1. Wellington, New Zealand TETIARY EDUCATION SUMMIT 28 APRIL 2009 ETHICAL LEADERSHIP AND GOOD GOVERNANCE BY EXAMPLE. DRIVING BEST PRACTICE THROUGH EDUCATION, COLLABORATION AND CONSENSUS. MAKING A SUSTAINABLE DIFFERENCE IN THE WORLD.

2. Public Private Partnerships – Changing The Way We Do Business A successful PPP must start with a project of importance to the public and a commitment to the PPP delivery method. Henry A Davis: Infrastructure Finance 2008

3. Buildings should inspire learning, nurture staff and students and be a source of pride and a practical resource for the community Les Watson, European Journal of Education Vol 42 Nov 2007

4. Revitalisation of Vocational Education and Training Queensland Skills Plan Southbank will be an Institute of Technology a bridge between technical education and university a modern, learner focused environment for local and international students a lead institute for a range of Associate Degrees, university pathways and articulation arrangements Queensland Skills Plan 2006: Qld Government, Department of Employment and Training

5. Revitalizing Southbank Strategic Drivers Skills Plan Institute Strategic and Business Plan IT Strategic Plan International Plan On-Line Strategic Plan Quality Products – University Articulation – Post Graduate Courses Asset Management

6. Infrastructure Analysis In 2004 Buildings not fit for purpose Poor utilization of space IT incompatible Poorly maintained facilities Need for compliance upgrades Inflexible spaces for changing education needs Poor use of energy Inefficient use of ‘footprint’ Inefficient energy and utilities

7. Growth Analysis Average Annual Growth Rates 1990-91 to 2000-01 Southbank’s top 6 targets are among Qld’s strongest growth industries Output Growth (%) Employment Growth (%) Communication Services Property and Business Services Accommodation, Cafes and Restaurants Health and Community Services Cultural and Recreational Services Personal and other services 7.2 8.1 9.9 6.7 7.8 10.4 3.4 6.5 5.5 3.8 5.8 4.1 Retail Trade Wholesale Trade Manufacturing Construction Government Administration and Defence 6.1 4.7 5.8 4.5 7.4 2.5 -0.8 2.5 2.4 1.9 SBIT Industry Delivery Average Queensland State Average 8.35 6.1 4.85 2.8 Southbank Education Precinct – Business Planning Foundations Deloitte 2002

8. Functionality Analysis Generic Use Simulation Replication Adaptation Incubation

9. Functional Solutions Adaptable Flexible Buildings Buildings for the future in keeping with modern precinct Greater public use of facilities Flexible learning spaces Responsive Teaching and Learning Spaces Opportunity to reconstruct core delivery systems and services Opportunity to introduce alternative teaching modes e.g. Mode 2 Opportunity to introduce a greater range of learning technologies Cost Effective Operations Efficiencies through one-campus operations Greater efficiency of no-core services in the delivery of core services Affordability Limited to Agency Business Case

10. Design Brief A modern world class precinct Operates on one campus only Opportunities to introduce alternative and creative teaching modes Greater public and commercial use of facilities Opportunity to reconstruct delivery systems and services Greater potential for transition and articulation to higher education programmes Must maximise IT capability and use of facilities Provide a safe and secure educational environment

11. Balancing Public/Private Needs in Infrastructure A successful PPP must start with a project of importance to the public and a commitment to the PPP delivery method Henry A Davis: Infrastructure Finance 2008

12. What is a Public Private Partnership (PPP)? PPP is a collaboration between the public and the private sectors based on a contract Sensible division of roles and fair sharing of responsibilities, cost and risk between the public and private sectors Optimal – as opposed to maximum – assignment of risk to the private sector to maximise value for money Private sector to contribute not only capital but also technology, management and innovation Expected results: availability, quality and efficiency of service and efficiency of capital utilization

13. Affordability Who pays for PPP investments? Ultimately there are only two funding sources for infrastructure investment : Consumers (via user charges) Taxpayers (via subsidies) Financiers can change the requisite time and payment profile Eventually financier contributions have to be repaid Financiers Providers State Budget Infrastructure UsersTax Payers Growth PPP is not free infrastructure! Connecting East Asia: A new Framework for Infrastructure ADB-JBIC-WB, 2005

14. Why PPPs are Attractive to Government To attract private sector capital and fill the shortage of public funds for building new infrastructure, and maintaining new and existing facilities, in order to sustain growth To relieve pressure on the tax base and free up public resources for use in basic services (e.g. education and health care) To introduce private sector management and know-how To improve quality and efficiency of service delivery To maximise value for money on the part of the government Connecting East Asia: A new Framework for Infrastructure ADB-JBIC-WB, 2005

15. Southbank Business Review Institute Design Philosophy Academic Corporate Support Functional Precinct Non Core FM Contract Functional Facilities Core Educational Functionality Mode ll Teaching Practice Delivery Corporate Operating Philosophy

16. Core Services Program delivery, content and teaching delivery Administration of corporate services Commercial learning opportunities ICT services except the ICT backbone infrastructure Library Commercial activities Timetabling, examination administration and tutor support

17. Non-Core Services Infrastructure and equipment – Buildings – ICT backbone – Energy systems – Plant Facilities management – Maintenance of the facilities – Maintenance of the plant and equipment Operations – Cleaning, pest control, grounds maintenance and security – Provision and maintenance of building systems – Other services e.g. cafeteria and out-of-hours use of facilities

18. Operations and Maintenance Cycle 30 year operations contract Replacement of all plant and equipment Replacement of all Operator provided FF&E Regular maintenance cycle for all buildings and grounds

19. Risks with Social Infrastructure PPPs The governing principle of a project’s risk allocation dictates that risk should be allocated to the party best able to manage it Qld State Govt, State Development: Public Private Partnerships Guidance Material August 2002 With appropriate risk transfer, public sector is not exposed to cost overruns…as risk is transferred to the sector best able to manage them The right project – The right process KPMG 2008

20. Beware Bureaucratic Deviance Skye Bridge Example When the PPP procured toll bridge from the Isle of Skye opened in 1995, the islanders found themselves forced to pay the highest toll fees in Europe By the end of 2004, crossing the Skye Bridge cost £5.70 for a one-way ticket which precipitated civil action On 21 December 2004 the Scottish Executive bought the bridge back and abolished the tolls www.corporatewatch.org

21. Beware of Doing Nothing The inflexible and inappropriate built environment remains inflexible and inappropriate Maintenance backlogs increase and become more costly over time The perception of contracted and irrelevant business develops The ability to remain competitive becomes limited Morale suffers and confidence in public sector management diminishes

22. Beware of Biased Optimism The view that private sector involvement is the only way to deliver the project The view that the innovation of a PPP will provide for more than similar traditional expenditure – and for free The view that acceptance of the PPP is acceptance of all change

23. Beware of Business Inertia Inaccurate projections - increased demand for facilities Encouraging staff to use alternative teaching methods – inconsistent use of facility Managing changeover in delivery structures and service arrangements – resistance to commercial entity Preparing teams for the future – alignment of delivery with market demand

24. Risk Profiling CategoryExamples Site risksExisting structure Site conditions Some environmental risks Availability of site Design, construction and commissioning risk Design Construction (excl force majeure/government intervention) FinancialFinancing availability Tax changes OperatingInputs Maintenance and refurbishment KPMG 2008

25. Risk Profiling continued Shared risks CategoryExamples Site risksSome environmental risks (contamination) MarketInflation risk Government may redress impacts LegislativeChanges in law Force MajeureFloods, earthquakes, terrorism etc KPMG 2008

26. Risks retained by the public sector CategoryExamples Site risksSome environmental risks Native title SponsorProbity Financial Technical and operational FinancialInterest rates pre completion Further finance requirements OperatingChanges in output specification outside agreed range Asset Ownership Residual value on transfer to government KPMG 2008

27. Southbank Institute of Technology Risk Analysis Risk EventResidual Rating Failure of SBI to properly manage the administration and calculation of the private party payments stream Financial: High Reputation: High The output specification does not meet the requirement for the services to be provided Financial: High Reputation: Moderate The standard of service delivered to SBI by the private party is not to the standard agreed in the contract Financial : Moderate Reputation : High Social and demographic change (international and national) affects core educational) affects core educational services Financial : High Reputation: High SBI total revenue from the project varies from initial expectations to the extent that SBI cannot meet its financial obligations Financial : High Reputation : Moderate Legislation is introduced that affects demand for services provided by SBI (e.g. SBI no longer permitted to do electrical trades) Financial : High Reputation : High Qld Treasury Corporation : SETP Risk Report June 2006

28. The key risks faced by Axiom during the operating phase are summarised as follows: Pricing Operator – KPI deduction – Operator default and replacement – Lifecycle Refinance Insurance – premature and unavailability Malicious damage Damage Change in Law Termination Consequential Loss Defects

29. Why Some PPPs Work and Some Don’t The key is the integration of these different objectives into a well designed solution – not balancing these different objectives with competing solutions Michael Cooney, Policy Director: percapita.org.au October 2008 Attempts by previous government to create a training market may have not been fully successful because they neglected to design an adequate market structure Julia Gillard: ACPET 2008 National Conference

30. ….our track record in shaping and implementing new investments is questionable We design and implement solutions without any clear understanding of the business need (‘solutions looking for problems’) We don’t articulate the benefits that investments are expected to deliver…and we never track benefits We are prolific at undertaking feasibility studies and developing business cases for things that can never happen …..pointless process has replaced intelligent discussion Dept of Treasury and Finance, Victoria 2008

31. Tangible Benefits for Southbank Reconstruction of delivery systems and services – Mode ll learning areas – Use of latest technologies Fully IT networked campus Flexible learning spaces Accredited standards for fitouts to operate commercially A modern single campus operation Managed risk Value for Money – early access Energy efficient ‘green’ facilities – equivalent to five star rating Areas for public use – Ground floor studios – Auditoria – Meeting spaces – Retail

32. Lessons from the SETP – Partners need to fully understand each other early face-to-face engagement is highly desirable – Be clear about expectations regarding levels of innovation engage with the service provider during bid development to ensure design innovation serves 30 year operations – Engage the residual expertise of stakeholders but Avoid the Trojan Horse

33. Lessons from the SETP continued – Undertake honest and objective business reviews Immature projection will undermine the integrity of a project – Risk analysis needs early activation Don’t wait until it is too late – Maintain clear leadership messages Change is inevitable over the life of a PPP project – Be clear about scope upfront Avoid shifting the goal posts

34. Lessons for the Training Market COAG has indicated the significant reform is required in three key interlinked areas: Market design - reforms in this area will need to focus on the supply and demand side of the market and include competition and contestability, regulation and quality assurance, and information Sector capacity – reforms in this area will need to focus on the capacity of the VET sector including training products, the VET workforce, and infrastructure Investment – reforms in this area will need to focus on developing an investment strategy directed to growing the pool of skilled Australians, and which results in a fair sharing of costs and benefits VET Training Products for the 21 st Century : COAG Consultation Paper Feb 2009

35. Towards a Reliable Market Framework The longer-term policy Is this really a market design approach? What have we learnt from recent public policy experience? The Supply-Side Will the policy outcomes genuinely expand student choice? Will investment in training capacity be adequate over time? Will new infrastructure satisfy new expectations?

36. Sources Les Watson: European Journal of Education Vol 42 Nov 2007 Queensland Skills Plan 2006 Southbank Education Precinct – Business Planning Foundations: Deloitte 2002 Qld State Govt, State Development: Public Private Partnerships Guidance Material August 2002 Connecting East Asia: A new Framework for Infrastructure ADB-JBIC-WB, 2005 Michael Cooney, Policy Director: percapita.org.au October 2008 Julia Gillard: ACPET 2008 National Conference Dept of Treasury and Finance Victoria: Investment Management http://www.dtf.vic.gov.au/CA25713E0002EF43/WebObj/Workshop1-VPS-0807/$File/Workshop1-VPS-0807.PPT http://www.dtf.vic.gov.au/CA25713E0002EF43/WebObj/Workshop1-VPS-0807/$File/Workshop1-VPS-0807.PPT COAG: VET Training Products for the 21st Century, Consultation Paper Feb 2009

37. 63 Bent St Toowong 4066 m: 0409 473 524 e-mail: norm@normjagger.com.au www.normjagger.com NORM JAGGER ETHICAL LEADERSHIP AND GOOD GOVERNANCE BY EXAMPLE. DRIVING BEST PRACTICE THROUGH EDUCATION, COLLABORATION AND CONSENSUS. MAKING A SUSTAINABLE DIFFERENCE IN THE WORLD.