Private investors could soon be building more Kiwi schools with public-private partnerships.
Video / NZHerald
Private investors seem likely to soon be building more Kiwi schools.
Supporters say the private sector can build more schools faster, giving parents more choice and reducing the financial risk to the Government.
Critics says stories abound from overseas where governments have been left paying millions for empty schools and community groups have been locked out of school facilities, like gyms, by exorbitant fees.
Private investors could soon be building more Kiwi schools, but overseas controversies raise questions about whether it gives parents and taxpayers the best results, teaching groups argue.
However, critics say governments overseas have been forced to spend millions maintaining empty schools, while community groups have been locked out of school gyms and halls by exorbitant fees.
Kate Gainsford, chair of the Secondary Principals’ Council lobby group, said PPPs may have benefits but they should only be considered with “eyes wide open”.
“There are many risks and liabilities and there is not compelling evidence that we have got on top of all of those in New Zealand,” Gainsford said.
For parents, the potential use of PPPs raises questions.
Will it lead to more schools being built, giving greater choice, especially in cities where record migration is helping crowd classrooms?
Rolleston College in the South Island is one of 11 schools built by public-private partnerships. Photo / Rolleston College
Will it cost or save taxpayer money, allowing more cash to be put back into education?
And will PPP schools still act as important community hubs, where knitting groups can meet after hours and where parents happily donate volunteer working bee hours?
Buy now, pay later – how PPPs work
Much of the difference between public-private partnerships and traditional school building contracts is how and when the Government pays up.
Typically, the Government signs contracts with a range of companies to design and build its schools and pays them the cash in full once the build is finished.
Under PPPs, however, the Government tells a group of private investors - usually big consortiums with deep pockets - to design, build and pay for a new school while also looking after its maintenance for the next 25-30 years.
The Government owns the school but pays it off in instalments.
This is supposed to transfer more risk on to the private sector, the Government has previously argued.
Education Minister Erica Stanford said too many school builds had used “fancy architects” and bespoke classroom designs. Photo / Hagen Hopkins
That’s because the Government is supposed to pay a fixed price, meaning investors are left to pick up the extra costs should it go over budget.
The long-term maintenance contracts are also supposed to encourage investors to do a good job because the Government can withhold payments should build defects show up later, the Government says.
However, critics say it doesn’t always work out this way.
The potential move to a PPP model also comes as the new Government launches a ministerial inquiry into build projects at schools, after scores have suffered delays and budget blow outs over the past few years.
‘No lawn mowing contracts’ - NZ’s first PPP school
Daniel Birch says he’s lucky compared with other principals - he doesn’t have to organise who is going to mow the school lawns.
As well as designing and building the school, private investors also signed a contract to look after its buildings and organise cleaning and gardening crews for 25 years.
It’s been great for Birch because he says he can focus on what’s most important - helping teachers and students achieve.
One study in Australia showed principals spent up to 40 per cent of their time managing school property, he said.
“I don’t really want to be involved in cleaning carpets and roofs and getting the lawns mowed,” Birch said.
Hobsonville Point Primary has also been able to renegotiate with the private investors to get them to build an extra garage for the school.
“It’s been a very, very effective model,” he said about PPPs.
‘You can’t call up Bob the caretaker’: Rolleston College
Rolleston College principal Rachel Skelton agrees public-private partnerships are good when they work well.
Except it hasn’t run as smoothly at her school south of Christchurch, which was built among the second tranche of PPPs schools.
When Stanford launched her ministerial inquiry in February, she said too many school builds had used “fancy architects” and bespoke classroom designs.
But Skelton said her school had also been built to “high specs”.
Rachel Skelton says the PPP has not run as smoothly at her school as elsewhere. Photo / Rolleston College
That included a double-ceiling atrium with crisscrossing internal bridge that looked “beautiful” but wasn’t “overly functional” when 1800 noisy students passed close to staff working in the front office.
Trying to organise maintenance jobs has also been a headache at times.
In a non-PPP school, Skelton said: “You’d probably talk to Bob the caretaker and say, ‘Hey Bob, can you please do X,Y and Z for me’.”
But at Rolleston College, any unforeseen jobs or variation to the maintenance contract between the Ministry of Education and private investors can lead to drawn-out negotiations.
Like other schools, Rolleston College also tries to make its facilities available for community groups at cheap prices.
But to do that, the college has to keep track of how many hours it uses facilities, like its gym.
That’s because Rolleston College’s contract includes a maximum bank of hours that its gym can be used for free.
If it goes over that, there’s a fee.
“If you’ve taught in a non-PPP environment, that seems quite foreign because most schools are the heart of a community,” Skelton said.
Gainsford from the Secondary Principals’ Council says rather than take workloads off teachers, strict contracts can often be less flexible.
For instance, it may make it harder to plan a parent-teacher meeting out of hours at short notice, she said.
Would parents also be willing to volunteer their hours at a working bee if that was simply to save money for a big consortium of rich investors, Gainsford asked.
She also wonders whether the private groups in charge of maintaining schools will do as good a job towards the end of their 25-year contracts as they do at the start.
Millions of dollars on an empty school
Max Rashbrooke, a senior research fellow at Victoria University of Wellington and a former journalist in the UK, said he’s seen so many PPPs go off the rails overseas, he hopes they don’t spread widely here.
In one case, in Northern Ireland, taxpayers spent millions on a long-term contract maintaining the buildings of an empty school.
That’s because when the school was built, no one expected student numbers to fall so rapidly it had to close.
However, because the Government was locked into a contract, it had to continue paying, Rashbrooke said.
Researcher Max Rashbrooke says PPPs have been controversial in the United Kingdom.
Other stories include paying thousands of pounds for a new tap or paying contractors to cut the grass even when it isn’t needed, he said.
It highlights how PPPs can be very complex rather than flexible, Rashbrooke said.
Their contracts have to cover every eventuality that could come up over the course of 30 years - something that “is nigh-on impossible”, he said.
It’s also been hard to prove whether PPPs save money in the long run or cost more. That’s because the contracts are typically not opened up to the public to look at because of commercial sensitivity.
Rashbrooke, however, suspects PPPs cost more than more traditional builds.
That’s because the Government can borrow money more cheaply than private firms can, he said.
The firms also need to make a healthy profit over the course of 25 years to justify the risk of paying upfront, while the PPP contracts can become so complicated they can rack up huge consultant’s fees.
Still, with Te Waihanga - New Zealand Infrastructure Commission estimating the country needs to spend $210 billion on new projects, many expect the private sector will have to pay for much of that.
Quintin Blackburn, an expert in project delivery with engineering consultants Beca, said public-private partnerships can work with the right systems put in place.
Commenting on PPPs in general rather than school builds, he said it’s important that the projects are set up with the risk of failure distributed fairly.
It can’t be left to either the Government or the private sector to pick up all the financial risk. Nor should large investors use their power to put all of the risk on smaller building contractors, who might not have the ability to negotiate on a level playing field.
Blackburn also said in an article on the Newsroom website that despite commercial sensitivities, it’s important lessons from previous PPP builds are made public so the country can keep building better infrastructure.
Gainsford agreed, saying for parents and teachers, the most important thing is to ensure an open discussion on how to get the best schools for Kiwi kids.
Ben Leahy is an Auckland-based journalist covering property. He has worked as a journalist for more than a decade in India, Australia and New Zealand.
