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New PPP school procurement announced

Hon Hekia Parata

Minister of Education

Hon Nikki Kaye

Associate Minister
of Education

4 March 2014 Media Statement
New PPP school procurement announced

Education Minister Hekia Parata and Associate Education Minister Nikki Kaye today announced that building and maintaining four new schools around New Zealand could be delivered using a public private partnership (PPP).

An invitation for Expressions of Interest will be issued for the design, construction, financing, and maintenance of Aranui Community School and Rolleston Secondary School in greater Christchurch, Wakatipu Secondary School’s new site in Queenstown and a new school in Auckland yet to be confirmed.

“If the expression of interest is successful and the PPP goes ahead the Ministry of Education estimates the cost of construction and maintenance for the project will be more than $200 million,” Ms Parata says.

“The Ministry advises that the use of a PPP for this bundle of four schools could deliver savings of two to eight per cent over traditional procurement by the Ministry.

“A big benefit of a PPP is that professional facilities managers take care of school property freeing up school staff time for teaching and learning.

“The four new schools in this project are being developed either as part of the Greater Christchurch Education Renewal Programme (GCERP) or to meet population growth in Auckland and Queenstown. These schools will be built whether we use a PPP or not, but together they make a viable PPP project that promises to deliver real benefits for students and teachers.

“This Government is committed to investing in education and making sure schools have high-quality infrastructure to get the best learning outcomes. The use of PPPs for new school projects is a key part of our plan to achieve this,” Ms Parata says.

The green light from Cabinet for this project follows the Ministry of Education’s first PPP contract signed in April 2012 with Learning Infrastructure Partners for the development, financing, construction and maintenance of Hobsonville Point primary and secondary schools.

“This Government has made it clear we are open to greater use of private sector expertise where it makes sense. This second school property PPP demonstrates the benefits of this model of procurement," Ms Kaye says.

“These schools will be built via the traditional Ministry of Education procurement if the expressions of interest don’t result in the best value being delivered.

“Over the past 12 months the Ministry has conducted a comprehensive market sounding exercise. Feedback from market sounding participants also shaped the Ministry’s thinking about which schools should be included in the project,” Ms Kaye says.

The Cabinet paper is available on the Ministry’s website:www.minedu.govt.nz/pppschools

Questions and Answers

How does a school property public private partnership (PPP) work?

The provision of education remains the responsibility of the principal and board of trustees.

A private partner is responsible for designing, building, financing and maintaining the school property for the term of the contract (25 years from the opening of the final school). The Ministry of Education pays the private partner quarterly, with this payment reduced if the school facilities do not meet the standards specified in the contract. This effectively provides a 25-year guarantee on the buildings.

The Government retains ownership of the land and buildings throughout the life of the contract.

What schools are included in this PPP?

School Proposed Opening Dates Estimated Final Roll
Aranui Community School (Christchurch) Jan 2017 1,300
Rolleston Secondary (Canterbury) Jan 2017 1,500
Wakatipu Secondary School (Queenstown) Jan 2018 1,200
New school (Auckland) To be confirmed To be confirmed

Each school will have its own board of trustees. Establishment boards will oversee the development of the three new schools.

The type of school and opening date for the Auckland school will be confirmed in the coming months. This is not an impediment to beginning the Expressions of Interest process.

What is the value of this PPP project?

The exact cost will not be known until after the procurement process and negotiations with the successful consortium are complete.

The Ministry estimates the cost of construction and maintenance for the project will be over $200 million.

What are some of the benefits of a public private partnership for school property?

Having a professional facilities manager responsible for school property reduces the amount of time senior school staff spends on property, freeing up this time to be spent on teaching and learning.

The Ministry of Education is also investigating the possible provision of other community and social services on the Aranui Community School site. Having a professional facilities manager ensures the facilities for social services are maintained to a professional standard, and frees up the time the board of trustees and school staff would otherwise have spent on property issues related to these spaces.

PPP schools are designed and built to meet the Ministry’s weather-tightness requirements, but if any defects arise over the life of the contract the private sector partner is responsible for correcting them.

For some projects, a PPP offers the best opportunity to deliver value for money. This is because the private sector partner engaged to deliver the asset is also responsible for its long-term performance, so they make design, construction and maintenance decisions with the longer term in mind.

Would you expect NZ companies to tender for a PPP?

Yes. The Ministry ran market sounding exercises in April and October last year, which suggested there are a number of New Zealand companies interested in a school property PPP.

Why are four schools in three different regions being bundled together for this PPP?

Based on previous PPPs in New Zealand and overseas, the total value of a school property PPP needs to be greater than $100 million to be attractive to the market and deliver value for money for Government.

This means that a PPP project needs to include a number of new school projects. However, concentrating the project in one region may place undue pressure on local construction firms, particularly in Christchurch, and could lead to increased price pressures. Therefore, the Ministry selected schools in geographic ‘clusters’ to take advantage of regional economies of scale while not concentrating in one region.

Through the Ministry’s market sounding process, it became clear that the market is capable of delivering and maintaining schools in different parts of the country and keen to do this.

What happens if the quality or prices of bids do not meet expectations?

The Government retains the right to revert to traditional means of procurement if that would provide the best value for money and best services for taxpayers.

What happens next?

Now that the project has been approved, the Ministry will seek Expressions of Interest from consortia wishing to design, build, finance and maintain the schools. Up to three consortia will be shortlisted, and they will be asked to respond to a Request for Proposal. Responses to the RFP will go through a rigorous evaluation and the Ministry expects to announce a successful consortium later this year. After negotiations are completed with this consortium, a contract will be signed and construction can commence in early 2015.

Is the Ministry of Education considering the use of public private partnerships for other schools?

The Ministry will continue to consider the use of PPP for projects of sufficient scale.

© Scoop Media

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