Only small savings in private building of schools - Govt

Having the private sector build and maintain schools would save just $800,000 over 30 years, says a Govt business case. Photo / Christine Cornege.

A Government proposal to introduce public private partnerships (PPPs) for the building and maintenance of some new schools would save just $800,000 over 30 years.

The Government commissioned a business case last year to investigate using private sector operators for financing, building and maintaining schools for a set term, while retaining Government ownership of the land.

The business case, provided to Radio New Zealand, showed that introducing PPPs would provide "only a small improvement in value for money" - expected to be about $800,000 over 30 years.

The document identified four significant risks for introducing PPPs, including that there might not be sufficient interest in the private sector to acquire property and that the Government's reputation could be damaged if the first school property PPP was a failure.

However, the business case said further consideration should be given to using PPPs.

"Tendering for a school PPP will test the value for money assessment made in this business case and provide a firm basis on which to assess the level of competition and innovation that might be unlocked by PPP," it said.

"In addition, not all of the policy reasons for pursuing PPP are captured in the quantitative cost benefit analysis."

Education Minister Anne Tolley agreed $800,000 over 30 years was not a large saving, but said there were other benefits in using PPPs.

"The first stage showed there wasn't going to be great amount of money saved by building that way," she said.

"It also showed that there were other benefits and some of that is around the time saved for board's and principals, but that's why we're taking it very quietly."

Infrastructure Minister Bill English said only one or two schools had been proposed for a PPP at this stage, but further decisions would be made once a second business case was given to Cabinet next month.

"We've always said we'll do PPPs if there's significant value in it for the taxpayer, if there isn't we won't.

"Education is our second-largest chunk of property, it's about $10 or $12 billion worth, part of the benefit of the PPP process is that we're learning a lot about what works now and what doesn't, and what could change."

English accepted that there was a risk of the private sector not being interested in the project.

"With respect to prisons there's been quite a bit of interest, but we've yet to see whether that will translate into hard bids."

He said the first business case had highlighted a number of weaknesses in the current management of schools.

"So we would expect, over the next 12 months or so, that the Ministry of Education will strengthen its management of the schools, regardless of whether we proceed with the PPP," he said.

Prime Minister John Key was more positive about the savings, saying "$800,000 is $800,000".

"When we look at PPPs our view of it is they add quite a number of dimensions, it's less capital that's required on the balance sheets, less borrowing...

"Secondly, the overall running of those schools we believe might be very efficient or hospitals or the other things that we are considering."

NZPA