OVERVIEW ON PPP IN EDUCATION

By Dr. Vincent K. Fabella

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

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.

Background

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

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.

• 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.

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

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

DEFINING PPPS IN EDUCATION

• 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.

Defining Public-Private Partnership

Win-win arrangement

― Enables public sector to focus on delivering other critical functions and services;

GOVERNMENT:

―promotes certainty and predictability in spending.

―Maximizes the use of its skills, resources and capacities to deliver services in a more efficient manner;

PRIVATE SECTOR:

― generates new business.

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.

Financing of Education

FinancingProvision

Private Public

PrivatePrivate schoolsPrivate universitiesHome schoolingTutoring

User feesStudent loans

Public Vouchers Contract schools Charter schools Contracting out

Public schools Public universities

OPPORTUNITIES FOR PPPS IN EDUCATION

OPPORTUNITIES FOR PPP IN EDUCATION

• Expanded ESC

• K+12 Senior High School PPP Schemes

ESC Expansion

2013 GASTPE Budget

• Php 7.0 billion in 2013 vs. Php 6.3 billion in 2012

• 2013 budget sufficient for 1 million grantees (DepEd)

Win – Win Solution(DepED’s Perspective)

Source: Usec Varela’s PPt Presentation: “Enriching PPP in Education”

Proper Grantee Selection

Decongest Public

Schools

Additional Enrollment for Private Schools

Increased Revenues for

Private Schools

PPP Opportunity:K to 12 Senior High

School

NEED classrooms. Teachers and expertise for Grades 11 and 12

Have classrooms, teachers and expertise for Grades 11 and 12

PPP

The Logic

Public Private

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

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 2016-2017: 400,000 (Grade 11)

SY 2017-2018: 800,000 (Gr 11 and 12)• How many can you absorb during the

transition?• What are your plans for after the transition?

PPP MODELS FOR SHS

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

3 Models, Con’t

Source: DepED’s PPt Presentation to Congress, 15 Oct 2012

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.

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3 Models, Con’tOption 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/USADescription 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• No consumer choice

CHALLENGES IN IMPLEMENTING PPPS IN EDUCATION

KEY CHALLENGES IN STRUCTURING EDUCATION PPPs

1. Initial structure and prioritization of objectives1. Government priorities (meets DepEd

mandates)2. Private participant priorities (price,

demand stability, financial viability, performance targets)

2. The bidding process 3. Capacity building 4. Regulatory and legal issues

SELECTION CRITERIA OF PPP PROJECTS

1. Project Readiness/Preparation

2. Responsive to the Sector’s Needs

3. High Implementability (bankable, no major issues)

Thank You

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 2011-08-11.

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

Typology of Forms of Contracting in Education

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.

Regulatory Differences Among Charter Schools, Contract Schools and CPS Performance Schools, Chicago Public Schools

Source: http://www.ren2010.cps.k12.il.us/types.shtml

Five Types of Contracts in Education

TWO WAYS OF GIVING PUBLIC FUNDS FOR PRIVATE OPERATION

Supply side financing Demand side financingExamples Aided schools, India

Concession schools, ColumbiaCharter Schools, USVoluntary Aided schools, UK

Voucher schools, ColombiaVoucher schools, USAVoucher schools, ChileVoucher schools, New Zealand

Funding of school

By public sector By public sector

Operation By private sector 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 IndiaPer student grant in UK, USA

Necessarily per student

Six Models – Three for Discussion

• Improved ESC• Vouchers – Universal• Vouchers – Targeted• Concessions• Charter Schools• Others

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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

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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

a. Addopt-a-school: corporation support public schools

b. 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

a. Adopt a school (Philippines), b. 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

a. Direct engagement of businessesb. 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

a. Limited Scalabilityb. High risk

Six Dimensions – Two for Discussion

• Quality• Access• Equity• Pricing and Financing• Business Arrangements• Policy Environment

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Comparing PPP Models for SHSDimensions Indicative Fungible

MechanismsIndicative 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

Comparing PPP Models for SHS … continuedDimensions Indicative Fungible

MechanismsIndicative 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

COMPARING PPP MODELS FOR SHSDimensions 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

Comparing PPP Models for SHS … continuedDimensions 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

DepED PRESENTATION TO CONGRESS(OCTOBER 2012)

THANK YOU!

EXTRA SLIDES

The Philippines has over 20 years experience in Private-

Public Partnerships.

Background

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

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.

Challenge for 2013 and Beyond:

Will there be a 20% increase in the enrollment of private schools?

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”

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”

HOW IS THIS PUBLIC-PRIVATEPARTNERSHIP 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.

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”

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”

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.

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?

THE AIM OF PPPS

(i) 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

(ii) to improve existing services provided by both sectors with an emphasis directed on system efficiency, effectiveness, quality, equity and accountability.

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.

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.

Benefits of Public-Private Partnerships