Stromness2

Projects and News

IMG_0138

Scoping Education PPPs – a Four Step Approach

Scoping Education PPPs is tough. These four steps will help you do it right.

As I have written previously here, PPPs have the potential to break the cycle of invest and neglect in education infrastructure that erodes efforts to tackle inequalities in coverage and quality of education in developing countries. Experience in Canada, Australia, Latin America and in my Scottish homeland show us that it can be done.

No alt text provided for this image

In the course of Caledonian Economics’ recent education PPP assignments in West Asia, Central Asia, Southeast Europe and Latin America, it has become apparent to us that the education sector needs a different approach to PPP project identification and selection compared to the classic infrastructure sectors (such as transport, energy, municipal services).

The textbook approach, as described in the APMG PPP Certification Guide is to use a Multi Criteria Analysis structure to pick the best PPP candidates. It asks: is the project of a suitable size, is it legal, is there a market, and so on? Each candidate project is given a score based on a basket of criteria, and the least suitable ones are weeded out. Then, a pre-Feasibility Study or Outline Business Case is produced to confirm viability and affordability of a very limited shortlist.

This approach works fine in the classic infrastructure sectors because the list of ideas to be sifted is generally self-evident and limited. For example, a highway is needed between two major towns, or a region’s power grid is failing, or the capital city’s water treatment system can’t cope with its growing population.

No alt text provided for this image

Social infrastructure – especially education buildings – is quite different. The challenges are multi-faceted and diffuse, especially in developing countries. A city of 1 million people will have several hundred schools, colleges and universities of many different designs and ages, some will be in terrible condition, some will be operating with two or even three shifts of pupils, while others may have spare capacity. Although the problems are clear for all to see, the best configuration of buildings and services to include in a PPP are seldom immediately obvious.

Identifying the best candidates for PPP requires a systematic approach, the main steps of which are described below.

Step 1 – get reliable data

Decision making in a complex and dynamic environment requires reliable data. If we are to avoid spending money in schools that are too big, or too small, or in the wrong places we need a reliable database that contains the following information on each building:

Crumbling school in West Asia
  1. location
  2. size (gross floor area and theoretic number of pupils)
  3. condition of the building (a simple A-D rating system is fine – is the building weathertight, in good decorative order, with functioning heating and safe drinking water)
  4. suitability for education (A-D rating for factors such as classroom size, facilities, telecoms)
  5. population (age cohort) forecasts for the area covered by the school
  6. number of teachers, vacant positions. This data allows the best use to be made of the space that already exists – the first step in managing the education portfolio efficiently.

Step 2 – Tackle the worst first

 Crumbling college building, still being used in 2019

This means prioritising the worst buildings or the biggest gaps between forecast supply and demand, or where there is greatest economic or social need. This does not necessarily imply using PPP where need is greatest (PPP may be problematic in areas with high risk of natural disasters, for example), but it will guide the overall investment strategy. In Scotland our long term strategy is to have all schools at least ‘B’ in terms of Suitability and Condition. Our first phase of PPPs tackled the buildings rated as ‘D’, especially those in areas of economic deprivation.

Step 3 – Know what works best for PPP

Some developments are more suitable than others for PPP. Large high schools, greenfield projects, and uncomplicated sites make more attractive PPPs than small buildings, brownfield sites and renovations. Regions with good transport links and established construction and building maintenance businesses are also likely to be more attractive.

I like to visualise this by placing buildings on a graph, with ‘Need’ on the y-axis and ‘Suitability for PPP’ on the x-axis.

Project Selection Matrix

Schools that are placed in Zone A are low priority. Schools in Zone B are not suitable for PPP and the most urgent ones should be addressed using other sources of finance. The most suitable candidates for including in a PPP will lie in Zone C.

Step 4 – Assemble viable bundles

The minimum ‘viable’ size (usually expressed as capital cost) of a PPP is a subject of discussion. The absolute value will be affected by local economic conditions, maturity of the market and availability of finance, but in my experience a reasonable rule of thumb would be at least 5,000 classroom places.

Therefore the final stage in the project selection process should be to identify a group (or groups) of schools within Zone C that share common features. This could mean schools of a similar size (so that standard designs can be used), or within a region (efficiency of logistics). Confidence in the local construction and building maintenance sector should also be a consideration and will reduce the risk of procurement failure.

An example of a PPP pipeline emerging from this kind of analysis in a developing country might be to launch pilot projects in a country’s two largest cities of between 5,000 and 10,000 pupils, perhaps one for public schools (grades 1-11) and one for VET colleges. A second phase of PPPs might involve a project in a smaller city for kindergartens, and one to create public schools in a vulnerable rural region. Subsequent phases would learn from the pilot models, improving and expanding their use.

Conclusion

In conclusion, the diffuse nature of the education sector requires some adaptation to the standard approach to PPP project identification and selection.

The challenge when selecting projects for education PPPs is to balance the competing considerations of social need with deliverability.

A systematic approach which identifies the most suitable candidate schools, then creates PPP projects bundles based on common features will maximise prospects of a positive outcome.

Elgin High School, a PPP school in Scotland

Martin Finnigan

Caledonian Economics,

Edinburgh, Scotland

martin@calecon.com

Copyright Caledonian Economics 2019 ©

Also published on Linkedin

https://www.linkedin.com/pulse/scoping-education-ppps-tough-four-steps-help-you-do-right-finnigan

OHS Crest

Lessons from a New School

Yesterday I had the pleasure of attending the opening ceremony of Oban High School, a PPP school on the west coast of Scotland.  The building is a superb example of a modern learning environment, but the stars of the day were the pupils whose excitement and enthusiasm was a joy.

My team at Caledonian Economics were financial transaction advisers on the project, which reached financial close in 2016. The new building opened for pupils in 2018, with demolition of the old school buildings and sports pitches completed this year.

Oban High School Pipe Band - World Champions

Oban High School Pipe Band – World Champions

Reflecting on this in the light of my recent projects in #Azerbaijan, #Uzbekistan and #Kosovo, I wondered what lessons we can apply, as we tackle the challenges of crumbling buildings and dynamic populations in these former Soviet countries.

Lesson 1) – school estate regeneration is a long term business.  My involvement with redevelopment of schools in the region goes back to the feasibility study we wrote in 2000.  This led to a series of developments using both direct capital investment and PPP modalities.  The approach I recommend in developing countries is to:

  1. start by making the most efficient use of the classroom space that already exists;
  2. next, tackle areas of greatest need – buildings in bad condition, or mismatch between forecast population and classroom spaces;
  3. then, choose the procurement method that is best suited to the task at hand. Our large new high schools are #DBFM -type #PPPs, small primary schools are financed using government capital, and refurbishments use budgeted revenues.

Lesson 2) – listen to the pupils.  The range of facilities in the new school are striking: gymnasium, dance and music studios, workshops for vocational skills, and all weather sport pitches.  Yet, when I asked pupils what they would recommend for as priorities to maximise the impact on pupils of new school buildings in developing countries, they told me about the simple things, such as:

  1. bright, airy, uncluttered classrooms and informal ‘break-out’ spaces;
  2. avoid projectors and screens – large bright backlit monitors are much easier to read;
  3. plenty of whiteboard space, to capture important points;
  4. good school meals.

Lesson 3) – create networks of institutions.  Oban High School works closely with the small (30 pupils) High School on the remote island of Tiree.  Video links and screen sharing, backed up with in-person visits, tackle the curriculum constraints and provide developmental experiences for staff and pupils.

The Oban-Tiree link generally involves connecting classes, as compared to the one-to-one approach being followed by e-sgoil in the Western Isles.  These techniques are relevant for remote, rural and mobile communities in developing countries.  Reliability, I have been told, is more important than bandwidth: good audio matters more than high resolution video.

The network also includes the local further education (#VET) college who deliver training on construction, marine and mechanic skills.

Lesson 4) – In Oban I saw how extra-curricular after-school arts, sport and music activities build social and team-working skills, and strengthen the core curriculum.

Many schools in developing countries operate with two or three shifts of pupils – sometimes a response to population growth, but sometimes also a consequence of demand for popular schools while nearby schools have spare capacity.  Multiple shifts make extra curricular activities virtually impossible, depriving pupils of opportunities to increase the quality and value of their school days.  This is a primary determinant of ‘need’ described in Lesson 1).

Finally I would like to thank the Head Teacher Mr Bain, the staff at the school, the team at Argyll & Bute Council, and especially the pupils of Oban High School for a memorable, instructive and very enjoyable day.

Unknown

Report on the DIT Latin American and Caribbean Roadshow 2019

Report on the DIT Latin American and Caribbean Roadshow 2019

Glasgow, 25 March 2019

The Roadshow (one of five being held in locations around mainland Britain) was organised by the Department for International Trade (DIT) to provide businesses with an insight into the markets of Latin America and the Caribbean.

Joanna Crellin, HM Trade Commissioner for Latin America and the Caribbean, led the event, accompanied by senior trade experts located in Embassies and Consulates throughout this vast region, and senior officials from the Embassies in the UK.

Key points were:

  • the region is home to 650 million people with a growing middle class. Collectively, the region’s 48 countries and territories constitute world’s third largest economy after China and the USA;
  • key growth sectors being targeted by DIT include the extractive industries, life sciences, security and defence, infrastructure, education and financial services;
  • the UK seriously underperforms in terms of trade in the region, with only remnants the once-strong relationships remaining. However there is a positive legacy with a respect for British quality and values;
  • the area is far from homogenous, a point stressed by the DIT regional representatives, but many common traits are shared, especially the importance of personal relationships and trust: “it is a face-to-face place” as one person put it;

When asked what to bear in mind when trying to enter this market, DIT officers highlighted the following:

  • use the DIT offices, chambers of commerce and business associations as multipliers, to help make contact with more of the right people;
  • be aware of politics and the potential implications of changing government, for example in Brazil and Mexico recently;
  • go native – spend time in country and meeting potential trading partners;
  • differentiate on the basis of quality and innovation.

Thank you to the team at DIT and the various speakers for organising a useful and informative event.

Azer-symb

Education PPPs in Azerbaijan

We are very pleased to be working in an international team to support the Ministry of Education in #Azerbaijan on a long term donor-funded assignment to explore opportunities to expand the use of public-private partnerships (#PPP) in the Education sector.

This country of around 10 million people is a place of great contrasts. In the capital Baku, a glitzy modern centre sits alongside ancient Silk Road caravanserais, while an easy drive on good roads crosses the arid coastal desert before rising into the Caucasus – a mountain range as high as the alps.

Azerbaijani, a language closely related to Turkish, is the main language, with most people also speaking Russian.  English is not widely spoken, although this is changing rapidly as international links grow.  Most of the country was part of the Russian empire in the 19th century then the USSR until independence in the early 1990s.

Education is secular and compulsory from years 1 to 9 plus a pre-school year, and a high proportion of pupils do an additional two years in school. Most then go on to college or university.

We are looking forward to identifying the most suitable PPP modalities for addressing challenges within the education system here, testing their feasibility, and helping develop capacity and capability within the country.

 

fill_340x259-xl_limit-ECCI

Edinburgh Centre for Carbon Innovation – our new home

On 1 February 2019 we will relocate to the Edinburgh Centre for Carbon Innovation.

This move places us within Edinburgh University’s hub of  knowledge and expertise in ‘low carbon’ policy, training and education. We will be working in the first listed building in the UK to achieve the BREEAM (building sustainability) ‘Outstanding’ certification, and we will be sharing this collaborative environment with University start-ups, Masters students and established organisations in the sector.

We are looking forward to developing partnerships where our knowledge of finance and economics in the infrastructure sector can be applied in low carbon initiatives in the UK and around the globe.  We are confident that our growth in Asian markets will be of value, and that our Directors’ personal involvement in community renewable energy schemes and low carbon housing projects will contribute to the wider objectives of ECCI.

From 1 February 2019 our address will be:

Caledonian Economics – Edinburgh Centre for Carbon Innovation – High School Yards – Edinburgh EH1 1LZ – Scotland, UK.

nhsggc

NHS Greater Glasgow & Clyde – DBFM Financial Close

Yesterday, 20 December 2018, the latest NHS Greater Glasgow and Clyde healthcare PPP reached financial close.  The DBFM healthcare project will procure two new facilities (the new Greenock Health Centre and Mental Health In-patient facilities at the Stobhill Hospital) from hub West Scotland under a single hub/DBFM contract.  Under current plans, a third facility will be added to the contract under a pre-agreed change procedure during 2019.

We supported the NHS in-house team and were responsible for a range a financial transaction support activities including assessing financial submissions from the private sector partner, confirming that returns, margins and fees are consistent with benchmarks and confirming that the financial model is consistent with technical project details.   On the day of financial close we supported rate benchmarking, financial model optimisation and completion activities.

 

Spinning logo by Calum Finnigan

3D Animation Intern

Our recent Intern, Calum Finnigan, produced this slick 3D animation of our corporate logo as a little side project.  Calum is a graduate of the University of Edinburgh (BA with honours, Fine Art) and Edinburgh College (HND, Grade A, 3D Animation) and is interested in short or long term opportunities to apply his skills.

Spinning Graphic by Calum Finnigan

Spinning Graphic by Calum Finnigan

More examples of his work and his contact details can be found on his website , his blog, and on Linkedin.

SBC

Jedburgh Intergenerational Campus – financial close

As financial transaction advisers to Scottish Borders Council on their Jedburgh Intergenerational Campus project, we are pleased to report that Financial Close was achieved on 25 October.

The new £32 million education campus will replace three existing schools in the town and will include #nursery, #primary, #secondary, and further educational facilities.

The project is being delivered in partnership with hub South East Scotland using the standard Scottish PPP/DBFM structure, and achieved financial close 13 months after the business case (known as the New Project Request) was approved.

This successful project continues our relationship with the Council, having previously advised them on the development of the new Kelso High School which achieved Financial Close in February 2016 and which opened on time and budget in November 2017.

Glasgow School PPP

Glasgow City – two new Primary Schools

The Glasgow City Council procurement of the new Blairdardie and Carntyne primary schools reached financial close on 23 October 2017, and the first of the schools, Carntyne, was handed over on time and budget on 19th October 2018, with Blairdardie on target for hand over on time in February 2019.

 The new primary schools have been developed under a single compact PPP contract between the Council and  hub West Scotland.

As the public sector Financial Transaction Adviser on this PPP we supported the Council’s in-house team and were responsible for assessing financial submissions from the private sector partner. This included confirming that returns, margins and fees are in line with the market and consistent with pre-agreed levels.  We worked closed with technical specialists to calibrate the payment mechanism, and supported commercial negotiations.

7jJO3joD_400x400

Report on the Social Value Gathering 2018

Report on the Social Value Gathering 2018,

Our Dynamic Earth, Edinburgh, 21 September 2018

The ‘Gathering’ was designed as a forum to bring together leading thinkers and practitioners in the area of ‘Social Value’ from the fields of private enterprise, charities, public sector and academia.

Traditional methods for measuring and reporting activities such as shareholder returns and GDP are inadequate because they fail to measure how programmes, organisations and interventions contribute to society.  The Social Value Portal, who arranged the event, advocates a data-driven approach to building an understanding of wider social and environmental impacts of business activity and public sector action within a common framework applied across an expanding network of organisations.

From 1D to many D

The concept of Social Value is familiar but difficult to define.  It is sometimes thought of as corporate social responsibility, or contributing to good causes, or simply just the desire to do the right thing.  Some delegates made the point that much of the ‘good work’ done by business is quite one dimensional – for example charity fundraising – very valuable in itself, but not really synergetic.  True social value gains are found where enterprise, the public sector and communities intersect and align towards a common purpose in multi-facetted, multi direction ways.

Sound Bites

An impressive range of speakers presented details of various initiatives and policies including details of Scottish Government programmes to bring vacant and derelict land back into productive use, approaches used by Balfour Beatty and Scape Procure to broaden social benefits in the construction sector, the Adopt an Intern scheme which seeks to address under-employment of graduates, and the Social Bite experience of helping address homelessness in a commercial context.

Breaking out the lessons

Within various break-out sessions participants asked what the financial sector can learn from charities in reporting social impact of investments, and what urban parts of Scotland can learn from the remarkable number of major community enterprise initiatives in remote and rural parts of the country.  Other sessions asked how public procurement can deliver inclusive growth and how social value can be built into urban investment plans.

Coffee and Chips

The event stressed the importance of networks, being essential to finding synergies between organisations, and for gathering data across a broad front.  The points was illustrated using interactive coffee cups that every delegate received with their welcome pack.  Electronic tags within the cups logged connections made by delegates, earning tokens that could then be used to ‘vote’ for favourite projects in a ‘Social Value Marketplace”.

Lessons

The main points I took from the day were:

  1. society’s needs once lent themselves to centralised solutions – for example large scale health interventions or larger central power plants. Society’s needs today are distributed – for example care for chronic conditions in the home, low carbon energy generation, storage and use. This will require a shift from a state that focusses on centralised delivery of services to a state that focusses on developing relationships that meet the needs of the individual within a local context.  This shift will need new ways of measuring impact and effectiveness, including decoupling carbon from GDP.
  1. decades of dispiriting depopulation and economic decline are being reversed in many remote and rural communities. The best examples of community enterprise and realignment of local services to meet local needs are to be found among our islands, far coasts and rural hinterlands.  There is much our towns and cities can learn from them.
  1. the choice of financial investment products available through pensions, ISAs and other tools bamboozles most private retail investors. There is no easy way for the layman (or even industry specialists) to gauge the impacts of investments on society or the environment.  This is a huge missed opportunity to use customer choice of investments as a force for good.  A common measurement and reporting framework would help in this regard, perhaps alongside appropriate regulation.

Martin Finnigan

www.caledonianeconomics.com

24 September 2018

EnglishFrançaisBahasa IndonesiaPortuguêsEspañolTürkçe