Twelve years of scottish school public private partnerships: Are they better value for money?
| Date | 01 March 2017 |
| DOI | https://doi.org/10.1108/JOPP-17-02-2017-B002 |
| Pages | 187-228 |
| Published date | 01 March 2017 |
| Author | Rizal Yaya |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue |
JOURNAL OF PUBLIC PROCUREMENT, VOLUME 17, ISSUE 2, 187-228 SUMMER 2017
TWELVE YEARS OF SCOTTISH SCHOOL PUBLIC PRIVATE
PARTNERSHIPS: ARE THEY BETTER VALUE FOR MONEY?
Rizal Yaya*
ABSTRACT. This research evaluates the value-for-money (VFM) obtained from
public-private partnership (PPP) schools in Scotland, based on headteachers
questionnaires, local authority interviews and Scottish School Estate
Statistics. The period covered is 2000-2012, when 395 new schools were
commissioned. The PPPs were better in building condition and maintenance
standards and conventionally-financed schools were better in terms of
teacher access and improvement in staff morale. There was transfer of
knowledge whereby the high standards of the PPPs then became the new
standards for the conventionally-financed schools. Concerns about PPP VFM
relates to the high cost of unitary charge s and contract inflexibilities. A
higher percentage of headteachers of c onventionally-financed sc hools
(63.64%) considered their new schools resulted in good VFM compared to
PPP schools (42.86%).
INTRODUCTION
Growing demand for public infrastructure in the context of limited
public funds has pushed governments to seek more private sector
involvement in infrastructure procurement (Hodge, 2010; Yaya,
2014). Since the 1990s, this involvement has moved to an integrated
model of a PPP contract which bundles the design, construction,
financing and operation activities into a single long-term contract.1
In the United Kingdom (UK), there was a significant increase in
PPP contracts, notably during the 1997-2010 Labour Government.
Figure 1 shows that the increased trend of using PPP-type
procurement started in 1996 and reached its peak seven years later.
-----------------------
* Rizal Yaya, Ph.D., is a Senior Lecturer, De partment of Accounting,
Universitas Muhammadiyah Yogyakarta, Indonesia. His teaching and
research interests are in public sector management accounting,
environmental accounting and accounting for Islamic banking.
Copyright © 2017 by PrAcademics Press
188 YAYA
FIGURE 1
PPP Development in the United Kingdom
Source: Author’s calculations based on UK Treasury (2012) with
adjustment by adding data of three London Underground contracts
in 2002 (£5.53b) and 2003 (£12.07b).
In 2003, the investment in PPP contracts was around £16.63bn,
equivalent to 3.18% of total public spending of the UK Government in
that fiscal year. After a sharp decrease in new contracts, there was a
significant rise (by £7.14bn) in 2006. However, since 2007, the
number of new PPP contracts steadily decreased as a result of the
global financial crisis (National Audit Office, 2010a, p. 14). The number
of PPP contracts also diminished due to the policy of the UK Coalition
Government, elected in 2010, to reduce budget deficits by inter alia
the cancellation of a large number of PPP bidding processes in England
(Watt, 2010; UK Treasury, 2010).
0
20
40
60
80
100
120
140
160
180
1992
1996
1998
2000
2002
2004
2006
2008
2010
Y1=£100m;Y2=number of projects
Year
Est. Total Capital
Value (£100m)
Number of Projects
TWELVE YEARS OF SCOTTISH SCHOOL PUBLIC PRIVATE PARTNERSHIPS 189
This research was undertaken in the context of school PPPs in
Scotland. This was characterised by some changes in the internal and
external environment surrounding the Scottish PPP schools projects.
The changes in the internal environment were, for instance, the
experience gained on project management skills by both the public and
private sectors; longer relationships maintained with partners; the
issuance of new PPP guidelines; and the increased number of
conventionally-financed schools. Changes in the external environment
include the austerity imposed by the UK Government on the devolved
Scottish Governments. In 2010, excluding the NHS ring-fenced budget,
the new UK Coalition Government targeted 25% overall cuts in the
public services provided by departments at the central government
level by 2014-15 (The Economist, 2010). Similarly, the public spending
budget of the devolved Scottish Government was predicted to fall by
2.9% per year with a cumulative fall of 16.1% (£4.8b) by 2015-16
compared to the 2009-10 public spending budget (Goudie, 2010, p.
23). The UK Treasury (2011a) had said that savings from the on-going
PPP projects should be secured and local authorities were urged to
secure savings from PPP operations through, for instance, optimising
asset management.
A PPP school project is designed for a long-term contract to provide
accommodation and related services for 25 to 30 years.
Notwithstanding that the UK Coalition Government had a severely
reduced programme for schools rebuilding in England and had set a
new approach for PPP projects, the previously-signed contracts would
continue to operate until the end of the contract period and it was still
necessary to demonstrate their VFM.2 Given this new context, the
Government budget cuts policy will have reduced the budget flexibility
of local authorities. On the other hand, the PPP contractors may have
purposely managed these projects well to obtain the good reputation
needed to obtain new PPP contracts. Thus, the uncertainty of the
availability of future new schools PPP projects may or may not affect
the contractors’ behaviour towards their ongoing PPP projects.
LITERATURE REVIEW
This section discusses the definition of PPPs followed by a detail
definition of VFM and factors that may contribute to PPPs VFM. Grimsey
and Lewis (2005, p. 346) stated that PPP procurement is used to fill
the gap between conventionally procured government projects and full
To continue reading
Request your trial