Dublin Castle, 28 September 2004

Press Release: Value for Money Report on the Grouped Schools Pilot Partnership Project

The Comptroller and Auditor General, Mr John Purcell, has today published a report on a value for money examination of the grouped schools pilot partnership project undertaken by the Department of Education and Science.

Background to the Examination

Public private partnerships (PPPs) are contractual arrangements between public and private sector partners, whereby the private sector partners deliver projects and services that traditionally were provided directly by the public sector. The public sector partner specifies the outputs and services required and, subject to these being delivered, pays agreed amounts. The private sector partner usually has some discretion to propose how the services will be provided.

In June 1999, the Government approved a pilot programme of projects to test the feasibility and value for money that can be achieved through the PPP approach. A ?grouped schools? project proposed by the Department of Education and Science was the first of the pilot projects to reach the agreed contract stage.

The examination sought to establish whether the project was properly developed, managed and evaluated with the intention that the findings would inform similar PPP projects in the future.

The Project

The Department?s initial proposal (approved in June 1999) was for a project involving three new second-level schools. By the time the project was formally launched in the market in July 2000, it had been expanded to include five schools. The increase in scale made the project more attractive to prospective private sector partners, but it also increased the State?s exposure in the event the pilot project would not deliver good value.

Following a competitive process, the Department agreed a contract in November 2001 with Jarvis Projects Ltd (Jarvis) for the design and construction of the five new schools, all on publicly-owned greenfield sites. Jarvis also took on responsibility for the running and maintenance of the school facilities for 25 years and for sourcing the funding for the project.

Schools were provided in Ballincollig, Clones, Dunmanway, Shannon and Tubbercurry, catering for a planned total of 3,475 pupils. All the schools were completed by the end of 2002 and were open and operating from January 2003. Jarvis staff now manage the accommodation and facilities, relieving the school Principals of that duty.

A lump sum of ?8.9 million was paid to Jarvis in January 2003, when the school buildings were made available. Subject to the agreed service levels being met, the Department will make monthly payments to Jarvis over the life of the contract. The total cost to the Department over 25 years is projected to be ?283 million (including VAT). This is equivalent to an estimated ?150 million in net present value terms.

Main Findings

  • The Department did not at any stage set a budget or spending limit for the project. This meant that, at the time it went to the market seeking proposals, the Department had no reliable benchmark against which to judge the affordability of what the bidders were offering.
  • In selecting a firm with which to negotiate, the proposal from Jarvis, while not the cheapest of the bids received, was judged to be significantly better than the others in design and technical terms.
  • In negotiating the final terms of the deal with Jarvis, the Department was reasonably successful in restricting upward cost drift.
  • The deal provided for school buildings about 15% bigger than the Department would normally allow, mainly because of the provision of extra social and circulating space. This may cause pressure for increasing the accommodation standard for other new schools in the future with attendant cost implications.
  • Before the deal with Jarvis was finalised, the Department estimated that it would result in a cost saving to the State of around 6% when compared to the traditional approach. Our analysis found shortcomings in the Department?s estimation. It is likely that the final deal with Jarvis could be between 8% and 13% more expensive than conventional procurement and operation.
  • While the true value for money can only be established over the 25-year cycle of the project, it is recommended that the Department undertake a retrospective evaluation of the project after five years so that the costs and benefits can be reassessed in the light of operational experience.
  • Significant changes were implemented by the Department of Finance in the way PPP projects are developed and managed, based on the experience of this and other PPP projects.

Notes for Editors

The Comptroller and Auditor General is an independent constitutional officer with responsibility for the audit of public funds. He reports to Dáil ?reann.

The full text of the report is available on the website of the Office of the Comptroller and Auditor General (go to www.gov.ie/audgen/)

For further information about the report, please contact:

Seamus McCarthy at (01)603 1080 or at Seamus_McCarthy@audgen.irlgov.ie