphasis directed on system efficiency, effectiveness, quality, equity and accountability.

71. PURPOSE OF PPP TYPOLOGY
With this knowledge of the typology of PPPs in education, practitioners and policy-makers can make informed choices about whether a public private partnership might help meet their resource needs to ensure high-quality education for those served.

72. Benefits of Public-Private Partnerships
Benefit from economies of scale regardless of the size of the government entity
Allow government agency to focus on functions where it has a comparative advantage
Increase access, especially for groups who have been poorly served under traditional forms of service delivery
Increase transparency of government spending by making the cost of services more visible.