Review of the Pilot PPP Schools Bundle 2019 2021 - Revision History AA
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Review
of the
Pilot PPP Schools Bundle
-
2019 - 2021
Revision History
AA Projects –
Internal Sign-off
AA PROJECTS LTD
About AA Projects
AA Projects is a management and property consultancy, established in 1999, with extensive experience
and expertise in both the public and private sectors, including significant experience in the Western
European PPP market. The firm works across the United Kingdom, Europe and the Americas and has 8
offices located in the United Kingdom.
We provide innovative, client focused consultancy solutions that are supported by best practice, with
quality and sustainability at the heart of our thinking. We pride ourselves on achieving best value for
clients, providing up-to-date knowledge of property management, estate strategies, procurement,
financing, and the complete management of the construction process. We also provide several
specialist consultancies including facilities management, energy and sustainability and rights of light.
We have significant experience of working in the PPP sector, with over 1.5m square meters of PPP
assets surveyed each year, technical advisory roles across multiple Primary PPP projects and
considerable expert witness work for several parties on the Procuring Authority and Investor side.
Our portfolio of clients is extensive and spans a wide range of sectors including commercial, education,
defence, health, heritage, regeneration, industrial & manufacturing, leisure & arts, government
agencies, residential, retail and transport & infrastructure.
The Review of the Pilot PPP Schools Bundle Commission
The Review of the Pilot PPP Schools Bundle has been commissioned by the Department of Education1
with the principal objective of examining all aspects of delivering the Pilot Schools under the PPP model
relative to delivering schools under the conventional delivery model, and to assess whether the
objectives of Pilot Schools have been met to date.
Our Consultants
Our highly skilled team includes strategic property consultants, PPP experts, building surveyors,
quantity surveyors, sustainability specialists and facilities management consultants.
James Ryan Nikki Carters Aggie Juszczyk
Director – Strategic Consultant - Data Analyst -
Management & Strategic Strategic
Lifecycle Management & Management
Lifecycle
1Following a Government Decision of the 26th June 2020 the Department of Education & Skills was renamed the Department
of Education.
2
CONTENTS
Executive Summary ..................................................................................................................... 10
Part 1 – Introduction ................................................................................................................... 19
Context of this Review........................................................................................................................... 19
Pilot PPP Schools Bundle ....................................................................................................................... 20
Conventional Schools ............................................................................................................................ 22
Methodology ......................................................................................................................................... 23
Part 2 – Comparison of the Pilot PPP Schools Bundle and the Conventional Schools ...................... 28
Design & Functionality .......................................................................................................................... 28
Building Condition ................................................................................................................................. 33
Lifecycle and Residual Value ................................................................................................................. 36
Maintenance & Facilities Services ......................................................................................................... 43
Energy Management & Performance.................................................................................................... 47
Administration ....................................................................................................................................... 49
Risk Profile ............................................................................................................................................. 50
Flexibility of Contracts ........................................................................................................................... 52
Third Party Usage .................................................................................................................................. 53
Value for Money Analysis ...................................................................................................................... 55
Part 3 – Extent to which the Pilot PPP Schools Bundle objectives have been met .......................... 59
Value for Money .................................................................................................................................... 59
Innovation ............................................................................................................................................. 60
Administration ....................................................................................................................................... 60
Part 4 – Conclusions .................................................................................................................... 63
Key Findings ........................................................................................................................................... 63
Conclusions............................................................................................................................................ 64
Recommendations for Further Reviews ................................................................................................ 64
3
APPENDICES
A Review Objectives as per Scope of Services
B Key Events in Pilot PPP Schools Bundle
C Financial Analysis Assumptions
4
REPORT CONTRIBUTORS
PPP, Construction, Operations, Facilities Management and Whole Life Costing
Jon Birch MIWFM, AIOSH
David Bailey BA (Hons) MBA
Nicola Carters BSc (Hons)
James Ryan MSc MRICS
Aggie Juszczyk MA, BA (Hons)
Jaime Sullivan BA (Hons), PGDip, PGCert
Surveying
Sam Hardwick BSc Hons MRICS
Tim Hughes BSc Hons MRICS
Luke Cousins BSc Hons
Jason Rostron BSc Hons
Jack Mappin BSc Hons
Malcolm Lavin CEng PGDip
Energy and Sustainability
Richard Murray BSc (Hons), MRICS, CEnv,
Erika Rankin BA, MA, PG Cert
Scott Rushton BEng (Hons), MSc, MEI
Milo Kenny BSc (Hons), MSc
Rebecca Tehan BSc (Hons)
Norr – Architectural Review
Brian O’Donnell HNC CIAT
Kevin Cooper B.Arch Hons M.Arch RIBA FRIAS
5
GLOSSARY
Abbreviation Term Definition
- Additional Bank of Quota of FM services to enable use by the school or
Hours other third parties (Third Party Usage) outside of
opening hour for community or other use. These hours
are already paid for within the UC.
- Backlog Maintenance The cost to bring condition C and D assets up to condition
B as identified within the condition survey and priced
within the Lifecycle cost model.
BER Building Energy Rating A rating of the overall energy efficiency of a building. The
rating is on a scale of A-G, with A rated buildings the most
energy efficient and G the least.
BMS Building Management A computer-based system that controls and monitors
System the building's M&E equipment such as ventilation,
lighting, power systems, fire systems, and security
systems.
CAPEX Capital Expenditure Refers to the construction and transaction costs for the
PPP and Conventional Schools.
CIBSE Chartered Institute of International professional engineering association.
Building Services
Engineers
C&AG Comptroller and Auditor -
General
CAFM Computer Aided Utilising information technology to support the
Facilities Management management and delivery of FM services.
- Concession The contractual period for which the Project Company is
responsible for the finance and operation of the PPP
project. This is 25 years for the Pilot PPP Schools Bundle.
- Conventional Schools The collective name for the 4 schools selected by the DoE
as the group for comparison against the Pilot PPP Schools
Bundle.
The Conventional Schools were developed by the DoE by
way of traditional procurement using up-front
Exchequer funding and external support, including the
design team and contractors.
DoE Department of -
Education
DPER Department of Public -
Expenditure and Reform
DBFO Design, Build, Finance DBFO services are procured by the authority and
and Operate delivered by a private sector partner.
DFHERIS Department for Further
and Higher Education,
6
Research, Innovation
and Science
ETB Education and Training -
Board
EWG Emergency Works Grant DoE grant for works required in emergency situations
such as health and safety matters. Grants are awarded
based on an application and review basis.
FM Facilities Management Management and delivery of services that ensure the
facilities meet the needs of the client and building users
e.g., maintenance, cleaning, grounds maintenance,
statutory compliance.
FMA Facilities Management The contract between the Project Company and the FM
Agreement Contractor which details the scope of the FM services.
FC Financial Close The point at which the PPP financing documents have
been signed and prior conditions for the availability of
financing have been met.
- Financial Model A digital spreadsheet computer file that incorporates, for
the duration of the contract, all the investments,
revenues, costs, and taxes as well as several analytical
parameters and the relative inflation. The tool also
incorporates the free cash flow of both the project
company and the equity investor. The model utilised in
this review is the model at FC.
FRA Fire Risk Assessment Under section 19 of the Safety, Health and Welfare at
Work Act, employers are required to carry out risk
assessments and to record these in the Safety
Statement. A fire safety risk assessment should be
conducted and should include Fire Prevention, Detection
and Warning, Fire Detection and Warning and
Emergency Escape.
- FM Contractor The party contracted to deliver the FM services as per
the FM Agreement.
GIFA Gross Internal Floor The area of a building measured to the internal face of
Area the perimeter walls at each floor level.
HICP Harmonised Index of The EU Harmonised Index of Consumer Prices for Ireland.
Consumer Prices
- Lifecycle Renewal or replacement of building fabric and M&E
plant, including significant overhaul. Costs assessed are
as per the PPP Financial Model and broken down within
the Conventional School accounts. AAP has produced
Lifecycle cost models in line with industry guidance.
LPG Liquefied Petroleum Source of fuel at some Pilot PPP Schools.
Gas
M&E Mechanical & Electrical Mechanical systems include elements of infrastructure,
plant and machinery within systems such as heating and
ventilation. Electrical systems include power supply and
distribution, telecommunications, and lighting.
7
NDFA National Development -
Finance Agency
NPV Net Present Value The current value of a series of cash flows over a period
where the value decreases over time based on the value
of money decreasing with time. This is the standard
method (in line with other reviews and with the
preparation of value for money/comparator exercises)
for comparison of cash flows over variable periods of
time.
OPEX Operating Expenditure Refers to the Lifecycle costs, FM Service delivery costs,
Utility costs, and backlog maintenance costs for the PPP
and Conventional Schools.
- Payment Mechanism PPP contract schedule/section outlining payment of the
UC and the process for performance and availability
based financial deductions.
- Pilot PPP Schools The five schools delivered as part of the Pilot PPP Schools
Bundle (the Pilot PPP Bundle, reviewed within this report.
Schools Bundle)
PAT Portable Appliance Under section eight of the SHWWA Act, employer’s
Testing duties cover the design, provision and maintenance of (i)
safe workplaces (ii) safe means of access to and egress
from the workplace and (iii) safe plant and machinery.
PA Project Agreement The contract between the Procuring Authority and
Project Company for the financing, design, construction,
operation and maintenance of the infrastructure being
provided by the Project Company.
PPM Planned Preventative Scheduled maintenance routine as required under the
Maintenance Project Agreement.
PPP Public Private A partnership between public and private sector
Partnership organisations with shared objectives for designing,
building, financing and operating new infrastructure.
PPP is a form of procurement available to the public
sector.
- Project Company The private sector partner of the Procuring Authority,
namely ‘Schools Public/Private Partnership (Ireland)
Limited’ for the Pilot PPP Schools Bundle.
PSB Public Sector Comparing the cost of the PPP with achieving the same
Benchmark objective by traditional procurement/upfront Exchequer
funding.
- Residual Value The cost of replacing an asset with its modern equivalent
less deductions for physical deterioration.
RICS Royal Institute of World's leading professional body for qualifications and
Chartered Surveyors standards in land, property, infrastructure and
construction.
8
- Senior Debt The main form of debt raised by the private partner
which usually has priority for repayment and decision-
making powers in priority of other lenders.
- Services Specification The detailed requirements for the services being
provided by the Project Co as outlined by the Authority
in the Project Agreement (e.g., helpdesk
provisions/energy management requirements).
- Statutory Compliance Compliance with health and safety regulations set out in
law in relation to the management/operation of
facilities. Legal compliance with these requirements is
incumbent on all asset operators, owners or other
responsible persons.
SWS Summer Works Scheme Devolved funding to individual school authorities to
undertake small-scale building works which, ideally, can
be carried out during the summer months or at other
times that avoid disrupting the operation of the school.
Grants are awarded based on an application and review
basis.
TPI Third Party Income Income received in line with the PPP contract for use of
the facilities by third parties.
TPU Third Party Usage Use of the facilities by third parties in line with PPP
contract.
- Transaction Costs Pilot PPP Schools Bundle – architect, civil, structural,
mechanical and electrical engineers, project
management, employer’s agent and FM consultant.
Conventional Schools - architect, civil, structural,
mechanical and electrical engineers and employer’s
agent.
UC Unitary Charge Monthly payments from the Authority to the Project
Company in line with the Payment Mechanism.
VfM Value for Money Consideration as to whether the value of a service
received equals or exceeds the amount spent.
WRA Water Risk Assessment Under the Safety, Health and Welfare at Work (SHWWA)
Act 2005, every employer must prepare a safety
statement which is based on an identification of the
hazards and an assessment of the risks to the Safety,
Health and Welfare of his / her employees. In carrying
out the risk assessment, consideration must be given to
the risk of exposure to Legionella bacteria.
WTE Whole Time Equivalent Unit of measure to compare staffing resource based on
hours of resource available considering different
patterns of part-time and full-time working.
9
Executive Summary
Background
1. In 1999 the Government approved a pilot programme of Public Private Partnership
(PPP) projects. One of these projects was the Pilot PPP Schools Bundle proposed by the
Department of Education and Science and the focal consideration of this Review.
2. As the first PPP projects in the country, any issues and problems encountered during
the implementation of the projects would provide information and learning to develop
policy and enhance the process for future PPP projects.
3. The Pilot PPP Schools Bundle is a 25-year design, build, finance and operation PPP of
five post-primary schools that commenced in 2002. The five schools cater for 3,4752
pupils and provide 35,834m² of accommodation space over the 25-year concession
with a total FM contract delivered through the PPP Project Company.
This Review
4. The DoE commissioned this Review to examine all aspects of delivering the Pilot Schools
under the PPP model relative to delivering schools under the conventional delivery
model, and to assess whether the Pilot Schools project objectives have been met. All
analysis in this Review has been undertaken prior to the start of the COVID-19
Pandemic and no impact of this on the figures reported is assessed as part of this report.
The Review is part of a wider framework to assess and review the success in delivery of
the objectives of a PPP project throughout its life. This framework consists of three key
stages: Post Project Review, Mid Term Review, and Post Expiry Review.
5. The objectives of the Review were:
To compare the Pilot Schools with a DoE-selected comparator group of
conventionally delivered schools, hereafter referred to as the ‘Conventional
Schools’. Including comparison of design/functionality, energy efficiency,
building condition, residual life, facilities and maintenance services, flexibility,
administration required, risk, and Third-Party Usage.
To assess the extent to which the following DoE objectives in delivering the Pilot
PPP Schools Bundle have been achieved, namely:
- To test the value for money of delivering school provision on a design,
build, finance, manage and maintain basis over a long period through the
PPP model.
- To obtain and realise new ideas and private sector innovation on school
design through an output-based approach.
- To reduce school Principals’ responsibility for managing school buildings,
allowing them instead to concentrate on their core educational and
school management functions.
- To achieve better use of State-funded school buildings outside of regular
school hours.
2 Design Capacity
10 To develop a methodology and template for use by the DoE in Reviews of other
PPP projects in the education sector.
Methodology
6. The Review has been completed based on a framework of four stages: Planning and
Methodology Identification, Gathering and Selecting the Information, Review and
Assessment of Information, and production of this final report.
7. Evidence has been collected from a variety of primary and secondary data sources to
enable the objectives of the Review to be met. The following analysis has been
completed to inform the following key findings and conclusions:
Literature Review
Document Review
Interviews
Building Condition Surveys
Lifecycle Cost Modelling & Residual Value Calculation
Facilities Management & Statutory Compliance Review
Energy Analysis
Architectural Surveys
Discounted Cashflow Financial Analysis
8. It should be noted that since the pilot programme of PPPs, all potential PPP projects
must complete a Public Sector Benchmark (PSB) comparison, comparing the cost of
the PPP with delivering the same standard facilities and services by traditional
procurement. The PSB also values the risk transferred under the PPP model. Due to an
absence of a PSB for the Pilot PPP Schools Bundle, this Review is unique in that it
considers an actual operational comparator group, the services delivered to that group
and the costs associated with it to date instead of a comparator to the PSB model. All
subsequent PPP School bundles have completed a PSB, therefore the reviews of the
subsequent PPP School bundles would reference the PSB model. As a result of this, the
comparison of value for money here is based on the information available and outlined
herein and is not comparable to full PSB comparator exercise that would otherwise be
undertaken. The limitation on the availability of information, primarily due to the age
of the schemes, means that a full VfM analysis is not possible; however, assessment of
individual elements is somewhat possible.
Key Findings
9. The Pilot PPP Schools Bundle are assessed as being of an overall higher standard from
the design review conducted, they provide a greater consistency in terms of design
and construction quality, when compared to the conventional schools procured and
delivered at the same time.
10. The Pilot PPP Schools are maintained in a very good condition overall. No significant
condition issues were identified at the Pilot PPP Schools with any such issues being
dealt with via the Latent Defects procedure, FM services, and Lifecycle replacement
programmes. There was a general lack of investment evident across the Conventional
11Schools which resulted in a higher number of poor condition assets being identified.
Maintenance was not to the same standard as the Pilot PPP Schools Bundle although
some was undertaken and evidenced. Overall, there is a clear disparity between the
very good condition of the Pilot PPP Schools and the relatively poor condition of the
Conventional Schools.
11. Under the FM Agreement, which incorporates Health and Safety and Statutory
Compliance obligations, the Pilot PPP Schools have robust maintenance regimes and
records in place. There is no FM risk for the DoE in relation to the Pilot PPP Schools
Bundle as the risk is transferred to the Project Company and subsequently the FM
provider. At the Conventional Schools there is no external party contractually bound
to manage compliance and the Principal is ultimately responsible for health and safety
and statutory compliance. The Conventional Schools evidenced very limited
maintenance planning and document management. Following an audit of compliance
with Statutory health and safety requirements the Pilot PPP Schools Bundle were
determined on average as 97% compliant, and the Conventional Schools 35%
compliant. Since the undertaking of the audit, several measures have been put in place
to remedy non-compliance issues identified at the Conventional Schools.
12. With regards to energy management, the Pilot PPP Schools were designed to a slightly
higher specification, consequently BER ratings for the Pilot PPP Schools are higher.
13. The electricity consumption for the Pilot PPP Schools Bundle is currently 10.7% (on a
1-year basis) less than that at the Conventional Schools, 25 kWh/m² versus 28 kWh/m².
The heating consumption for the Pilot PPP Schools Bundle is a significant 26.9% (on a
1-year analysis basis) less than that at the Conventional Schools, 49 kWh/m² versus 67
kWh/m². This is largely because the Pilot PPP School buildings have higher insulation
and airtightness standard and there is an efficient operation of the heating system by
its users. The total energy costs forecast over the entire Concession are higher for the
Pilot PPP Schools Bundle, based on the financial model data; however historic records
and current use show a lower figure at present. An assessment of the total Energy
Consumption and Cost over the whole Concession should be undertaken at the end of
the Concession.
14. TPI at the Conventional Schools is marginally (7%) above that at the Pilot PPP Schools
on a €/m² NPV basis. TPI income assumptions at the Pilot PPP Schools are based on
the forecast within the project Financial Close Model.
15. The Pilot PPP School Principals reported significantly less time spent managing the
facilities demonstrating that this risk has been successfully transferred to the Project
Company.
16. The DoE and the NDFA evidence higher levels of resource required to manage the PPP
contracts versus the Conventional Schools, so whilst the operation and maintenance
risk has been transferred in the PPP context, there is an ongoing contract management
resource required for the DoE and NDFA.
17. The indicative Financial Analysis NPV Outputs (€/m²) prepared as part of this Review
are shown below. NPV comparison is the assessment methodology used in line with
wider guidance on Value for Money comparisons:
12Variance Variance Variance
Cost/Income Conven-
PPP (PPP – (PPP to Group (PPP to
Element tional
Conv.) Conv.) Element Conv.)
(NPV)
€/m² €/m² €/m² % %
Construction 1,133.09 865.63 -267.46 -24%
Costs
CAPEX -21%
Transaction 138.97 144.22 5.25 4%
Costs
Lifecycle Cost 103.76 196.98 93.22 90%
FM Service 217.94 516.26 298.32 137%
Delivery
OPEX 52%
Energy Costs 79.16 93.64 14.48 18%
Backlog 135.61 10.36 125.24 -92%
Maintenance
Residual Asset 702.92 891.38 188.45 27%
Value
VALUE 27%
Third Party 2.32 2.15 0.17 -7%
Income
18. On an NPV basis, the Pilot PPP Schools construction costs are 24% lower than the
Conventional School costs, whereas PPP transaction costs are 4% higher than
Conventional School costs. The cost of finance (i.e., the debt payment to fund the long-
term repayment of the initial construction cost) is likely to have diminished this
benefit. However, the higher cost of finance must also be weighed against the risk
transfer that occurred under the contract and which is not costed within this analysis.
In later PPPs, a value is attached to the risk transfer within the context of the PSB.
19. While the cost of finance is not included within the scope of this Review, debt cost for
the Pilot PPP Schools Bundle, based on information provided by the NDFA, is
understood to be c.6%. Debt makes up the majority of funding for the scheme.
20. The Lifecycle costs for the Pilot PPP Schools Bundle are almost double that of the
Conventional Schools on an NPV basis (90% higher); however, the level of works
undertaken to the Pilot PPP Schools Bundle to date is greater. In addition to this, there
is no risk for the Pilot PPP Schools Bundle of early failure of assets resulting in an
immediate budget requirement for replacement or major repair of assets as this risk
is fully passed down to the Project Company. This risk is still present for the
Conventional Schools.
21. The cost of FM Service Delivery to the Pilot PPP Schools Bundle is some 137% higher
than the cost of FM delivery to the Conventional Schools on an NPV basis; however, a
significant number of failings in the compliance of the Conventional Schools with
Statutory Requirements, PPM undertakings and good FM practice were identified in
the reporting. None of the same issues were identified with the Pilot PPP Schools which
were considered to be maintained to an excellent standard and demonstrated full
Statutory Compliance and a high level of Contract compliance.
1322. The residual value calculation undertaken shows that the Pilot PPP Schools are
expected to have a higher residual value at the end of the 25-year Concession period
than the Conventional Schools will at the same point in time. The residual value of the
Pilot PPP Schools Bundle is 27% higher than that of the Conventional Schools. This is a
result of the higher specification of the Pilot PPP Schools and resulting higher rebuild
costs and the significant backlog maintenance costs at the Conventional Schools.
Key Conclusions
23. This Review has demonstrated that the Pilot PPP Schools outperform the Conventional
Schools on several elements (financial and non-financial). The Pilot PPP Schools are in
better condition, were designed to a higher standard overall, designed consistently,
were designed to, and also perform to higher energy ratings, and are fully compliant
with statutory health and safety requirements. The indicative financial analysis, on
NPV basis, demonstrates a lower construction cost for the Pilot PPP Schools Bundle
and higher Lifecycle and FM Service Delivery costs. It is also clear from the analysis that
the higher Lifecycle and FM Service Delivery costs have some attributable value (such
as better condition facilities and a higher residual value of the assets
forecast);however, it is not always clear that this value is sufficient given the higher
cost of the Pilot PPP Schools Bundle.
24. Within the PPP contracts the risk for all these elements: design, construction,
construction defects, availability, performance, and maintenance have been
transferred to the Project Company and/or FM provider. The contracts enable
availability and performance deductions to be made where the building is not available
or maintained to the standard as per the service specification. The analysis completed
here has evidenced that the Pilot PPP Schools Bundle is operating well, and the
minimal deductions to date further corroborate this. Subsequently, the DoE has access
to a bundle of well maintained, compliant and modern schools with few risks retained
(Change in Law and usage).
25. By comparison, the Conventional Schools have not been maintained to a high
standard, resulting in high backlog maintenance requirements and Schools that are not
evidenced as fully compliant with statutory health and safety requirements. While the
DoE is ultimately responsible for the availability, condition and services to the
Conventional Schools, there is a responsibility on individual schools to have an
appropriate maintenance regime in place. This is funded by the DoE by way of a
capitation grant which is paid to all Post Primary schools on a yearly basis.
Maintenance costs in Conventional Schools are liable to fluctuate more based on
market rates and school requirements and as evidenced throughout Condition and FM
reviews, there is no guarantee that a certain standard will be met. The Conventional
Schools do however allow an increased level of flexibility not permitted within the PPP
contracts and require less DoE management time overall.
26. When considering the financial analysis, it is evident that the standard of the Pilot PPP
Schools Bundle comes at a cost that (including debt) is likely to be higher than the
Conventional Schools costs. However, the higher cost is also underpinned by a material
transfer of risk that is not explicitly costed within this analysis. This risk transfer relates
to both the Construction and Operational phases and has been demonstrated on other
similar PPP schemes to insulate the Procuring Authority (in this case the DoE) from the
cost of Project Co or Contractor failure or similar such events. The PPP cost is a known
14annual cost to the DoE that increases only with HICP inflation and the DoE has no risk
for facilities related items. Spend on the Conventional Schools fluctuates based on the
maintenance/renewal deemed necessary in each year and no risk is transferred from
the DoE (or individual schools) to an external party.
27. The Pilot PPP Schools Bundle’s NPV CAPEX costs are 21% lower than the Conventional
Schools’ costs (taking account of both construction and other transaction costs). The
cost of finance (i.e., the debt payment to fund the long-term repayment of the initial
construction cost) is likely to have diminished this benefit.
28. The OPEX costs for the Pilot PPP Schools Bundle are 52% higher on an NPV basis than
they are for the Conventional Schools. These OPEX cost differentials are predominantly
reflective of the lower FM Service Delivery and Lifecycle costs at the Conventional
Schools rather than any material variance in the energy costs for the Schools.
29. The Lifecycle costs for the Pilot PPP Schools Bundle are almost double that of the
Conventional Schools on a NPV basis (90% higher); however, the level of works
undertaken to the Pilot PPP Schools to date has been found to be significantly greater
than that demonstrated across the Conventional Schools. This has ultimately resulted
in the excellent condition of the Pilot PPP Schools as evidenced in the condition
surveys. In addition to this, there is no risk for the Pilot PPP Schools Bundle of early
failure of assets resulting in an immediate budget requirement for replacement or
major repair of assets as this risk is fully passed down to the Project Company. This risk
is still present for the Conventional Schools.
30. The cost of FM Service Delivery to the Pilot PPP Schools Bundle is some 137% higher
(on an NPV basis) than the cost of FM delivery to the Conventional Schools. As
outlined, the variance in cost is in part caused by the variance in the scope of services
provided across each comparator group. The comprehensive FM services provided at
the Pilot PPP Schools have also contributed to the excellent condition of the Pilot PPP
Schools Bundle. Furthermore, a significant number of failings in the compliance of the
Conventional Schools with Statutory Requirements, PPM undertakings and good FM
practice were identified in the reporting. None of the same issues were identified with
the Pilot PPP Schools which were considered to be maintained to an excellent standard
and demonstrated full Statutory Compliance and a high level of Contract compliance.
31. The school condition, Lifecycle and FM outputs together indicate that the higher OPEX
costs provide a level of value for money, when considered against the cost, with
enhanced value achieved by the Pilot PPP Schools in their condition, residual value,
Statutory Compliance, and lower operational time requirements. Ascribing a specific
value to these outputs is, however, difficult. Until the final total cost of the PPP
schemes can be compared to other schemes (Post Expiry of the PPP Contract), it will
not be fully possible to assess the quantum of the value added. See section 2.10 – 2.20
for details of the condition of the schools.
32. The residual value calculation undertaken shows that the Pilot PPP Schools are
expected to have a higher residual value at the end of the 25-year Concession period
than the Conventional Schools will at the same point in time. This comes as a result of
the higher specification of the Pilot PPP Schools Bundle witnessed in the Architectural
Review and the higher Backlog Maintenance requirements of the Conventional
Schools.
1533. The scope of this Review does not extend to consideration of the long term forecast
for the end of life timings for the Schools (i.e. when the buildings fail to be economically
viable to maintain and a replacement school would be required); however, the trend
identified by the Backlog Maintenance would support a conclusion that the useful life
of the Conventional Schools’ facilities would be shorter than that of the Pilot PPP
Schools Bundle if the maintenance regime was continued at the same level and
specification.
Have the Pilot PPP Schools Bundle met the original objectives:
To test the value for money of delivering school provision on a design, build,
finance, manage and maintain basis over a long period through the PPP model
- As shown above, when financial analysis of the costs of each comparator
group is completed on a service element basis and in the context of the
actual service delivered, then there is additional value for money that can
be determined. For example, the schools are compliant with statutory
requirements and in excellent condition. However, apportioning the value
achieved against the higher FM and Lifecycle costs is subjective. Higher
debt costs would also impact on value for money; however, this needs to
be weighed against the value of the risk transferred.
To obtain and realise new ideas and private sector innovation on school design
through an output-based approach
- The Pilot PPP Schools were determined as designed to a higher standard;
however, this enhanced value is not greatly significant. Developments in
design over the last two decades, which will likely be evidenced through
subsequent School Bundle Reviews, may evidence this further.
To reduce school Principals’ responsibility for managing school buildings,
allowing them instead to concentrate on their core educational and school
management functions
- The Principal Interviews evidence that the Pilot PPP School Principals
spend less time managing school buildings. However, the duration and
complexities of the PPP contracts mean that the NDFA and DoE resources
for the Pilot PPP Schools Bundle replace this Principal resource, with the
DoE utilising more staff per Pilot PPP School than per Conventional
School.
To achieve better use of State-funded school buildings outside of regular
school hours
- Each Pilot PPP School has access to an Additional Bank of Hours of FM
resource which may be used by the school or to facilitate TPU outside of
regular school hours. For any TPU outside this allowance, the TPI is shared
between the DoE and the FM provider. Data shows that TPU accounts for
a portion of the Bank of Hours available; however, based on the
discussions with the DoE and Principals, the amount of TPU under the
Bank of Hours appears to be impacted by both school management
decisions, e.g., when the school needs to be available for
educational/school purposes, and demand within the local areas. As the
Conventional Schools only hold records of the community space charged
for, and not for all out of hours community use, it is not possible to make
a direct comparison.
1617
Part 1
Introduction
18Part 1 – Introduction
Part 1 of this report details the foundation for the Review to provide the context for the
review findings in parts 2 and 3, and explains the following:
Context and objectives of the Review
Background to the Pilot PPP Schools Bundle and the original objectives
Background to the Conventional Schools
Outline methodology of the Review
Context of this Review
1.1 The DoE commissioned the Review to examine all aspects of delivering the Pilot
Schools under the PPP model relative to delivering schools under the conventional
delivery model, and to assess whether the Pilot PPP School objectives are being met
at this stage in the PPP. The Review is part of a wider framework to assess and review
the delivery of the objectives of a PPP project throughout its life. This framework
consists of three key stages: Post Project Review, Mid Term Review, and Post Expiry
Review. Only on completion of the Post Expiry Review it is possible to fully assess the
success of the PPP in meeting the objectives.
1.2 The 2004 Comptroller and Auditor General (C&AG) Report on Value for Money was
akin to a Post Project Review for the Pilot PPP Schools Bundle. The report assessed
how the DoE developed and managed the project through the construction phase,
evaluated the tender proposals and assessed value for money in the procurement
process. The scope of the C&AG report was restricted to the early project stages and
did not assess any operational matters.
1.3 The analysis within the C&AG report suggests that the projected cost of the final PPP
deal was 8% to 13% higher than the projected cost of procuring and delivering services
to the schools using the conventional procurement route, as opposed to a 6% saving
forecast through a cost comparison exercise based on the preferred bidder price. The
report highlights that ultimately, the value for money achieved from the project will
be determinable only over the 25-year life cycle of the project and recommended that
a review is conducted at a suitable later date to determine if the Pilot PPP Schools
Bundle is delivering Value for Money. The report recommended that a review
commencing after 5 years of operation would provide a suitable timescale to assess
VfM. This Review was commenced in contract year 18 of 25, providing cost data over
a longer period than originally envisaged. This assessment takes into consideration
facilities management, energy and Lifecycle costs for the schools which would be less
prevalent after 5 years when the schools would be expected to be in very good
condition.
1.4 This Review is the first of its kind assessing the Government’s PPP projects. As such,
and as part of the scope of the exercise, AA Projects, with input from the NDFA and
the DoE have developed a detailed methodology (explained further below) for use in
future reviews.
191.5 It should be noted that since the pilot programme of PPPs, several recommendations
from the C&AG report have been put in place and the NDFA was established to procure
and manage PPP projects as requested by State authorities. Currently, all potential PPP
projects must complete a Public Sector Benchmark (PSB) comparison, comparing the
cost of the PPP with achieving the same standard facilities and services by traditional
procurement. The PSB also systematically values the transfer of risk. Due to an absence
of a PSB for the Pilot PPP Schools Bundle, this Review is unique in that it considers an
actual operational comparator group, the services delivered to that group and the
costs associated with it to date instead of a comparator to the PSB model. All
subsequent PPP School Bundles have completed a PSB, therefore the Reviews of the
subsequent PPP School Bundles would reference the PSB model.
1.6 The objectives of the Review are:
To compare the Pilot Schools with a comparator group of conventionally
delivered schools, hereafter referred to as the ‘Conventional Schools’. Including
comparison of design/functionality, energy efficiency, building condition,
residual life, facilities and maintenance services, flexibility, administration
required, risk, and TPU
To assess the extent to which the DoE objectives in delivering the Pilot Schools
have been achieved (the Pilot PPP School objectives are detailed in the following
section)
To develop a methodology and template for use by the DoE in reviews of other
of PPP projects in the education sector
1.7 The full breakdown of the Review objectives is detailed in Appendix A as per the Scope
of Services.
Pilot PPP Schools Bundle
1.8 A PPP is a partnership between public and private sector organisations with shared
objectives for designing, building, financing, and operating new infrastructure. PPP is
a form of procurement available to the public sector which differs from the more
traditional method of upfront Exchequer funding, with design, build, financing and
operational services either procured or provided (in the case of operational services)
by the public sector.
1.9 Following the Government approval of a pilot programme of PPP projects for
development, one of these projects was the Pilot PPP Schools Bundle. The Pilot Schools
Bundle is a 25-year design, build, finance, and operate PPP of five post-primary schools
which went into operation in 2002. As of January 2020, the Pilot PPP Schools Bundle is
in year 18 of the contract term. The five Pilot PPP Schools are shown in Table 1.1.
1.10 The DoE had four key objectives in delivering the Pilot PPP Schools Bundle:
To test the value for money of delivering school provision on a design, build,
finance, manage and maintain basis over a long period (i.e., using the PPP
procurement model)
To obtain new ideas and private sector innovation on school design through an
output-based approach
20 To relieve school Principals of the responsibility for managing school buildings,
allowing them instead to concentrate on their core educational and school
management functions
To achieve better use of State-funded school buildings outside of regular school
hours.
1.11 The procurement process commenced by way of a notice in the European Journal
(OJEU) in June 2000. The DoE, as the contracting authority, selected the PPP
consortium in 2001. A Project Agreement is in place between the DoE and PPP Project
Company. The DoE details the requirements for the delivery of the services, financing,
and operation of the facilities over the term and the Unitary Charge that is to be paid
by the DoE for the PPP. The Project Company is liable for all Lifecycle and maintenance
works during the 25-year contract term but does not have a role in the delivery of
education services.
1.12 A key element of PPPs globally is optimising the risk allocation between parties to
ensure that the risk sits with the party best placed to manage the risk. Typically, risks
are transferred from the Procuring Authority to the Project Company for construction
risk, maintenance risk, funding risk and insurance. This is the case with the Pilot PPP
Schools Bundle and all payments are managed through an availability and
performance-based Payment Mechanism where deductions can be levied for non-
performance of services or unavailability of spaces.
Table 1.1 – Pilot PPP Schools Bundle
School Location County Service Long
Commencement Term
Projected
Enrolment
- LTPE
Ballincollig Ballincollig Cork Dec 2002 1000
Community School
Largy College Clones Monaghan Dec 2002 500
Maria Immaculata Dunmanway Cork Dec 2002 700
Community College
St. Attracta’s Tubbercurry Sligo Dec 2002 675
Community School
St. Caimin’s Shannon Clare Dec 2002 600
Community School
21Conventional Schools
1.13 In line with the objectives of the Review and as a recommendation from the C&AG
report, the Review compares the Pilot Schools with a group of four Conventional
Schools. The schools were selected by the DoE based on the time they were
constructed and their locations.
1.14 The total Gross Internal Floor Area (GIFA) of the Conventional Schools is smaller than
that of the Pilot PPP Schools (Figure 1.2). All financial comparisons are drawn on a Euro
per metre square basis.
Figure 1.2 – GIFA by School
1.15 The Conventional Schools have been chosen as a comparator group to the Pilot PPP
Schools, taking account of the absence of a Public Sector Benchmark for this project.
Since the pilot programme of PPPs, frameworks have been developed and all potential
PPP projects must complete a PSB comparison. This Review is unique in that it
considers an actual operational comparator group, the services delivered, and the
costs associated as opposed to a theoretical PSB. Reviews of the subsequent PPP
School bundles would reference the existing PSB.
1.16 The Conventional Schools were developed by the DoE by way of traditional
procurement using up-front Exchequer funding and external support, including the
design team and contractors. Payment for the design and construction of these schools
is on a pay as you go basis and is linked to progress and agreed milestones during the
design and construction stages. Operational and maintenance matters are the remit
of the school authorities with costs paid for directly by the school authorities from
grants provided by the DoE and, in some cases, funding raised separately by school
authorities. ETB operational and maintenance services are procured across schools
under ETB governance, whereas other schools procure services individually. All
Conventional Schools have a caretaker to deal with everyday maintenance issues and
do not have a FM Contractor in place for delivery of all services.
1.17 There are two routes for schools to apply for funding to deliver major maintenance
(replacement, overhaul or major repair) works that would be defined under the PPP
Agreements as Lifecycle: The Emergency Works Grant and Summer Works Scheme.
These funding routes require the schools to apply to the DoE for the funding; this is
22granted based on the applications’ merits and the available funding at the time. Both
funding routes prioritise need for the works and maintenance of educational provision
along with consideration for the risk of not undertaking the works. Smaller-scale works
may be funded by the schools using their capitation grants.
Table 1.3 - Conventional Schools Group
School Service Long Term Projected
Commencement Enrolment - LTPE
School 1 2003 575
School 2 2003 300
School 3 2003 560
School 4 2003 650
Methodology
1.18 The Review has been completed based on a framework of four stages: Planning and
Methodology Identification, Gathering and Selecting the Information, Review and
Assessment of Information, and production of this final report.
1.19 Evidence has been collected from a variety of primary and secondary data sources to
enable the objectives of the Review to be met. Information has been provided from
several sources and has been subject to a request process from AA Projects to the DoE,
NDFA and individual schools.
Not all information requested is available due to the time elapsed since delivery of the
Pilot PPP Schools Bundle and the Conventional Schools. Table 1.4 outlines the research
and analysis completed throughout each stage of the project.
Table 1.4 - Methodology
Element Summary of Methodology
Literature The Literature Review completed provides an overview of documents
Review relevant to the Review. Literature has been assessed from several
sources, including: DoE, DPER, House of Oireachtas, European
Commission, European Investment Bank, European Parliament, and the
National Audit Office and Department of Finance in the UK.
In addition to informing the detailed methodology to deliver the Review,
the Literature Review established:
Definitions of a successful PPP
Examples of PPP assessment similar to the review previously
undertaken and models in use for such assessments
The definition of VfM in a PPP Context
Previous conclusions on PPP market VfM and objective meeting
23Document Multiple sources of information were collated from various parties,
review including the DoE, NDFA, school Principals, and the ETBs including:
PPP Contract
PPP Financial Model (from Financial Close)
PPP FM reports
Conventional School accounts
DoE summer and emergency works details
Additional data collated for individual reviews including as built
drawings for the condition surveys and Statutory Compliance
evidence for the FM/Compliance review
Interviews Semi-structured interviews were completed with the DoE (with input
from the NDFA in relation to the Pilot PPP Schools Bundle), the Project
Company, and school Principals/Caretakers. The interviews provided
wider context around non-financial aspects of the PPP and Conventional
Schools to assess the advantages and disadvantages of each
procurement route against cost. The operational benefits, experience of
delivering educational services in the facilities and PPP relationships
were all topics of discussion.
Questions to the DoE/NDFA focussed on advantages and disadvantages
of both models and the objectives of the Pilot PPP Schools Bundle.
Questions to the school Principals focussed on 12 non-financial
categories as agreed with the DoE/NDFA during development of the
methodology. It is noted that many of these categories have
corresponding data collection/analysis and that the interviews are
supplementary to conclusions made from actual data; these methods are
named in brackets and detailed under the individual methodology
sections below).
1. School Condition (Building Condition Surveys and Financial
Analysis)
2. School Design (Architectural Review and Financial Analysis)
3. Flexibility of Design (Architectural Review)
4. Flexibility of Contracts (Contract Review)
5. Quality of on-site Maintenance (FM/Compliance Review and
Financial Analysis)
6. Quality of FM services (FM/Compliance Review and Financial
Analysis)
7. Energy Efficiency (BER/Energy Analysis and Financial Analysis)
8. How well the building promotes Wellbeing and Sustainability
9. Cleanliness (FM/Compliance Review and Financial Analysis)
10. Building User Satisfaction
11. Third Party or Out of Hours Usage (Contract Review and Financial
Analysis)
12. Availability (Financial Analysis)
Outputs from the interviews are detailed in the appropriate sections
throughout this report.
24Building A detailed survey of building fabric and M&E installations has been
Condition completed for each school. Data has been captured for individual assets
Surveys on a component by room level (e.g., the floor finish within one
classroom, or a single hot water circulating pump present in a plant
room) which provides highly granular condition data.
This data has been utilised to inform the Backlog Maintenance and
Residual Value calculations within the Financial Analysis, as well as
detailed breakdowns of each school condition and the likely future
Lifecycle requirements for the facilities.
Facilities The FM Review has been completed to compare the FM functions across
Management the PPP and Conventional Schools, and measure compliance against
Review statutory maintenance and health and safety requirements across all
schools.
The Review included onsite audits of records, a contract review of the
PPP FM services, discussions with key parties such as the Principals,
Caretakers, FM technicians and Project Company representatives.
Energy Each school has had a thorough energy assessment completed to
Analysis determine energy efficiency across the two comparator groups
including:
Production of a Building Energy Rating
Energy performance analysis
Review of energy management practices
Architectural NORR, the architectural sub-consultant for the Review completed a
Surveys comprehensive Architectural Review including, but not limited to,
assessment of the following considerations. This Review will have
assisted in determining whether the Pilot PPP Schools Bundle brought
innovation and new ideas to school design in line with the original
objectives of the Pilot PPP Schools Bundle.
Site Arrangements
Construction Quality
Building Layout
Internal Learning Space Quality
Internal Environmental Quality
Internal Finish Quality
Overall Architectural Quality
Financial The Financial Analysis has been completed to assess if project objectives
Analysis for the Pilot PPP Schools Bundle are being met and to provide a
comparative basis with Conventional Schools. The financial information
available for the Pilot PPP Schools Bundle was the Financial Close
financial model which is now not reflective of the Unitary Charges paid.
Variations, inflation changes and other movements are included on
monthly invoices but have not been captured and retained back to
commencement of the Concession, rendering the Financial Close model
too outdated to allow a full financial comparison. However, it was used
to inform the financial analysis undertaken.
25The following cost elements have been incorporated in the analysis:
Transaction Costs
- Pilot PPP Schools Bundle – architect, civil, structural,
mechanical and electrical engineers, project management,
employer’s agent and FM consultant
- Conventional Schools - architect, civil, structural,
mechanical and electrical engineers and employer’s agent
Capital Costs
Third Party Income
FM Service Delivery
Lifecycle Costs
Utilities Costs
Residual Value of Assets (incorporating the Backlog Maintenance
costs as identified within the Lifecycle Model)
Each of the above listed financial inputs is assessed with a discounted
cashflow analysis of the annual costs over the construction period and
25 years from the point at which the buildings were operational, using
the project specific nominal discount rate (5%) provided by the NDFA in
line with the Department of Public Expenditure and Reform guidance.
The following elements have been excluded from the quantitative
analysis: debt, tax, shareholder returns, ongoing contract management
costs, and financial risk allowances. These elements have been heavily
considered in the conclusions and key findings but based on the available
information, and particularly in the absence of a PSB, a suitably accurate
comparison between the funding costs and returns was not possible. In
the financial model it was not possible to include the debt cost while also
excluding the other elements listed above. Accordingly, it was not
possible, or appropriate, to compare the full Unitary Charge to the
Conventional Schools costs as fewer services are provided (e.g., lesser
FM services) and therefore it would not be a like-for-like comparison.
Inclusion of these costs in future reviews is recommended and will be
more likely to be possible due to the requirements for a PSB that was put
in place after the Pilot PPP Schools Bundle and some additional financial
data that are collected as part of newer PPP contracts. As recommended
below, consideration should be given to additional data reporting.
The Financial Analysis assumptions are detailed further in Appendix C.
26Part 2
Comparison of the Pilot PPP Schools Bundle
and the Conventional Schools
27Part 2 – Comparison of the Pilot PPP
Schools Bundle and the Conventional
Schools
Part 2 details the comparator assessment outcomes between the Pilot PPP Schools Bundle
and the Conventional Schools, based on the below factors:
Design and Functionality
Building Condition
Lifecycle and Residual Life
Maintenance and Facilities Services
Energy Management and Performance
Administration
Risk Profile
Flexibility of Contracts
Third Party Usage
Value for Money Analysis
Design & Functionality
Architectural Review
2.1 The Architectural Review consisted of a comprehensive site inspection and design
review of each school. For each school, an assessment of the categories below was
completed, and a score determined for each in accordance with the Building
Regulations at the time of construction or on a scale of consideration against similar
facilities. DoE General Design Guidelines for Post Primary Schools (2004)3, and relevant
to the Pilot PPP Schools Bundle only, the User Requirements prepared by the DoE
(2001), were also considered in the scoring assessment.
Architectural Review Categories:
Site arrangement & facilities
Construction quality
Building layout
Adaptability
Quality of internal learning spaces
Quality of internal space generally
Quality of internal environment
Flexibility and variety of learning spaces
Internal journey/pupil movement
3 While “General Design Guidelines for Post Primary Schools” was first published in 2004, earlier drafts of this document were
in circulation within the Planning and Building Unit of the DoE from 2001 and would have been used as a basis for evaluating
the design and layout of new post-primary school buildings and extensions at the time the Conventional Schools were
procured.
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