Wellington, New ZealandTETIARY EDUCATION SUMMIT28 APRIL 2009

ETHICAL LEADERSHIP AND GOOD GOVERNANCE BY EXAMPLE. DRIVING BEST PRACTICE THROUGH EDUCATION, COLLABORATION AND CONSENSUS. MAKING A SUSTAINABLE DIFFERENCE IN THE WORLD.

Public Private Partnerships – Changing The Way We Do Business

A successful PPP must start with a project of importance to the public and a commitment to the PPP delivery method.

Henry A Davis: Infrastructure Finance 2008

Buildings should inspire learning, nurture staff and students and be a source of pride and a practical resource for the community

Les Watson, European Journal of Education Vol 42 Nov 2007

Revitalisation of Vocational Education and Training

Queensland Skills Plan

Southbank will be • an Institute of Technology• a bridge between technical education and university• a modern, learner focused environment for local and international

students• a lead institute for a range of Associate Degrees, university

pathways and articulation arrangements

Queensland Skills Plan 2006: Qld Government, Department of Employment and Training

Revitalizing Southbank

Strategic Drivers• Skills Plan• Institute Strategic and Business Plan• IT Strategic Plan• International Plan• On-Line Strategic Plan• Quality Products

– University Articulation– Post Graduate Courses

• Asset Management

Infrastructure Analysis

In 2004• Buildings not fit for purpose• Poor utilization of space• IT incompatible• Poorly maintained facilities• Need for compliance upgrades• Inflexible spaces for changing

education needs• Poor use of energy• Inefficient use of ‘footprint’• Inefficient energy and utilities

Growth Analysis

Average Annual Growth Rates 1990-91 to 2000-01

Southbank’s top 6 targets are among Qld’s strongest growth industries

Output

Growth (%)

Employment

Growth (%)

Communication Services

Property and Business Services

Accommodation, Cafes and Restaurants

Health and Community Services

Cultural and Recreational Services

Personal and other services

7.2

8.1

9.9

6.7

7.8

10.4

3.4

6.5

5.5

3.8

5.8

4.1

Retail Trade

Wholesale Trade

Manufacturing

Construction

Government Administration and Defence

6.1

4.7

5.8

4.5

7.4

2.5

-0.8

2.5

2.4

1.9

SBIT Industry Delivery Average

Queensland State Average

8.35

6.1

4.85

2.8

Southbank Education Precinct – Business Planning Foundations Deloitte 2002

Functionality Analysis

• Generic Use • Simulation• Replication• Adaptation• Incubation

Functional Solutions

Adaptable Flexible Buildings• Buildings for the future in keeping with modern precinct• Greater public use of facilities• Flexible learning spaces

Responsive Teaching and Learning Spaces• Opportunity to reconstruct core delivery systems and services• Opportunity to introduce alternative teaching modes e.g. Mode 2• Opportunity to introduce a greater range of learning technologies

Cost Effective Operations• Efficiencies through one-campus operations• Greater efficiency of no-core services in the delivery of core

servicesAffordability

• Limited to Agency Business Case

Design Brief

• A modern world class precinct• Operates on one campus only• Opportunities to introduce alternative and creative teaching modes• Greater public and commercial use of facilities• Opportunity to reconstruct delivery systems and services• Greater potential for transition and articulation to higher education

programmes• Must maximise IT capability and use of facilities• Provide a safe and secure educational environment

Balancing Public/Private Needs in Infrastructure

A successful PPP must start with a project of importance

to the public and a commitment to the PPP delivery methodHenry A Davis: Infrastructure Finance 2008

What is a Public Private Partnership(PPP)?

• PPP is a collaboration between the public and the private sectors based on a contract

• Sensible division of roles and fair sharing of responsibilities, cost and risk between the public and private sectors

• Optimal – as opposed to maximum – assignment of risk to the private sector to maximise value for money

• Private sector to contribute not only capital but also technology, management and innovation

• Expected results: availability, quality and efficiency of service and efficiency of capital utilization

AffordabilityWho pays for PPP investments?

Ultimately there are only two funding sources for infrastructure investment :

• Consumers (via user charges)• Taxpayers (via subsidies)

Financiers can change the requisite time and payment profile

Eventually financier contributions have to be repaid

Financiers

ProvidersStateBudget

Infrastructure

UsersTax Payers

Growth

PPP is not free infrastructure!

Connecting East Asia: A new Framework for Infrastructure ADB-JBIC-WB, 2005

Why PPPs are Attractive to Government

• To attract private sector capital and fill the shortage of public funds for building new infrastructure, and maintaining new and existing facilities, in order to sustain growth

• To relieve pressure on the tax base and free up public resources for use in basic services (e.g. education and health care)

• To introduce private sector management and know-how• To improve quality and efficiency of service delivery• To maximise value for money on the part of the government

Connecting East Asia: A new Framework for Infrastructure ADB-JBIC-WB, 2005

Southbank Business Review

Institute DesignPhilosophy

Academic CorporateSupport

Functional Precinct

Non Core

FMContract

Functional Facilities

Core

EducationalFunctionality

Mode llTeaching Practice

DeliveryCorporate Operating Philosophy

Core Services

• Program delivery, content and teaching delivery• Administration of corporate services• Commercial learning opportunities• ICT services except the ICT backbone infrastructure• Library• Commercial activities• Timetabling, examination administration and tutor support

Non-Core Services

• Infrastructure and equipment– Buildings– ICT backbone– Energy systems– Plant

• Facilities management– Maintenance of the facilities– Maintenance of the plant and equipment

• Operations– Cleaning, pest control, grounds maintenance and security– Provision and maintenance of building systems– Other services e.g. cafeteria and out-of-hours use of

facilities

Operations and Maintenance Cycle

30 year operations contract• Replacement of all plant and equipment• Replacement of all Operator provided FF&E• Regular maintenance cycle for all buildings and grounds

Risks with Social Infrastructure PPPs

The governing principle of a project’s risk allocation dictates that risk should be allocated to the party best able to manage it

Qld State Govt, State Development: Public Private Partnerships Guidance Material August 2002

With appropriate risk transfer, public sector is not exposed to cost overruns…as risk is transferred to the sector best able to manage them

The right project – The right process KPMG 2008

Beware Bureaucratic Deviance

Skye Bridge Example

When the PPP procured toll bridge from the Isle of Skye opened in 1995, the islanders found themselves forced to pay the highest toll fees in Europe

By the end of 2004, crossing the Skye Bridge cost £5.70 for a one-way ticket which precipitated civil action

On 21 December 2004 the Scottish Executive bought the bridge back and abolished the tolls

www.corporatewatch.org

Beware of Doing Nothing

• The inflexible and inappropriate built environment remains inflexible and inappropriate

• Maintenance backlogs increase and become more costly over time• The perception of contracted and irrelevant business develops• The ability to remain competitive becomes limited• Morale suffers and confidence in public sector management

diminishes

Beware of Biased Optimism

• The view that private sector involvement is the only way to deliver the project

• The view that the innovation of a PPP will provide for more than similar traditional expenditure – and for free

• The view that acceptance of the PPP is acceptance of all change

Beware of Business Inertia

• Inaccurate projections - increased demand for facilities • Encouraging staff to use alternative teaching methods – inconsistent

use of facility• Managing changeover in delivery structures and service arrangements

– resistance to commercial entity• Preparing teams for the future – alignment of delivery with market

demand

Risk Profiling

Category Examples

Site risks Existing structure

Site conditions

Some environmental risks

Availability of site

Design, construction and commissioning risk

Design

Construction (excl force majeure/government intervention)

Financial Financing availability

Tax changes

Operating Inputs

Maintenance and refurbishment

KPMG 2008

Risk Profiling continued

Shared risks

Category Examples

Site risks Some environmental risks (contamination)

Market Inflation risk

Government may redress impacts

Legislative Changes in law

Force Majeure Floods, earthquakes, terrorism etc

KPMG 2008

Risks retained by the public sector

Category Examples

Site risks Some environmental risks

Native title

Sponsor Probity

Financial

Technical and operational

Financial Interest rates pre completion

Further finance requirements

Operating Changes in output specification outside agreed range

Asset Ownership •Residual value on transfer to government

KPMG 2008

Southbank Institute of Technology Risk Analysis

Risk Event Residual RatingFailure of SBI to properly manage the administration and calculation of the private party payments stream

Financial: High

Reputation: High

The output specification does not meet the requirement for the services to be provided

Financial: High

Reputation: Moderate

The standard of service delivered to SBI by the private party is not to the standard agreed in the contract

Financial : Moderate

Reputation : High

Social and demographic change (international and national) affects core educational) affects core educational services

Financial : High

Reputation: High

SBI total revenue from the project varies from initial expectations to the extent that SBI cannot meet its financial obligations

Financial : High

Reputation : Moderate

Legislation is introduced that affects demand for services provided by SBI (e.g. SBI no longer permitted to do electrical trades)

Financial : High

Reputation : High

Qld Treasury Corporation : SETP Risk Report June 2006

The key risks faced by Axiom during the operating phase are summarised as follows:

• Pricing• Operator

– KPI deduction – Operator default and replacement– Lifecycle

• Refinance Insurance – premature and unavailability• Malicious damage • Damage• Change in Law• Termination• Consequential Loss• Defects

Why Some PPPs Work and Some Don’t

The key is the integration of these different objectives into a well designed solution – not balancing these different objectives

with competing solutionsMichael Cooney, Policy Director: percapita.org.au October 2008

Attempts by previous government to create a training market may have not been fully successful because they neglected to design

an adequate market structureJulia Gillard: ACPET 2008 National Conference

….our track record in shaping and implementing new investments is questionable

• We design and implement solutions without any clearunderstanding of the business need (‘solutions looking for problems’)

• We don’t articulate the benefits that investments are expected to deliver…and we never track benefits

• We are prolific at undertaking feasibility studies anddeveloping business cases for things that can never happen

…..pointless process has replaced intelligent discussion

Dept of Treasury and Finance, Victoria 2008

Tangible Benefits for Southbank

• Reconstruction of delivery systems and services– Mode ll learning areas– Use of latest technologies

• Fully IT networked campus • Flexible learning spaces• Accredited standards for fitouts to operate commercially• A modern single campus operation • Managed risk• Value for Money – early access• Energy efficient ‘green’ facilities –

equivalent to five star rating • Areas for public use

– Ground floor studios– Auditoria– Meeting spaces– Retail

Lessons from the SETP

– Partners need to fully understand each other• early face-to-face engagement is highly desirable

– Be clear about expectations regarding levels of innovation• engage with the service provider during bid development to ensure

design innovation serves 30 year operations

– Engage the residual expertise of stakeholders• but Avoid the Trojan Horse

Lessons from the SETP continued

– Undertake honest and objective business reviews• Immature projection will undermine the integrity of a

project

– Risk analysis needs early activation • Don’t wait until it is too late

– Maintain clear leadership messages • Change is inevitable over the life of a PPP project

– Be clear about scope upfront • Avoid shifting the goal posts

Lessons for the Training Market

COAG has indicated the significant reform is required in three keyinterlinked areas:

• Market design - reforms in this area will need to focus on the supply and demand side of the market and include competition and contestability, regulation and quality assurance, and information

• Sector capacity – reforms in this area will need to focus on the capacity of the VET sector including training products, the VET workforce, and infrastructure

• Investment – reforms in this area will need to focus on developing an investment strategy directed to growing the pool of skilled Australians, and which results in a fair sharing of costs and benefits

VET Training Products for the 21st Century : COAG Consultation Paper Feb 2009

Towards a Reliable Market Framework

The longer-term policy• Is this really a market design approach?• What have we learnt from recent public policy experience?

The Supply-Side• Will the policy outcomes genuinely expand student choice?• Will investment in training capacity be adequate over time?• Will new infrastructure satisfy new expectations?

Sources

• Les Watson: European Journal of Education Vol 42 Nov 2007• Queensland Skills Plan 2006• Southbank Education Precinct – Business Planning Foundations: Deloitte 2002• Qld State Govt, State Development: Public Private Partnerships Guidance Material

August 2002• Connecting East Asia: A new Framework for Infrastructure ADB-JBIC-WB, 2005• Michael Cooney, Policy Director: percapita.org.au October 2008• Julia Gillard: ACPET 2008 National Conference• Dept of Treasury and Finance Victoria: Investment Management

http://www.dtf.vic.gov.au/CA25713E0002EF43/WebObj/Workshop1-VPS-0807/$File/Workshop1-VPS-0807.PPT

• COAG: VET Training Products for the 21st Century, Consultation Paper Feb 2009

63 Bent St Toowong 4066m: 0409 473 524e-mail: norm@normjagger.com.auwww.normjagger.com

NORM JAGGER

ETHICAL LEADERSHIP AND GOOD GOVERNANCE BY EXAMPLE. DRIVING BEST PRACTICE THROUGH EDUCATION, COLLABORATION AND CONSENSUS. MAKING A SUSTAINABLE DIFFERENCE IN THE WORLD.