By Dr. Vincent K. Fabella Background and rationale Defining Public-Private Partnership Opportunities in PPPs in Education Education PPP Models for SHS Challenges of structuring education PPPs Background 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. 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 Defining Public-Private Partnership • 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. GOVERNMENT: PRIVATE SECTOR: ― Enables public sector ―Maximizes the use of its skills, to focus on delivering resources and capacities to other critical deliver services in a more functions and efficient manner; services; ―promotes certainty ― generates new business. and predictability in spending. Win-win arrangement 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 Provision Financing Private schools User fees Private universities Student loans Home schooling Tutoring 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 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) Proper Grantee Selection Decongest Public Schools Additional Enrollment for Private Schools Increased Revenues for Private Schools Source: Usec Varela’s PPt Presentation: “Enriching PPP in Education” The Logic Public NEED classrooms. Teachers and expertise for Grades 11 and 12 Private Have classrooms, teachers and expertise for Grades 11 and 12 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 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. Tiered Voucher System • 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. 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 Source: DepED’s PPt Presentation to Congress, 15 Oct 2012 3 Models, Con’t Option 1: Education Service Contract (ESC) scaled up and improved Option 2: Vouchers Country Description Philippines 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 Netherlands (no top-up) Chile (top-up) 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) Market effect "Managed Market – school by school" "Managed market – funding follow pupil” Case study ESC-FAPE “Bijzondere “or special schools (N) Sectarian PPP schools (Chile) 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 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 Option 3: Concessions • Infrastructure PFI- Service • Management Contract UK/USA 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. "Private build-operate-concession, government owns" • UK: Building Schools for the Future Private finance initiative • USA: Seattle school district management contract to EMOS • PFI off balance sheet pre-finance & improves overall quality of infrastructure • Management contract competitive & shorter term to raise quality standards • Separates management from asset generation (2 different contracting streams) • No Primary quality levers 27 • No consumer choice CHALLENGES IN IMPLEMENTING PPPS IN EDUCATION KEY CHALLENGES IN STRUCTURING EDUCATION PPPs 1. Initial structure and prioritization of objectives 1. 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 • 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 noncore functions • Outsourcing of delivery by public tertiary institutions Infrastructure PPPs Demand Side Finance Initiatives Strategic Partnerships • 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 involvement 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 financing Examples Aided schools, India Concession schools, Columbia Charter Schools, US Voluntary Aided schools, UK Voucher schools, Colombia Voucher schools, USA Voucher schools, Chile Voucher 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 India Per student grant in UK, USA Necessarily per student Six Models – Three for Discussion • Improved ESC • Vouchers – Universal • Vouchers – Targeted • Concessions • Charter Schools • Others 41 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 Government directly subsidises private Vouchers made available to students private schools to pay for agreed volumes schools according to enrolment numbers. from low income families attending of places for low income students in Private schools allowed selective student public schools but who have been areas where there is a shortage of public admissions. All education publicly accepted into private schools. school places financed (Netherlands); Universal Renewable contingent upon students vouchers, switching between public and academic performance private schools (Chile) 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) Pros • • Cons • • • DepEd retains control over supplier • base & student volumes • Existing governance structure & political consensus in place • DepEd has to contract with every single supplier Implies existing school base, not new place creation No consumer choice • • Allows free market response to demand Consumer choice drives quality competitiveness Increases access and new creation PACES – Plan de Ampliacion de la Coberatura de la Educacion Secundaria • Increase access to secondary schooling for children from low income families 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 42 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 Government provides funding to schools, a. Addopt-a-school: corporation consortium to build, finance and attended out of choice, without direct support public schools maintain school buildings over long time control b. Dept. for Work and Pensions- back to frame. Separate school management work schemes by NGO providers and educational delivery contracts are (social enterprise) tendered, which are competitively bid on over much shorter time frames. Market effect "Private build-operate-concession, government owns" Case study • • Pros • • Cons • • • "Funding follows the pupil" a. School-by-school; b. results based financing UK: Building Schools for the Future - • • Private finance initiative USA: Seattle school district management contract to EMOS Edison - For-profit KIPP - Non-profit 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- a. Direct engagement of businesses for-profit supplier base b. Risk transfer to provider Increase consumer choice Decrease number of failing public schools Separates management from asset generation (2 different contracting streams) No Primary quality levers No consumer choice • • a. Adopt a school (Philippines), b. DWP (UK) Slow build-up, marginal system-wide a. Limited Scalability b. High risk effects (USA: 15+ years, charters only about 6% of system) Failing charters difficult to close 43 Six Dimensions – Two for Discussion • • • • • • Quality Access Equity Pricing and Financing Business Arrangements Policy Environment 44 Comparing PPP Models for SHS Dimensions Indicative Fungible Mechanisms Indicative Key Performance Indicators Quality • Performance based • Student Learning incentives Outcomes • Performance based contract renewal • Accreditation of private providers Access • Region based coverage • Transition rate from • Bundling highly grades 10 to 11 desirable and less desirable areas • Targeting • Graduation rates for low • Formula-based funding income students Equity Comparing PPP Models for SHS … continued Dimensions Indicative Fungible Mechanisms Pricing and financing • • • • Business Arrangements • • • • Indicative Key Performance Indicators Tiered pricing • Sustainable, transparent, and Formula based pricing predictable public expenditure Flat fee plus inflation factor on non DepEd providers Private finance with including whole lifecycle costs government subsidy • Pre-finance investment (off • Lifecycle price per student at or balance sheet) below agreed price point • Renewable management contract with performance outcomes 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 SHS Dimensions 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 … continued Dimensions 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 Time-bound contracts Decentralized Centralized with regulator One model plus limited pilots • PPP administration and management within DedEd’s current institutional capacity • • Business Arrangements • • • • • Fair playing field for longterm investment by private providers DepED PRESENTATION TO CONGRESS (OCTOBER 2012) THANK YOU! EXTRA SLIDES 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” • Decongest public schools • Minimize cost of expanding education services • Improve quality of education for beneficiaries • Improve quality of education for nonbeneficiaries by improving conditions in the public schools. Source: Usec Varela’s PPt Presentation: “Enriching PPP in Education” HOW IS THIS PUBLIC-PRIVATE PARTNERSHIP 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. • 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 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.