Public-Private Partnership for School Infrastructure Project (PSIP)-II Department of Education Good morning. We are pleased to present to the Investment Coordination Committee of the National Economic Development Authority the Department of Education’s plans for the second phase of the Public-Private Partnership (PPP) for School Infrastructure Project (PSIP). National Economic and Development Authority Regional Development Council XI 29 January 2013

Presentation Summary Project Rationale: Wipe out the classroom backlog PSIP-I Bid Results PSIP-II Project Components Project Features Expected Benefits Project Timetable

Our Goal: Eliminate the Classroom Backlog 66,800 SY 2010-2011 BACKLOG Our Goal: Eliminate the Classroom Backlog less 3,291 June –December 2010 ACCOMPLISHMENT 12,189 January-December 2011 ACCOMPLISHMENT less 15,354* January-November 12,2012 ACCOMPLISHMENT less 11,850* On-going/Programmed Balance 2012 less 9,301* Public Private Partnership-I 2012 less 2012 Provision* DepEd: 11,225 DPWH: 2,313 PDAF: 1,495 LGUs: 5,719 Private Donors, PAGCOR, AusAID: 6,452 PSIP: 9,301 At the start of the Aquino administration, the Department of Education estimated the classroom backlog to number to 66,800. This backlog, if unchecked, may grow to as much as 150,000  by 2016 as a result of population growth, and the implementation of the DepEd’s K+12 and Education for All (EFA) programs. The government would then need to construct about 30,000 classrooms per year from 2010 to 2015 in order to address the current and increasing classroom requirements of the school population.   Traditionally, the government builds only an average of 8,000 to 10,000 classrooms per year. However, under the new administration more significant public resources have been appropriated for classroom construction, doubling the budget for basic educational facilities from 6.14 billion in 2010 to 11.29 billion in 2011. At the same time, the DepEd has mobilized partnerships with local government units, the private sector, and foreign donors to help in the classroom construction effort. These initiatives have allowed us to quadruple classroom provision from 3,291 in 2010 to 12,189 in 2011 and even more so this year. As of November 12, 2012, the Department has surpassed the number of new classrooms constructed in 2011. About 32,000 more classrooms are in the pipeline and this includes our program under the PPP for School Infrastructure Project. The DepEd is keen on pursuing the PPP approach to harness private sector resources and technical expertise in order to: (a) improve the quality and introduce new technology in the construction of public school classrooms, (b) derive cost savings for government, and (c) achieve faster implementation timetables than our traditional construction program would allow. 10,679 Public Private Partnership-II 2013 less 18,924 Programmed 2013 less Zero Backlog End of December 2013

PSIP I Bid Results Bright Future Educational Facilities (BF Corporation-Riverbanks) Region I 2,157 classrooms PhP 3.4 billion To supplement the government’s existing initiatives, the Department has adopted a strategy to provide classroom facilities through a public-private partnership (PPP) project using the Build-Operate Transfer (BOT) Law (Republic Act No.9184). With the help of partner government agencies, the DepEd developed a Build-Lease-Transfer project dubbed as the Public Private Partnership for School Infrastructure Project (PSIP). Under the PSIP, the private proponent is responsible for the design and construction of 9,301 classrooms (with toilets and furniture) in Regions I, III and IV-A, and for the periodic maintenance of these facilities every 4.5 years within a ten-year lease period. On the other hand, government, through DepEd, shall be responsible for providing access to and right-of-way within the school sites, day-to-day wear and tear of the facilities, and for annual lease payments over ten years. The DepEd will source the lease payments from its annual appropriations, which are covered by a Multi-Year Obligational Authority (MYOA) issued by the DBM. The pictures you see here are of the mock up classroom buildings constructed by the two winning bidders of the Project. You will see the difference in building technologies used for the structures. BF Corporation’s mock up makes use of steel panels while Megawide’s mock up makes use of modular wall panels. These two-storey, two-classrooms structures were constructed within 2-3 weeks, which is about three times faster than conventional construction. These technologies were evaluated and found compliant to the Project’s Minimum Performance Standards and Specifications, which DepEd developed in partnership with the DPWH, the PPP Center of the Philippines and DOLE-Occupational Safety and Health Center. Bright Future Educational Facilities Inc. (of the BF Corporation and Riverbanks Development Corporation consortium) won the bid to build and maintain 2,157 classrooms in Region I under a ten-year lease contract of PhP 3.4 billion. Meanwhile, Citicore Investment Holdings, Inc.-Megawide Construction Corporation Consortium won the bids to build and maintain 2,885 classrooms in Region III and 4,259 classrooms in Region IV-A under a ten-year lease contract of PhP 5.2 billion and PhP 7.6 billion, respectively. The total contract price for the three Regions is PhP 16.28 billion, which is below the Approved Budget for the Contract of PhP 16.42 billion. Our ABC for the bid is lower than the net present value (NPV) analysis that was presented to and approved by the ICC and NEDA Board, as the Department was able to further refine its cost assumptions for the Project (ICC NPV: PhP13.75 billion vs. Actual ABC NPV: PhP12 billion). Since the resulting contract price is below the ABC, the government was able to derive greater cost efficiencies from the successful bid of the Project. Citicore-Megawide Region III 2,885 classrooms PhP 5.2 billion Region IV-A 4,259 classrooms PhP 7.6 billion

Regular Program vs. the PSIP Phase II Discussion Conventional Program PSIP-II Project Scope Single site Multiple sites Project Size Few classrooms Several thousand classrooms Procurement Mode RA 9184 RA 7718 (BOT Law) Construction Method Conventional technology Open to new technology Program of Works Pre-defined Open, subject to compliance to MPSS Payment Terms Progress billing Full-payment only upon completion of construction works The PSIP is unique from the DepEd’s regular construction program. Unlike regular procurement, the PSIP will be bidded out in large-scale portfolios in multiple sites underthe BOT Law framework. New building technologies, apart from conventional construction, will be allowed to provide government with a wider range of options in terms of quality and durability, cost and speed of delivery. The new technologies will be evaluated against the Minimum Performance Standards and Specifications set by the DepED, DPWH, PPP Center of the Philippines and the Department of Labor and Employment’s Occupational Safety and Health Center. The MPSS covers architectural, structural, electrical and sanitary and plumbing design requirements for classrooms, toilets and school furniture. The MPSS also outlines standards and specifications for construction, construction management, test requirements and maintenance and warranty. To name a few, classroom MPSS include size of 7m in width by 9m in length, operable transparent/translucent louver-type windows, complete electrical wiring and fixtures) and protection from heat, termites, corrosion, fire and toxic elements. Proponents receive payment only upon completion and turnover of classrooms; thus, they have the incentive to complete the infrastructure works at the earliest time. This scheme is different from PSIP-I, which adopted a deferred payment arrangement under a build-lease-transfer program. The government is able to adopt a build-transfer or turnkey approach for the second phase of the PSIP-II, as it is able to identify over-all savings that now enables it to make a full payment to Proponents.

PSIP-II: Design-Build Contract Classroom infrastructure Single-storey,two-storey, three-storey and four-storey school buildings Includes blackboads and electrical installations Comfort rooms Attached or detached units for single-storey structures Integrated for two-storey structures Furniture 45 school seats/armchairs per classroom 1 set of teachers’ desk and chair With the success of PSIP-I, the DepEd hopes to proceed with the second phase of the PSIP. This will involve the design and construction of 10,679 classrooms (including school furniture and comfort rooms) in 14 regions nationwide. The provision of school furniture and comfort rooms is an innovation over DepEd’s regular construction program. This will ensure that PSIP classrooms will be ready for use by teachers and students upon their completion. The provision of these infrastructure complements the massive teacher hiring program that the Department intends to roll-out in 2013.

PSIP-II Coverage Contract Package Regions Covered Total Number of Recipient Schools Total Number of Classrooms to be Constructed A I, II, III and CAR 1,082 2,440 B IV-B and V 1,118 2,169 C VI, VII and VIII 1,434 2,672 D IX, XI and XII 720 1,468 E X and CARAGA 813 1,930 Total 5,167 10,679 Unlike the first bid, which covered 3 regions in Luzon, the PSIP-II will cover 5,167 elementary and secondary schools in 14 regions nationwide, including Regions I, II, CAR, III, IV-B and V in Luzon, Regions VI-VIII in Visayas, and Regions IX-XIII in Mindanao. The regional requirements have been bundled in five packages as seen in the table on this slide. The recipient schools have been identified under DepED’s Basic Education Information System as experiencing acute shortages in classrooms. As a basic approach, these schools were selected based on the following criteria: a) incidence of shortage/need, b) complete site ownership documents, c) availability of space for construction, d) peace and security, and e) ease of mobilization of technical engineers, architects, and staff of DepED and the Private Proponent. Of the total 10,679 classroom requirement, 75% are single-storey, 20% are two-storey, 4% are three-storey and 1% are four-storey rooms.

Expected Benefits from the PSIP Benefits to DepED and National Government: 480,600 students who will immediately enjoy better learning facilities. Shares and transfers certain risks to the private sector proponent (i.e. design, construction). Benefits to Infrastructure Sector: Promote local capacity-building consistent with the national development goals of creating inclusive growth, generating local employment, and poverty alleviation Benefits to Financial Sector: Provide investment opportunities for the excess liquidity in the market and promote the development of the domestic capital market. Benefits to Education Sector: Increase students’ productivity, academic performance and long-term learning potential; improve enrolment, retention and completion rates. We believe that a major factor that affects our children’s willingness and ability to go to school, remain in school, and learn what they should in school is the adequacy of our school facilities and resources. Outright, the PSIP-II will benefit about 480,600 students who will immediately enjoy better learning facilities. In addition, the Project has other societal benefits to the Infrastructure and Finance Sector. The provision of these facilities will also contribute to the longer-term objectives of the Department under the K to 12 Reform.

Indicative timelines for PSIP-II Bid Pre-Procurement (Nov-Dec 2012) Pre-Qualification (Jan-Feb 2013) Bidding Mock-up Assembly; Submission of Bids; Evaluation and Award (Mar-May 2013) Implementa-tion 12 months (July 2013-June 2014) Target bidding (two-stage) Pre-qualification: Jan-Feb 2013 Bidding: Mar-June 2013 Basis of Award: lowest complying bid Target construction: 2013-2014 The DepEd intends to continue employing a two-stage bidding for the PSIP II. The Department is targeting the completion of the bidding documents for the Project before the end of the year so that we can publish the invitation to Pre-Qualify to bid in January 2013. The basis of contract award for the Project is compliance to the Department’s Minimum Performance Standards and Specifications (MPSS) and the lowest project cost. Included in the technical proposal for the bid is the installation/assembly of a mock-up structure in pre-selected sites. The mock-up will be based on a two-storey, two classroom design, which will be tested against the Project’s MPSS. With these timelines, DepEd hopes to commence with construction by July 2013.

Thank You… For more information on the PSIP: Thank you and we hope to gain your support in moving this initiative forward. For more information on the PSIP: DepED Finance and Administration Unit Tel: 633-9342; Telefax: 631-9640 DepED Physical Facilities and Schools Engineering Division Tel: 638-4108 loc.117