Ομιλία στο διεθνές Συνέδριο της World Bank με τίτλο "Southeastern Europe and the Mediterranean PPP Forum 2011", Θεσσαλονίκη 16-18 Μαΐου 2011
"It is a great pleasure for me to have the opportunity to speak about the Greek experience on PPPs for educational infrastructure by the School Buildings Organisation (SBO) at this high-level Forum.
In my presentation, I will attempt to explain the Greek experience about building school infrastructure through PPPs and provide you with the argumentation for this strategic decision of our company, SBO.
Before proceeding however to the core of this presentation which will relate to PPPs’ activities, let me first say a few words about SBO and what we do.
SBO is a state-owned public limited company supervised both by the Ministry of Education and the Ministry of Infrastructure. Its main scope of work is to build school infrastructure in the wider Athens and Thessaloniki regions and to equip schools all over Greece with the appropriate material (such as desks, boards, computers etc). By specific legislative procedures, SBO can also be provided the responsibility to construct school buildings in other regions of the country. As for PPPs, since 2005 SBO may serve as the managing authority for PPP projects of school infrastructure all over Greece.
Overall, SBO at the moment is involved in more than one thousand ongoing and future projects, of which 72 per cent are carried out by the SBO itself, through traditional procurement and are financed by the state budget, EU structural funds and a loan from the European Investment Bank. 23 per cent of all projects are implemented through memoranda of understanding with local authorities and about 5 per cent are PPP projects. Funding of our PPP projects has been secured through the Greek state budget, while EIB has also approved to finance directly the SBO contractors.
You can here have a look of the legislative framework for PPP projects in Greece, which was explained earlier by Mr. Mantzoufas.
The law for carrying out PPP projects in Greece was established in 2005. The interministerial committee is the main decision maker that approves or rejects the proposals of various public and private entities regarding PPP projects.
An important question we need to answer is “why PPPs for schools?” And it is a fact that many people consider it unorthodox to conduct a Private Finance Initiative in projects that are aimed to create a public good, as are state schools. We should also bear in mind that the school PPP projects are non-revenue based, in contrast to road or energy projects.
International research proves that PPPs for school infrastructure offer certain financial and more importantly valuable non-financial benefits. For all benefits, an important piece of the puzzle is that private contractors are responsible not only for the design and construction of the school, but also its maintenance for a period of 25 years.
Financial benefits are assessed and calculated in the Public Sector Comparator and Value for Money analysis. The basis for using a PPP arrangement instead of conventional public procurement rests on the proof that optimal risk sharing with the private partner delivers better Value for Money for the public sector.
Non-financial benefits are the socio-economic benefits stemming from the project. They are typically not easily measured, thus not necessarily factored in the Public Sector Comparator and Value for Money analysis. This does not mean that they are not crucial.
PPPs for schools can ensure accelerated and enhanced delivery of the infrastructure. They can also end up to improved educational outcomes, since maintenance is guaranteed by the contractor who is responsible for the project for over a period of 25 years. Service standards and the response to user needs are higher. Energy savings and sustainability are ensured. On wider societal impacts, PPPs for schools may boost the construction industry, especially in the current debt crisis and may provide educational infrastructure of high standards despite constraints in the public funds.
Let’s now focus on the specific SBO PPP projects.
In our case, our management that took office last year, in March 2010, had to face a “grand” plan of the previous administration including 5 mega PPP projects for more than 150 schools all over the country. In addition, we were asked to meet the changing needs of education within the constraints of a much tighter budget in the middle of a debt crisis. Internationally, development of education facilities through PPPs has proved to be a rather useful tool. In addition to that, performing PPP projects was one of the main requirements of the Greek government also triggered by the European Commission. The EU had placed emphasis on the need to accelerate investments in infrastructure, by mobilising public and private sector finance through PPP arrangements as part of a strategy to address the economic downturn.
In the context of Greek educational infrastructure, we factored in four main criteria:
- first is the need for improved educational infrastructure across the nation in the middle of a debt crisis
- second goes the existence of certain projects in the pipeline
- third go the guidelines from the government and the European Commission to utilize PPPs and
- last, but not least, come the spread up till now competences regarding school buildings and their maintenance between various agents of central and local administrations, which leads to a higher cost and a questionable quality over the lifetime of a project.
At the same time, looking at the projects already lied down by previous administrations, there were operational and strategic concerns we needed to look into. The initial planning took place at a period of skyrocketing economic growth, hence, all financial factors were totally different. Today, there are liquidity issues both in the private and the public sectors and the public budget is very much constrained. Further to that, all projects programmed were in a very different maturity phase.
Taking into account all the above benefits, risks and concerns, we needed to make a careful restructuring of the initial planning. Our strategic decision was that we definitely need to take the PPP path but in a realistic way and not with the overly ambitious –not to say utopian- existing plan, which covered hundreds of school buildings all over Greece.
The new programme was based only on mature projects that were a social priority for the country. It was therefore reduced in 4 smaller scale projects as follows:
- 2 projects for 22 schools in Attica
- 1 project for 16 schools in Thessaloniki, the host city of this Forum, and
- 1 project in Crete.
In a period of only fourteen months we have achieved huge progress in our PPP programme: we launched the second phase of the tender for the first three projects and we have completed the evaluation of the competitors’ bids for all three. We currently have a preferred bidder for the two projects of Attica, while the decision for the preferred bidder of the third project will be validated this week by the Board of Directors. We aim to reach financial close in the third and fourth quarter of 2011 for all three projects, which represent a total Net Present Value of approximately 225 million euros. The budget of our PPP projects represents more than 12% of all Greek PPP projects currently tendered.
In addition to that, we have recently completed the project identification and due diligence phase for our fourth project in Crete, consisting of 14 schools. We plan to launch the first phase of the tender, the invitation to tender, during June 2011. The second tender phase of this project will be launched before the end of this year.
If we look closely to all PPP school projects and the rationales behind them, we will clearly understand that they all represent business cases of social priority.
The rationale for the 22 schools in Attica was to eliminate double shift, to cover the need for new schools due to co-location of schools and population growth, to minimize the use of prefabricated units, and to replace the leased units.
Let’s see some facts and figures of the two projects in the region of Attica.
The rationale for Thessaloniki’s 16 schools was once again to eliminate the double shift operation, to cover the current educational needs of the community, to respond to population decentralisation and concentration in new areas of the city and to replace leased buildings. Central Macedonia and Thessaloniki is one of the least favoured regions of Greece regarding school infrastructure.
The student population in Thessaloniki has an upward trend and the entire region of Thessaloniki has the highest percentage of schools operating in double-shift [4.1% in total and a 7.8% in high schools]. Almost two thirds of the school buildings are more than 20 years old [58.9%], while 24% are much older [more than 40 years old]. Moreover, most schools lack football courts [more than 75%], with football being the most popular sport in Greece and the average school yard surface per student is 48 sq.m.!
Let’s have a closer look to some facts and figures of the project in Thessaloniki.
For the fourth PPP project in Crete, the rationale is to replace old buildings and modernise an old “fleet”, to cover current educational needs of the community and to respond to the expansion of urban areas. In Crete, double shift does not constitute a major problem, but at the same time demographics for student population show an upward trend.
The “fleet” at the same time is ageing: seven out of ten schools are more than 20 years old [69.8%], while 41% are much older [more than 40 years old]. Open spaces do not exist either: most schools lack football courts [almost 70%] and the average school yard surface per pupil is 75 sq.m. (which is higher than in Thessaloniki but not sufficient!).
The projects -once we rescheduled the programming- went very fast, which turned us into pioneers in PPP projects in Greece. We are one of the few public agents in Greece that have acquired know-how in PPP arrangements, especially in the project identification and procurement phases, and we are in place to draw lessons learnt from this experience.
What we have seen so far is positive: the market response has been immediate and abundant, thus enabling us to carry out competitive tenders, with a satisfactory discount rate. The quality of the design studies submitted was high. In addition, coordination between the private and the public sector proved quite satisfactory and forms the basis for the future cooperation between SBO and the Special Purpose Vehicle company. The PPPs of SBO are considered as a fresh breath in the construction market of the country, that will boost the economy for a long time. Our main challenges from now on will focus on successfully reaching financial close and delivering up-to-date contract management services, that will lead to the schools of the future.
Based on the experience acquired so far, we are positive that all four SBO projects will pass the test and deliver better value for schools!
Thank you very much for your attention.
You are more than welcome to introduce any questions regarding this brief presentation"
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