Companies ‘not interested’ in public-private partnerships for schools, Government warned

By Phil Pennington of RNZ

Companies that could build and operate schools think it is too risky and are not interested, the Government has been warned.

It has also been told financing school builds with public-private partnerships (PPPs) is unlikely to allow the Crown to dodge the risk of cost blowouts as much as it would like.

However, the advice to Education Minister Erica Stanford from Ministry of Education officials goes on to conclude that the PPP model could be rejigged to overcome these barriers.

Eleven schools were built using PPP under the previous National-led Government. The funding model sees a contractor or alliance of companies designing, building, financing and maintaining a school property over a period of years - typically 25.

The Labour-led Government put the kibosh on PPP schools when it came into power, but set up an expansion programme for existing schools in 2021-22, seeking $6.5 million for five years to cater for roll growth.

The advice - contained in a single page - was all that was returned from an Official Information Act request to Stanford about any advice she had received about alternative funding options for schools.

The additions to Rolleston College were due to start later this year but have been delayed until 2026, the school says. Photo / Rolleston College

Officials said market feedback “signals that construction suppliers are not interested in the PPP model”.

They listed four barriers: too much risk for the contractors, an “onerous performance regime in NZ, eg compared to USA”, the high costs associated with tendering, and companies being too busy with other construction work

It also listed three benefits of PPPs: the costs could be spread over a longer timeframe, the “property burden” on a school board and principal could be reduced, and the model would allow the Government to “share risks of partners”.

However, the officials then warned Stanford they were “unlikely to achieve the level of risk transfer” experienced under previous public-private partnerships.

It also noted PPPs were complex commercial arrangements that “require significant involvement from external specialist advisers”.

The schools also generally cost more to operate than a regular state school, the advice said.

The officials concluded that those challenges could be “mitigated or managed through adjustments” to the PPP model.

There was no record of any discussions about what this might look like. RNZ has asked if any discussion was had or if the minister has received any advice on mitigating the “challenges” to PPPs.

RNZ also asked, through the Official Information Act, for a list of any meetings the minister has had on alternative school financing with any non-government entity. No meetings were mentioned.

An independent ministerial inquiry, due to report back by June, is looking at the management of school property projects throughout the motu.

Separately, the ministry last Friday released a list of 352 school projects it was assessing. Stanford described this as “value-for-money” assessments of individual projects, which were an operational matter for the ministry.

The ministerial inquiry must “consider all possible delivery options, including options around alternative funding mechanisms”, she said.

“I expect [it] to consider and make recommendations and offer a range of possible options for the management and delivery of school property, including financing.”

In 2016, independent reviewers said the designs of the first two schools built as public-private partnerships - Hobsonville Point Primary School and Hobsonville Point Secondary School - were too complicated and displayed a lack of understanding of how schools worked.

The schools were so reliant on electrical systems they had to close if the power was off for more than a couple of hours, though the school principals said the buildings were good to work in.

Currently, Treasury has given three lots of advice about PPPs to the Government, but not, it seems, about schools, according to the results of a second Official Information Act request.

So far RNZ only knows the titles of these Treasury papers. One is titled Environmental Science and Research - Kenepuru property, while two others in December were about infrastructure to do with contract disputes resolution, and a meeting with Crown infrastructure partners.