PublicPrivate Partnerships in Education Asian Development Bank Manila, Philippines 9 November 2006

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Public-Private Partnerships in EducationAsian
Development BankManila, Philippines9 November
2006

• Norman LaRocque
• norman.larocque_at_xtra.co.nz

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I. Public-Private Partnerships Defined

• No fixed definition of PPPs
• Definitions differ in terms of scope and
  formality of arrangements.
• Various definitions
• risk sharing relationship based upon an agreed
  aspiration between the public and private sectors
  to bring about a desired public policy
  outcome.
• Commission on UK PPPs
• cooperative venture between the public and
  private sectors, built on the expertise of each
  partner, that best meets clearly defined public
  needs through the appropriate allocation of
  resources, risks and rewards.
• Canadian Council for PPPs

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II. Public-Private Partnerships Common Elements

• Formal arrangement with contractual basis
• Involve public and private sectors
• Outcome focus
• Sharing of risks/rewards between public and
  private sectors
• Recognise complementary role of public and
  private sectors.

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III. 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 recognise that governments can meet their
  policy objectives using different service
  delivery models not just traditional public
  finance/public delivery model.

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IV. Financing and Provision
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V. Benefits of Public-Private Partnerships

• Increase efficiency improved performance
  incentives and increased competitive pressure
• Improved quality of service delivery
• Secure specialised skills that may not be
  available in government agencies
• Overcome public service operating restrictions
  obsolete salary scales, out of date civil service
  work rules, etc
• Permit quicker response to changing demands and
  facilitate adoption of service delivery
  innovations.

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V. 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.

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VI. 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

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VII. Examples of Education PPPs

• Government contracting with private schools
• Private management of public schools
• Infrastructure PPPs
• Adopt-a-school initiatives
• Vouchers/subsidies
• Public/private sector affiliation arrangements
• Private sector regulation

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VII. Examples of PPPs
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VII. Examples of PPPs (Contd)
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a. Government Sponsorship of Students at Private
Institutions (Cote dIvoire)

• Government sponsors students to attend private
  schools given lack of places at public secondary
  schools. Key elements of the scheme are
• private schools are paid on a per-student basis.
  Payment rises with student's education level
  (US200)
• students in lower/upper secondary, as well as
  technical and professional training are eligible.
  Applies to both religious and secular
  chartered schools
• placement of students is linked to school
  performance
• 116,210 students in 1993 to 223,244 in 2001 92
  growth
• Public financing of private schools 26 million
  in 1993 to 39 million in 2001
• In 1995/96, 40 of students in private
  institutions were state sponsored. Private
  primary schools receive subsidies.

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b. Educational Service Contracting (Philippines)

• Government contracts with private schools to
  enrol students in areas where there is a shortage
  of places in public high schools
• Administered by the Fund for Assistance to
  Private Education, a private not-for-profit
  organisation
• Nearly 400,000 students in 1,500 schools and
  rising
• Certification program for schools participating
  in ESC
• Other contracting schemes exist at tertiary,
  school and ECE level.

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c. Fe y Alegria Schools in South America

• Fé y Alegría (FyA) established in Venezuela in
  1955 by Jesuits
• Operate formal pre-school, primary, secondary and
  technical education programs in poorest
  communities in Latin America
• Government pays teachers and principals. Private
  sector pays the rest
• Schools in 15 countries, 1.2 million people in
  FyA network (500,000 in formal education) and
  31,000 staff
• Growing enrolments.

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d. Private Management of Public Schools

• Private management of public schools relatively
  recent phenomenon in education
• Involves governments or public authorities
  contracting directly with private (for-profit or
  not-for-profit) providers to manage a public
  school
• Schools remain free to students no fees
• Schools responsible for all aspects of school
  operation
• Used in most disadvantaged areas.

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d. Concession Schools, Bogota (Colombia)

• Private schools contracted to manage poorly
  performing public schools
• 25 schools serving over 26,000 students
  disadvantaged students
• Autonomous
• 15 year contract
• Designed to overcome problems faced by public
  schools inability of schools to hire own staff,
  lack of labour flexibility, bureaucracy
• Schools paid US500 per student per year below
  public school unit cost

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e. School Contracting Initiatives (Pakistan)

• Quality Education for All (Punjab)
• 2,400 schools managed by National Rural Support
  Network, governed by management contract
• Began as pilot in of 48 schools in 2002
• Railways Schools
• Beaconhouse Schools managed 19 Railways schools
  from 2003-2005
• Contract was for 33 years but it ended early
  poor contract design
• City District Government of Lahore (CDGL)/CARE
• CARE, a local NGO, manages 172 public schools in
  Lahore on behalf of the CDGL (97,000 students)
• Developments in LearningL
• DIL, an NGO, contracts with providers to operate
  150 public schools
• DIL provides funding and local NGOs manage
  schools on their behalf.

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f. Education Management Organisations (EMOs), USA

• 535 schools being managed by 59 EMOs and nearly
  240,000 students in 24 states/DC in 2004/05
• Edison Schools, National Heritage Academies and
  White Management are largest providers
• Two forms of contracting with schools
• Direct. EMOs are contracted directly by local
  school board to manage a public school
• Indirect. EMOs manage charter schools either as
  the holder of the school charter or under
  contract to the organization that holds the
  school charter
• Latter form becoming more common in 2004/05,
  86 were privately managed Charter schools.

• History
• Began early 1990s - EAI
• Initial setbacks (eg. Baltimore)
• Setbacks in 2000/01 Edison Schools financial
  situation
• Recovery
• Growth in recent years number of schools up by
  factor of four between 1998/99 and 2004/05
• Chicago Public Schools (Renais-sance 2010),
  Denver Public Schools, Philadelphia.

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EMO Managed Schools/Enrollments, 1998/99-2004/05
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g. Vouchers/Subsidies

• Many countries are making use of
  vouchers/subsidies in education
• More than 30 countries using demand-side
  financing mechanisms to finance education - vary
  from small/targeted to full/national programmes
  
• Iskolar programmes in the Philippines
• Swedish school choice programme
• Denmark, Ireland, Netherlands, Australia, New
  Zealand, Ontario, Sweden public funding of
  private schools
• Chile national programme
• USA Florida, Milwaukee, Cleveland voucher
  schemes for poor kids
• Pakistan Punjab Education Foundation
• Senegal and Cameroon - subsidies for private
  schools.

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h. Netherlands

• Nationwide school choice scheme - free choice of
  public or independent school.
• No zoning - students can attend any school.
• Liberal supply side. Non profits and parents can
  set up schools if minimum requirements are met.
• Diverse supply of schools.
• 70 of primary and secondary students attend
  independent schools receiving government funds.
• Topping up of fees not allowed.
• Schools with students from lower income areas
  receive more government money.

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i. Denmark

• Nationwide programme of free choice of
  independent school. Parents who opt out of
  public system get a large proportion of the cost
  (80-85) covered by the government.
• No free choice at public primary and secondary
  grammar schools - zoning prevails.
• Free choice for students attending upper
  secondary vocational schools.
• Liberal supply side - parents and non-profits can
  set up schools if they meet requirements.
• Poorer families can apply for a place at an
  independent school and have their fees paid.

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j. Infrastructure PPPs

• Increasingly used form of procurement for
  education infrastructure
• Used to construct schools, classroom blocks,
  hostels, laboratories, etc at both school and
  higher education levels
• Private sector builds infrastructure and leases
  it to the government for a set period, then turns
  asset over to the government at the end of that
  period
• Key characteristics
• private sector partners finance, design, build
  and operate education infrastructure
• government remains responsible for the delivery
  of core services such as teaching
• governed by long-term contracts usually 25-30
  years
• contracts specify services the private sector
  must deliver and standards to be met
• Contractor employs non-teaching staff
• payments are contingent upon the private operator
  delivering services to an agreed performance
  standard.

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j. Infrastructure PPPs (Contd)

• Private Finance Initiative in UK is largest PPP
  program 121 education deals signed, with value
  of 2.9 billion
• Australia also making increasing use of PPPs
• New Schools Initiative in New South Wales
• Southbank Education and Training Precinct,
  Victoria (AUD550 million)
• University of Queensland
• University of Southern Queensland
• Swinburne University of Technology, Victoria
  (AUD60 million)
• Proyecto Prestacion de Servicios in Mexico -
  similar to UK PFI programme 8 universities
  constructed
• Botswana, Egypt, Colombia reportedly considering
  PPPs.

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k. Public/Private Affiliation/Partnership
Arrangements

• Several countries allow/require private tertiary
  institutions to affiliate to existing tertiary
  institutions public or private
• Combines strengths of public and non-state
  sectors
• Public Reputation, faculty, degree-granting
  status, QA
• Private Flexible delivery, private sector
  linkages, innovation, accountability, scaling up
• Can also involve public sector institutions
  outsourcing education delivery to private
  providers
• Different motivations for such arrangement
  private institution may be seeking reputation or
  ability to confer degrees, while public
  institution sees it as a means of generating
  revenue (affiliation fees)
• Examples - University of Moratuwa (Sri Lanka),
  Sichuan Normal University Film and Television Art
  Promotion College (China), New Zealand, Ghana,
  Technikons (South Africa).

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l. Private Sector Regulation

• Private sector can play significant role in
  regulation - it does not need to be carried out
  by the government
• Much regulation in the USA is private, produced
  and enforced by independent parties and trade
  associations eg. product safety, ISO 9000,
  Internet ratings, etc (Yilmaz 1998)
• Many examples of private sector playing a role in
  regulating a number of aspects of private
  education
• quality assurance (e.g., Oman, Ghana, Seventh Day
  Adventists)
• school establishment (eg. Cameroon)
• funding (eg. Philippines)
• accreditation (eg. Philippines, USA).

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VIII. Evidence on PPPs

• Some evidence on the impact of PPPs, but more and
  better evaluations required, especially outside
  impact of vouchers/Charter schools and outside of
  USA
• Best evaluations involve random assignment and
  use a true control group or natural experiment.
  Other techniques are available such as
  propensity score matching
• Evidence on PACES voucher in Colombia (Angrist
  and others 2002, 2006)
• randomised trial
• voucher students more likely to attend a private
  school and more likely to complete 8th grade
• scores on standardised tests increased by
  two-tenths of a standard deviation
• program cost less than the unit cost in the
  public sector
• longer-term positive effects lottery winners
  more likely to take college entrance exam
• increase in (proxy) high school graduation rates
  of 5-7 percentage points, relative to a base rate
  of 25-30 percent
• Evidence on Concession Schools (Barrera 2005)
• propensity score and matching
• strong evidence of a direct effect on dropout
  rates and some evidence that they have an impact
  on dropout rates on nearby public schools
• a positive impact on students test scores
  relative to those in public schools
• dropout rates were 1.7 points lower, while
  mathematics and language scores were higher than
  students in similar public schools

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VIII. Evidence on PPPs (Contd)

• Evidence on Fe y Alegría (Swope and Latorre 2000,
  Allcott and Ortega, 2006)
• unit costs are higher in FyA schools than in
  public schools
• FyA schools have lower repetition and dropout
  rates progression and retention rates in FyA
  schools were 44 percent and 11 percent higher
  than in public schools
• FyA students performed somewhat better in verbal
  and math scores, after correcting for observables
• Much debate over impact of vouchers in Chile and
  USA results inconclusive
• Many studies on impact of charter schools, though
  few randomised trials mixed effects. Hoxby and
  Rockoff (2005) use randomised trial and find
  positive impact on education outcomes
• Infrastructure PPPs lower costs and more timely
  delivery
• UK National Audit Office and Treasury studies
  show PFIs performed better than under traditional
  procurement
• Australia infrastructure delivered 2 years
  earlier and 7 cheaper than under traditional
  procurement methods.

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Gross Repetition Rates Fe y Alegria vs Other
Public Schools
Source Swope and Latorre (2000)
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Gross Dropout Rates Fe y Alegria vs Other
Public Schools
Source Swope and Latorre (2000)
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Impact of Charter Schools on Chicago Public
School Students, Mathematics and Reading
Source Hoxby and Rockoff (2005)
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Certainty of Delivery and Price PFI vs Non-PFI
Projects
Source HM Treasury (2003)
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IX. Conclusion

• Many examples of PPPs across education sector in
  developed and developing countries can be
  tailored to country circumstances
• PPPs not a panacea, but can play a role in
  improving education outcomes
• Not just use of private sector that can bring
  gains different regulatory environment can have
  an impact as well
• Importance of policy frameworks and thinking
  broadly about the role of government and
  innovative policies
• Limited number of evaluations so far more
  studies required.

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It doesnt matter if a cat is black or white, as
long as it catches mice. - Deng
Xiaoping
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norman.larocque_at_xtra.co.nz