Background and rationale

Opportunities in PPPs in Education

PPP Models for SHS

National Workshop Results

Challenges to Implementation

• Deepening partnerships with the private sector is

becoming a reliable way of financing quality

education and making it accessible especially to

the poor. (World Bank)

• The 2013 Philippine Budget has been designed

to enable public-private partnerships

(PPPs) for the delivery of social services.

Private investment imperative to expand

infrastructure and provide greater access to all

forms of education

PPPs a good way to attract private investments

Concept of PPP and its applicability to education

not new (our ESC program is recognized abroad)

KEY EDUCATION REFORM AREAS:

• Expanding the basic education cycle

from 10 to 12 years,

• Filling the gaps in the system of

classrooms, books and teachers,

• Expanding education service

contracting.

• School-community partnerships on

the ground have shown the way

forward in making schools perform

better.

• Government and the private sector

must ensure that these islands of

excellence become the norm for all by

scaling up these successful initiatives.

• Public-Private Partnerships

or PPPs must indeed become

part of our education reform

effort.

Considerations for PPP in Education:

• Help expands access to basic education,

directly or indirectly, especially in areas not

reached by the public school system

• Promote quality basic education

• Offers a cost-effective solution for government

• Cater to target clientele of government

Undersecretary Varela, 2012

DEFINING PPPS IN EDUCATION

• Relationship where government contracts out to private providers the supply of a particular service of a defined quantity and quality at an agreed priced for a specific period of time.

Defining Public-Private Partnership

Win-win arrangement

― Enables public

sector to focus on

delivering other

critical functions

and services;

GOVERNMENT:

―promotes certainty

and predictability

in spending.

―Maximizes the use of its

skills, resources and

capacities to deliver services

in a more efficient manner;

PRIVATE SECTOR:

― generates new business.

PPPs in Education

• Definitions differ in terms of scope and

formality of arrangements.

• Common Elements:

― Formal arrangement with contractual basis

― Involve public and private sectors

― Outcome focus

― Sharing of risks/rewards between public and

private sectors

― Recognize complementary role of public and

private sectors.

Provision and Financing of Education

Private schools

Private

universities

Home schooling

Tutoring

User fees

Student loans

Vouchers

Contract schools

Charter schools

Contracting out

Public schools

Public universities

OPPORTUNITIES FOR PPPS

IN EDUCATION

NEED classrooms.

Teachers and

expertise for

Grades 11 and 12

Have classrooms,

teachers and

expertise for

Grades 11 and 12

The Logic

Public Private

PPPs and the K to 12 Reform

• Senior High School Program

– Projected total enrollment : 1.1 million by 2016

– Offer Senior High School License

• enables not only private secondary schools but also

private HEIs to participate

– Adjust role of public high schools

• Some will expand to offer SHS

• Some will become standalone Junior High Schools

• Some will be developed into stand

alone SHS

The Challenge of Bro. Armin

Last October 26, 2012

• Of the projected 1.1 million SHS students,

how many can the private sector absorb?

– SY 2016-2017: 400,000 (Grade 11)

SY 2017-2018: 800,000 (Gr 11 and 12)

• How many can you absorb during the

transition?

• What are your plans for after the transition?

PPP MODELS FOR SHS

Three Models

• Expansion of current ESC Program

• Voucher System

– Universal

– tiered vouchers

• “Concessions:” individual contracts with

schools

– Government will pay per student, may provide

capital

– schools deliver enrollment and quality targets at

agreed-upon price

What Activities are in a PPP?

• Construction

• Non-teaching services

–Support services

–Building maintenance

• Teaching services

• Ancillary services

–Teacher training

–Assessment

Range of PPPs

Build

and

design

Operate

and

maintain

Build

Operate

Transfer

Build Own

Operate

Lease-

Develop-

Operate

Concessions ESC,

Vouchers

Mostly

government Mostly

private

Govt

finances,

owns

Private

sector

finances

The PPP Continuum

Public

schools

Subsidize

d private

school

inputs

Private

school

contracts to

provide

education

Private

mgt of

public

schools

Vouchers:

funding

follows

students

100 public/

low PPP

100 private/

high PPP

WB, 2006

3 Models, Con’t

• Flat grant to selected

non-DepEd schools

• Government allocates

the number of grants

allocated per school

based on need.

• Eligible schools are

selected based on

certain enrollment and

quality targets.

Voucher System

• 100% demand free

exercise of market

choice by students and

their families.

• Tiered: all public

elementary graduates

receive a voucher which

will be honored in any

DepEd or non-DepEd

school. Amount of

government subsidy

linked to students’

capacity to pay.

Concession

• 100% supply: individual

negotiations with non-

DepEd schools

• Government provides

lump sum capital and

operating funds

• Schools commit to

deliver certain

enrollment and quality

targets

• Rules – the party with the most control over a risk should bear the risk

– the party which bears a risk should expect a reward

• Some kinds – Demand risk

– Political risk

– Performance risk

– Price risk

– Construction and completion risk

– Repayment risk

• All these risks are identified in the PPP contract

• Risk insurance is available, but expensive

• Risk that enrollment will not meet the

levels as agreed upon

• Who bears the risk?

– Gov’t – guarantees level of enrollment?

– Private sector – market forces?

• In general, whoever bears the risk should

be rewarded more

• The risk that the forecast won’t be reached

due to political factors

• Examples

– Change of policy due to change of

government

– Same government, unilateral change of policy

• In general, government should bear

political risk

•

• The risk that you cannot charge the price

agreed upon, or that your price is eroded by

inflation

• Remedies

– Price escalation formula

– Government guarantees deviations from

agreed price

– Or, the private sector can just take the risk

• Performance risk

– You don’t deliver the educational service as per

contract

– Operator (private party) generally bears this risk

• Assumes government meets its part of the agreement

• Construction risk

– You don’t complete the facility in time, at the price

agreed upon, at the right quality

– Private sector generally bears this risk

FAPE-COCOPEA ePPP Steering Team

Consultative Workshops conducted in three

venues with HEI presidents and Secondary

School heads and principals:

Star Plaza Hotel in

Dagupan, Nov. 26

Hotel Fortuna in

Cebu, Dec. 3

The Pearl Manila

Hotel in Manila,

Dec. 6.

VENUE

NUMBER OF

PARTICIPANTS

NUMBER OF

INSTITUTIONS

TYPE OF INSTITUTION

HIGH

SCHOOL

HIGHER

ED

EDUC’L

ASSO.&

OTHERS

Dagupan

73

60

35%

52%

13%

Cebu 56 38 32% 66% 3%

Manila 143 107 26% 66% 7%

TOTAL 272 205 30% 62% 8%

Table 1

NUMBER OF INSTITUTIONS AND PARTICIPANTS in Attendance of the Series of One-day Workshop on PPP in Education

Get the participants to understand PPP education models for Senior High School: ESC, Vouchers, and Concessions.

Identify a range of costs/subsidies per student from private schools/HEIs as requested by DepED.

Get to a short list of key factors and risk factors acceptable to the participants to help DepED develop a PPP model in more detail.

Workshop 1:

Pricing PPPs in

Education

Workshop 2: Designing

the SHS Program and

PPP Solutions

Subsidy or Voucher)

The Table 2 on Range of Pricing of SHS Provision simply indicate the magnitude of

school costs of the private education sector.

The variations of school costs are due to different tuition and other fees charges,

enrollment size, teachers’ salary structure, and other internal and external cost

factors.

The three workshop groups had different average price per student for SHS:

Dagup an – P24,676; Cebu – P33,306; Manila – P28,986.

Overall mean price = P28,986.

Price of ESC/Voucher should be not too far from current

levels (P10,000) so it would not be too difficult to explain to

legislators and the general public.

Increase grant/subsidy under the ESC/voucher for grades 11

and 12.

– Students under the new ESC/Voucher scheme will likely be poorer with

lower ability to pay the difference between the subsidy and private

school tuition than the present ESC grantees.

– Tiered pricing is attractive. It likely will focus on two aspects:

geographical location of the school and income of grantees’ parents.

– Tiered pricing will require means testing.

Allow top up for good performance.

With regards PFI, while this is being done for infra

PPP right now, the private sector expressed

interest in having an arrangement like it for

private school expansion.

How to narrow down the

gap?

Option 1 bring the ESC

subsidy to the

average/look for

another baseline for

ESC

Option 2 new subsidy

provision for Grades

11 and 12, separate

from ESC

Option 3 estimate of parents’

willing to pay

(means test as

students come from

different income

levels)

Possible options to explore and study:

Bridging the Gap

• Workshop comments

• Survey comments

• DepEd Oct 26 comments

Recalculate operational budget to its essential costs

of providing grades 11 and 12 core and pathways

curricula.

Partnering with industry so that students earn while

they learn.

Harnessing CSR (corporate social responsibility)

through some kind of adopt-a-scholar program by

providing the same tax incentives to the private sector

under the adopt-a-school program.

DepED to raise P 5.8 billion from the private

sector yearly in various forms of CSR

arrangements.

– This amount can be channeled to financing of

ESC/ vouchers through some kind of adopt-a-

scholar program.

Subsidy should be sufficient to cover at least 80% of

cost so parents would shoulder the 20% counterpart.

Increase current subsidy to at least P15,000

Government vouchers may be too low to cover

school's actual cost of education/training. It can be

compensated by:

– the volume students, i.e., the school has to operate at optimum capacity to recover costs.

– The school could also have other sources of income, like scholarships and industry OJT support.

The subsidy may be too small to attract the

public junior high school graduates to enroll in

private senior high schools.

School advances on the fixed cost of

operation.

Capability of parents to pay for additional cost

(not covered by the ESC grant) may become

a problem.

Average total school enrollment is 4,840 ranging from a low

of 732 students to a high of 17,752 students.

– Elementary average total enrollment is 575 ranging from

a low of 10 students to a large enrollment of 3,145.

– Secondary school’s average total enrollment is 695. The

lowest enrollment is 218 students and its largest enrollment

size is 2,016.

Average teacher’s monthly salary structure:

Starting – Php 11,000

Median – Php 18,000,

Highest – Php 37,000.

In the second week of November 2012, FAPE-COCOPEA secretariat disseminated the survey questionnaire to randomly selected

member institutions both secondary and tertiary levels. As of January 14, only 68 duly accomplished survey responses were

submitted. Documentary analysis, data processing and statistical analysis are still ongoing.

The average secondary tuition is Php 15,428 ranging

from a low of Php 1,200 to a high of Php 42,455.

The average unit cost of the college is P 1,776

ranging from a low unit cost of P 326 to a high unit

cost of P 9,300.

Over 90% of the respondents from both HEIs and

secondary schools confirmed their institutions’

willingness and readiness to provide Senior High

School by SY 2016-2017.

The average cost of SHS provision is Php 31,820

from a low of Php 10,000 to a high of Php 70,000.

Respondents generally positive in terms of exploring

the variants of the three PPP models for education:

ESC, Voucher and concession.

The key issues discussed revolved around

three areas:

(1) The selection process of SHS schools and grantees,

(2) The SHS grant value and the methods used for

determining that value, and

(3)Quality Assurance and accountability

of the new SHS.

Which private high schools/HEIs can

participate in providing SHS program?

“…Only those PHS/HEIs which can

meet the service standard

requirements and are ready and willing

to provide SHS Core Curriculum and

its Career Pathways Curriculum.”

Who will select the PHS/HEIs?

DepEd selects PHS/HEIs which will offer SHS curriculum,

The “selected” schools would have to apply for permit to operate

SHS, separate from government recognition required

of current junior high school curriculum.

Who will select students?

Participating private schools to

set their own admission criteria

for senior high school duly

aligned with DepEd admission

parameters.

Eligible for SHS grant: graduates of either public or private

junior high schools.

The ESC grantees from Grades 7 to 10 should be automatically eligible for Grades

11 to 12 ESC grant. This means that their JSH ESC grant is extended to SHS.

Aside from the current JHS diploma, a separate diploma for

those who complete senior high school.

The students who would be given

vouchers have the choice to enroll in

either private or public schools. If they

opted to enroll in public schools, then the

vouchers just cancel out the costs.

For those who opted to enroll in private

schools where the school fees are much

higher than the value of the voucher, the

parents would have to pay for the

differential.

The government can narrow down this differential when it provides

substantial subsidies. The suggested consideration was that government

subsidy to the private schools should be enough in such a

way that it will be able to compete with the

other schools in the area.

As practiced by UP as in other voc-tech

schools which cater to students coming

from financially poor families, tuition fee

and other school charges are

socialized or subsidized based on

income tax return documents.

For those families whose incomes are

within the “tax-exempt” bracket, then

the students of these families are entitled

to scholarship. Those families whose

income levels are way above the “tax-exempt” range

can be charged some top up.

The Federation of Accrediting Agencies of the Philippines (FAAP)

and its members (PAASCU, PACU-COA, ACSC, ACCUP) have

well-established quality assurance mechanisms, organization and

implementation tools.

The accreditation instruments (self-survey, program assessment

and audit, etc) can be developed and enhanced to

include both junior high school and senior high school.

CHALLENGES IN IMPLEMENTING

PPPS IN EDUCATION

1. Initial structure and prioritization of objectives

a. Government priorities (meets DepEd mandates)

b. Private participant priorities (price, demand stability,

financial viability, performance targets)

c. Have a dedicated unit (ePPP?) to implement

2. The bidding process

3. Regulatory and legal issues

1. Project Readiness/Preparation

2. Responsive to the Sector’s Needs

3. High Implementability (bankable, no

major issues)

2013 2014 to 2015

January to

February

March to

December

January to

December

• Crafting of a proposed

Education PPP Policy

for DepED approval.

• Completion of PPP

policy by Philippine

Government

• Capacity-building

• Some discussions

about early starts for

PPPs

• “Bidding” and private

sector invitations

• Capability building

and professional

training

• Private sector PPP

participants

Thank You

TABLE 2a: DAGUPAN GROUP - RANGES OF PRICES BY APPROACHES

APPROACHES

BREAKOUT GROUPS

Grp.

No.

BOTE ESC TSF Standard

Deviation LOW HIGH LOW HIGH LOW HIGH

U of LU, Metro Dagupan, SLC 1.1 44,000

45,000

30,000

35,000

32,000

36,000

6,197

3 HEIs, Laoag,La Union, Pagasinan 1.2 11,500

16,800

8,000

13,000

15,300

19,300

4,022

CAR, Isabbela Mostly HS 1.3 14,000

17,000

10,500

16,500

15,000

22,500

3,968

R 1 all HEI, BED, Voc-tech 1.4 18,000

28,000

13,000

20,000

19,000

28,000

5,933

Pangasinan, mostly HS 1.5 30,000

35,000

25,000

30,000

21,000

24,000

5,089

R 1 all HS 1.6 10,000

15,000

8,000

13,000

12,000

16,000

3,011

R 3 1 HS 1.7 35,000

37,000

30,000

33,000

37,000

39,000

3,251

4 HEIs 1.8 30,000

40,000

22,000

40,000

28,000

47,000

9,333

Average 24,063

29,225

18,313

25,063

22,413

28,975

4,131

Minimum 10,000 15,000 8,000 13,000 12,000 16,000 2,000

Maximum 44,000 45,000 30,000 40,000 37,000 47,000 3,606

Table 2b: Cebu Group - Range of Prices by Approaches

APPROACHES

BREAKOUT GROUPS

Grp.

No.

BOTE ESC TSF Standard

Deviation LOW HIGH LOW HIGH LOW HIGH

Central & Western Visayas 2.1 22,000 43,000 6,000 5,000 25,000

15,643

15,000 29,000

More sudsidy if there’s

a chance

Same as

1st yr.

college

Same as

1st yr.

college

9,899

Bukidnon & Cotabato (BEds/HEIs) G.11 2.2 20,000 24,000 20,000 24,000 22,000 24,000

1,966

G.12 24,200 26,400

1,556

Mindanao/Cebu/Bicol (Beds/HEIs) 2.3 35,000 43,000 17,000 23,000 37,000 46,000

11,345

Cebu (USJ-R/LaSalle) 2.4 40,000 60,000 40,000 60,000 40,000 60,000

10,954

Negros Oriental & Iloilo 2.5 20,000 60,000 12,000 24,000 60,000

23,048

Average 26,000 43,200 22,250 35,667 29,440 43,280

8,871

Minimum 15,000 24,000 6,000 23,000 5,000 24,000

8,931

Maximum 40,000 60,000 40,000 60,000 40,000 60,000

10,954

Table 2C: Manila Group - Range of Prices by Approaches

APPROACHES

BREAKOUT GROUPS

Grp.

No.

BOTE ESC TSF Standard

Deviation LOW HIGH LOW HIGH LOW HIGH

MANILA 3.0 21,659 40,166 16,100 25,625 25,836 44,471

NCR & Reg. 3 (HS & HEIs) 3.01 24,816 58,656 11,200 12,000 34,968 72,192 25,058

Mindanao/Bicol/NCR (3 HEIs/2 HS) 3.02 10,000 80,000 10,000 15,000 15,000 80,000 34,928

NCR/Reg, 4A/Bicol (HS/HEIs) 3.03 30,000 35,000 18,000 22,000 30,000 50,000 11,215

NCR 3.04 19,375 27,500 18,000 20,000 21,451 25,213 3,680

NCR/Reg. 4A (5 HS/4 HEIs) 3.05 20,000 24,000 15,000 20,000 28,000 35,000 7,062

NCR/Reg. 2, 3, 4A (HS/HEIs) 3.06 15,000 20,000 18,000 20,000 18,000 25,000 3,327

Reg. 4A 3.07 18,000 25,000 15,000 20,000 30,000 40,000 9,201

NCR/Reg. 4A (HS/HEIs)

3.08 25,000.00 30,000.00

Amount of

subsidy from

DepED

Parents pay

the difference 35,000.00 40,000.00 6,455

HEIs & BE/HS 3.09 50,000.00 120,000.00 35,000.00 105,000.00 50,000.00 120,000.00 39,115

HEI-1/HS-2/BE&HEI-5 3.10 22,000.00 24,500.00 18,000.00 20,500.00 22,000.00 24,500.00 2,478

Reg. 4A/Reg. 2, 5/NCR 3.11 18,000.00 25,000.00 15,000.00 20,000.00 20,000.00 29,000.00 5,037

NCR 3.12 19,375.00 27,500.00 10,000.00 18,000.00 21,450.00 25,212.00 6,157

Reg. 2, 4A/Mindanao 3.13 10,000.00 25,000.00 10,000.00 15,000.00 10,000.00 12,000.00 5,888

Average 21,659 40,166 16,100 25,625 25,836 44,471 11,006

Minimum 10,000 24,500 10,000 15,000 10,000 12,000 5,696

Maximum 50,000 120,000 35,000 105,000 50,000 120,000 39,115

June 2016 – PPPs should be ready

June 2015 – Schools prepare for PPPs

June 2014 – Bidding, selections and award

June 2013 – DepEd completes project proposals, gets oversight approvals to proceed

Before June 2013 – PPP policies in place

3 Models, Con’t

64

Option 1:

Education Service Contract

(ESC) scaled up and improved

Option 2:

Vouchers

Option 3: Concessions • Infrastructure PFI- Service

• Management Contract

Country Philippines Netherlands (no top-up) Chile (top-up) UK/USA

Description Government contracts directly with

private schools to pay for agreed

volumes of places for low income

students in areas where there is a

shortage of public school places

Government directly subsidises private

schools according to enrolment numbers.

Private schools allowed selective student

admissions. All education publicly

financed (Netherlands); Universal

vouchers, switching between public and

private schools (Chile)

Government gives concession to private

consortium to build, finance and maintain

school buildings over long time frame.

Separate school management and

educational delivery contracts are

tendered, which are competitively bid on

over much shorter time frames.

Market

effect "Managed Market – school by

school"

"Managed market – funding follow pupil” "Private build-operate-concession,

government owns" Case study ESC-FAPE “Bijzondere “or special schools (N)

Sectarian PPP schools (Chile)

• UK: Building Schools for the Future -

Private finance initiative

• USA: Seattle school district

management contract to EMOS

Pros • DepEd retains control over supplier

base & student volumes

• Existing governance structure &

political consensus in place

• Allows free market response to demand

• Consumer choice drives quality

competitiveness

• Increases access and new creation

• PFI off balance sheet pre-finance &

improves overall quality of infrastructure

• Management contract competitive &

shorter term to raise quality standards

Cons • DepEd has to contract with every

single supplier

• Implies existing school base, not

new place creation

• No consumer choice

• Not means-tested, so not optimising

benefit to lower-income families, but also

benefiting those who could afford to pay

anyway

• Race to the bottom on price amongst

private suppliers

• Separates management from asset

generation (2 different contracting

streams)

• No Primary quality levers

• No consumer choice

• The risk that you won’t get paid

– As scheduled

– For the amount agreed upon

The ESC allocation for the NCR should also be the same for all

regions.

More government subsidies to private HEIs.

Local government units should stop putting up colleges and

universities for these pose a direct competition that would cause

the death of private HEIs.

On the question where to base the price range of Grade 11,

considering that high school fees are yearly while colleges fees

are charged semestral or trimestral.

– Suggestion : Grade 11 price closer to grade 10.

Grade 12 closer to 1st year college

Value of ESC/voucher should be more or less equivalent to

current and inflationary adjusted total school fees.

College faculty with master’s degrees with no diminution of

salaries --- and discipline specialization

Range captures prices fluctuation during implementation year

Secondary school with science orientation is priced at a range

of Php 24,000 – Php 30,000.

It is important for private schools and colleges to know if the

public schools and colleges in local communities are planning

to offer SHS. If they will, the private schools even if subsidized

by DepEd will lose its clientele.

Present ESC subsidy is very low at Php 6,500 in the

province and Php 10,000 in NCR.

Service standards such as class size (45 students per class)

should be the same for all.

The assumption on inflation rate would have to be specified

based on realistic calculations.

The salary of teachers in private schools should be comparable

with that of the public schools, starting salary is Php 18,000.

HEIs are still in a dilemma whether to price SHS students the

same as college students or HS students.

Educational associations in collaboration with

DepED/CHED/TESDA should meet and agree to standardize

pricing for SHS.

Since private school parents, educators and administrators are

among the biggest group of taxpayers, government ought

to give additional subsidies to private educational

institutions to be at par with the public schools. These

subsidies may be in the form of faculty development

assistance, instructional materials development assistance,

capital support for building and other physical infrastructures.

The government should assist private schools in developing

linkages with private companies and industries, which can

provide various forms of assistance to help improve

educational institutions .

OPPORTUNITIES FOR

PPP IN EDUCATION

• Expanded ESC

• K+12 Senior High

School PPP

Schemes

2013 GASTPE Budget

• Php 7.0 billion in 2013 vs. Php 6.3

billion in 2012

• 2013 budget sufficient for 1 million

grantees (DepEd) for HS 1-4