A few weeks ago I revealed in Parliament that the National government have spent $3.5 million developing the business case for a new school in Hobsonville to be built under a Public-Private Partnership. That school is forecast to save $2 million over the 25 year lifespan of the contract, in other words, a lot less than the Business Case cost to develop in the first place.
At the time Craig Foss, the Associate Minister of Education, argued that the blowout in the cost of the Business Case was justified as it could be used as a template for other PPPs for schools. Interesting to note, therefore, that Hekia Parata confirmed at the Education and Science Select Committee this morning that her Ministry will be employing a $100k a year Relationship Manager to oversee the new project in Hobsonville. Over the life of the PPP, that would equate to another $2.5 million.
There is simply no way this PPP is going to save the taxpayer money. In fact, quite the opposite. This school is proving to be considerably more costly than if we’d just built it using traditional public sector practices. Will every PPP school have one of these managers paid for by the taxpayer?
I’m pretty sure there will be a number of boards and principals around the country who will be shaking their heads at this. The government have argued that PPPs could ‘free up’ boards and principals by reducing the amount of time they spend managing property. I’m sure every public school in the country would argue they could ‘free up’ quite a bit of time if they were given an extra $100,000 a year to manage their facilities…
The Guardian has an interesting article about the G4S Olympic security debacle, saying it “should at least bury the fantasy that private companies are more efficient than the public sector.”
Last time I was in Scotland one of my Phys Ed teacher friends told me that she is not allowed keys to the gym in per PPP school. Access has to be managed by the the company – something to do with insurance risk – it was driving her mad -I guess that’s what they mean by freeing up time?!
Pete – That’s a pretty absurd statement. I hardly think one piece of anecdotal evidence amounts to much of an argument.
Here is some empirical evidence for you to consider. In the paper: From State to Market: A Survey of Empirical Studies on Privatization the authors surveyed a number of studies on privatization. For instance, in ten studies comparing the relative efficiency of private and public enterprises in the same industry none of the studies found the public sector more efficient, two found no significant difference, and eight found the private sector firms performed better. In another 22 studies in developed economies all bar one found improved performance in the privatised firms. In their conclusion they stated that:
Another review paper Public vs. Private Ownership: The Current State of the Debate surveyed 16 studies of privatisation in competitive markets of which 11 found private firms to perform better and 5 were neutral.
Here is another paper: Privatization: What Have We Learned? They look at when privatisation works and when it doesn’t work. It works when the appropriate institutions exist e.g., rule of law, and protection of property rights. Their conclusion:
According to John Armstrong, the Labour opposition can’t land a “hit” on Key or his government. Maybe they now accept that Tory ministers lie and cheat routinely, so exposing them is not actually news anymore?
This has to be a joke. This is the stupid Deleted. Clare that asset sale money is going to pay for. What qualifications required to be a relationship manager?
jennifer, it’s never been news to armstrong… he’s accepted that reality decades ago as an acceptable behavior from a tory government…
It pays to remember who it is he writes his opinion pieces on behalf of…
So Chris, are we back to the bad old days when the labour party had to publish it’s own newspaper to get the facts out in the public domain?
I would personally like to see a situation where the herald is cut out of the picture altogether… they are part of the problem, never part of the solution…
What a superficial piece of analysis! A business case should be prepared for a project regardless of whether it is delivered as a PPP or not, so it’s misleading to claim (as this article does) that the cost of the business case is an additional cost for the PPP only.
Similarly, someone within government has to look after the asset once it’s built, regardless of whether it’s a PPP. Actually, come to think of it, you’re right – government wouldn’t face that cost if the project wasn’t a PPP – government would just let the asset deteriorate, so that it would be falling to pieces in 20 years time. In contrast, under the PPP, the schools will be maintained in good condition for the life of the contract.
Well.. dont we all really know that Private/public/partnerships`s may too often be just a device constructed by the ‘right’ to benefit their supporters. They believe that if they chant their mantra; “private is always better and more efficient than public” often enough then we will believe them. It is nonsense of course. In common ongoing situations such as essential infrastructure (eg; schools/hospials/prisons/many roadworks etc, the State should have efficient, fully employed staff, who can extract the very best value from contractors. The old Ministry of Works did this, AND often did the actual construction as well… That is not necessary, but most of the planning and design staff should be State servants. Private contractors should be very closely directed and monitored by the state – by competent public servants. In the case of schools there must always be government agencies to ensure that the best and most cost efficient advice is available. There is absolutely no reason why a properly constituted state agency cannot be everybit as efficient(huge economies of scale?) as private enterprise. AND, we can much more effectively monitor corruption and ‘cosy’ deals if the state is in control!
The state inevitably gets screwed when it loses too much expertise and institutional knowlege to the private sector.
Of course the private sector , contractors and the like, are an essential element BUT they must be closely directed. Allowing them to be ‘in charge’ may work for a start , but once they have control they will inevitably attempt to maximise their profit. (ie ‘screw’ an increasingly ignorant state) That is the nature of the beast!. Right wing parties such as National and ACT simply represent that sector too closely… They cannot be expected to restrain such a major support base. The basic PPP model is flawed
The rapidly increasing ‘outsourcing’ and use of consultants
is equally troubling as these groups are everybit as capable of empire building as were some public servants of the past. The difference is that we should be able to monitor our state employees much better than consultants and contractors for the best and most efficient outcome for all our public works and operations – as long as we RETAIN SUFFICIENT EXPERTISE
You have to be concerned that major roading investigations and the like provided by non state servants may so very easily be compromised by self interest.
Of course, similar principles also apply to the part sale of assets. Good for investors (includes many politicians of the ‘right’, and their major support base?), BUT, sooner rather than later, inevitably increasingly bad for the public.
PARTIES OF THE RIGHT TOO CLOSELY REPRESENT THE INTERESTS OF THOSE THAT THEY ARE ‘SELLING OUT’ TOO!
Unfortunately we have a Government which is trying to reinvent the wheel, good discipline, good teaching and good physical education should set young people up for life whether it is done by the private or public sector.
Privatisation is not necessarily the golden bullet for everything certainly wasn’t the answer for the BNZ, Tranzrail, Telecom and AirNZ total disasters for investors.
The primary purchasers and primary beneficaries did particularly well out of these floats.
“PARTIES OF THE RIGHT TOO CLOSELY REPRESENT THE INTERESTS OF THOSE THAT THEY ARE ‘SELLING OUT’ TOO!”
Parliamentary swipe cards for the highest bidders
So Chris, labour doesn’t support PPP’s any more?
meeting 50% of your performance target gets hammered when its a ministerial department, but is passing news met with ” they will get better” when it is a PP prison??? Is this the accountability we are promised from the private sector that so many rail against its lack in the public sector?