Catching the drips

November 2011


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Public-private partnerships (PPPs) might pave the way for building schools of the future but will they help the hangover from the era of leaky buildings? JUDE BARBACK reports.


Everyone knows New Zealand’s leaky little secret. The students and teachers at Raumati Beach School know it all too well – water running down walls, water stains and smelly carpet are testament to their leaky surrounds. In addition to countless houses and other buildings, around 150 New Zealand schools, like Raumati Beach School, have been identified as containing leaky buildings. Perhaps more startling than that number is the estimated $1.5 billion repair bill.

The Dominion Post reported in January this year that the government was at a loss as to how it was going to afford the repairs. “There just isn’t the money to go out and borrow $1.5 billion and start repairing schools,” Education Minister Anne Tolley said, adding that she planned to consult Finance Minister Bill English on acquiring more funds to repair the leaky schools. Forget repair budgets – money was still needed at this stage to ascertain the extent of the crisis, with the government set to spend an estimated $22 million on surveys of all schools built or renovated since 1994. The mind starts to boggle with the financial magnitude of the problem.

And this was all before calamity in Christchurch struck.

Bearing in mind the enormity of the leaky school crisis, perhaps the public-private partnership (PPP) initiative for schools, the NZ Schools PPP project, should come as no surprise. After all, the present government is left to pick up the pieces of dodgy construction practices from the ‘90s and it stands to reason that it doesn’t want history to repeat itself.

For schools, a PPP means the private sector would design, build, finance, and maintain the school property over a long-term contract (25 years). The education provision of the school would remain the responsibility of the board of trustees. The government would retain ownership of the land throughout and ownership of the property would revert to the government at the end of the contract period.

In the context of leaky schools, the government sees the PPP approach to building schools as prudent. It means the Crown would be no longer exposed to design and construction risks such as leaky buildings. These would become the responsibility of the private partner who would have to fix them promptly or face financial penalties.

Ultimately, this should free boards of trustees and school leadership from worrying about school property maintenance, allowing them to focus on the task at hand: the learning outcomes of their students.

New Zealand Council for Infrastructure Development (NZCID) chief executive Stephen Selwood agrees PPPs for schools will prove to be beneficial for all parties. His explanation of the PPP model for schools goes some way to clarify why new schools shouldn’t suffer the same plight as their leaky forebears. “At the end of the concession period, in this case 25 years, the asset is handed back to the government in a pre-agreed condition. It is up to the private sector to build an asset that will have low maintenance costs and stand the test of time. The government may then choose to maintain the asset from that time on, redevelop it, retender the maintenance, or extend the concession.”

Selwood is pleased the government is moving to more innovative forms of procurement. “Should the PPP bids not be competitive with traditional methods of procurement, the government will have the option of not proceeding with a PPP and develop the new schools as normal. The challenge is now on for the private sector to demonstrate its capability.”

Not everyone shares Selwood’s enthusiasm for the PPP initiative. Former PPTA president Kate Gainsford believes the plans to be short-sighted and dangerous as well as costly to the taxpayer. Gainsford and other critics are wary of the experiences of other countries with PPPs. And rightly so. The United Kingdom’s private finance initiative (PFI) schemes – a variation of PPPs – are said to be bringing National Health Service (NHS) trusts to the “brink of collapse”, according to a recent report in British newspaper, The Guardian. The UK’s hospitals are reportedly struggling to cope with the growing burden of the PFI contracts, a policy under which private capital is used to build hospitals, and the NHS is consequently left with an annual fee. The controversial PFI scheme also extends to British schools.

Having said that, PPPs, or their equivalent, have worked effectively in many overseas examples too. It all remains to be seen how successful the model will be in New Zealand. The first NZ Schools PPP was announced in April for a two-school project in Hobsonville, Auckland. Will these two schools be leaky? Not if the government can help it.

One could write a book on the many and varied arguments for and against PPPs,  but regardless of whether they put an end to schools and governments worrying about the dubious construction of school buildings, at the end of the day we are still left with a $1.5 billion bill that won’t go away. PPPs won’t eliminate the price tag hanging over the existing leaky school building nightmare, though they may go some way to prevent it happening again.