PHOTO: Erica Stanford, Education Minister Photo: RNZ / Angus Dreaver
Warnings have been issued to the government that companies capable of constructing and managing schools perceive the endeavor as too risky and are therefore uninterested. Additionally, the feasibility of financing school constructions through public-private partnerships (PPPs) has been cast into doubt, with indications that such arrangements may not shield the government from the risks of cost overruns to the extent desired.
However, Ministry of Education officials have suggested to Education Minister Erica Stanford that the PPP model could potentially be revised to surmount these obstacles. Despite the previous construction of eleven schools under PPP during the National-led government’s tenure, the current Labour-led government halted further PPP school projects upon assuming power, opting instead to focus on expanding existing schools to accommodate enrollment growth.
A brief advisory document, obtained through an Official Information Act request, outlined concerns from officials regarding the lack of interest from construction suppliers in the PPP model. Identified barriers included perceived high risks for contractors, stringent performance standards in New Zealand compared to other jurisdictions, substantial tendering costs, and competing demands on construction companies’ resources.
Nevertheless, the document highlighted several potential benefits of PPPs, such as the ability to spread costs over a longer period, alleviate property management burdens for school boards and principals, and share risks among partners. Despite these advantages, officials cautioned Minister Stanford that replicating the level of risk transfer seen in previous PPPs might prove challenging.
Rolleston College in Christchurch was built through a public-private partnership. Photo: Rolleston College
Moreover, the complexity of PPPs necessitates significant involvement from specialized external advisors. Officials acknowledged that PPP-operated schools generally incur higher operational costs compared to traditional state schools.
In response to inquiries, there was no evidence of discussions regarding potential adjustments to the PPP model. An ongoing ministerial inquiry is examining school property management practices nationwide, while the Ministry of Education is currently evaluating 352 school projects for “value-for-money.”
The inquiry is tasked with exploring various delivery options, including alternative funding mechanisms, and is expected to offer recommendations and options for managing and delivering school property effectively, including financing avenues.
Previous independent reviews criticized the design complexity of the initial PPP-built schools, highlighting operational challenges such as excessive reliance on electrical systems. While Treasury has provided advice on PPPs, there is no indication of specific advice concerning schools.