Key Findings

9. The Pilot PPP Schools Bundle are assessed as being of an overall higher standard from the design review conducted, they provide a greater consistency in terms of design and construction quality, when compared to the conventional schools procured and delivered at the same time.

10. The Pilot PPP Schools are maintained in a very good condition overall. No significant condition issues were identified at the Pilot PPP Schools with any such issues being dealt with via the Latent Defects procedure, FM services, and Lifecycle replacement programmes. There was a general lack of investment evident across the Conventional Schools which resulted in a higher number of poor condition assets being identified. Maintenance was not to the same standard as the Pilot PPP Schools Bundle although some was undertaken and evidenced. Overall, there is a clear disparity between the very good condition of the Pilot PPP Schools and the relatively poor condition of the Conventional Schools.

11. Under the FM Agreement, which incorporates Health and Safety and Statutory Compliance obligations, the Pilot PPP Schools have robust maintenance regimes and records in place. There is no FM risk for the DoE in relation to the Pilot PPP Schools Bundle as the risk is transferred to the Project Company and subsequently the FM provider. At the Conventional Schools there is no external party contractually bound to manage compliance and the Principal is ultimately responsible for health and safety and statutory compliance. The Conventional Schools evidenced very limited maintenance planning and document management. Following an audit of compliance with Statutory health and safety requirements the Pilot PPP Schools Bundle were determined on average as 97% compliant, and the Conventional Schools 35% compliant. Since the undertaking of the audit, several measures have been put in place to remedy non-compliance issues identified at the Conventional Schools.

12. With regards to energy management, the Pilot PPP Schools were designed to a slightly higher specification, consequently BER ratings for the Pilot PPP Schools are higher.

13. The electricity consumption for the Pilot PPP Schools Bundle is currently 10.7% (on a 1-year basis) less than that at the Conventional Schools, 25 kWh/m2 versus 28 kWh/m2. The heating consumption for the Pilot PPP Schools Bundle is a significant 26.9% (on a 1-year analysis basis) less than that at the Conventional Schools, 49 kWh/m2 versus 67 kWh/m2. This is largely because the Pilot PPP School buildings have higher insulation and airtightness standard and there is an efficient operation of the heating system by its users. The total energy costs forecast over the entire Concession are higher for the Pilot PPP Schools Bundle, based on the financial model data; however historic records and current use show a lower figure at present. An assessment of the total Energy Consumption and Cost over the whole Concession should be undertaken at the end of the Concession.

14. TPI at the Conventional Schools is marginally (7%) above that at the Pilot PPP Schools on a €/m2 NPV basis. TPI income assumptions at the Pilot PPP Schools are based on the forecast within the project Financial Close Model.

15. The Pilot PPP School Principals reported significantly less time spent managing the facilities demonstrating that this risk has been successfully transferred to the Project Company.

16. The DoE and the NDFA evidence higher levels of resource required to manage the PPP contracts versus the Conventional Schools, so whilst the operation and maintenance risk has been transferred in the PPP context, there is an ongoing contract management resource required for the DoE and NDFA.

17. The indicative Financial Analysis NPV Outputs (€/m2) prepared as part of this Review are shown below. NPV comparison is the assessment methodology used in line with wider guidance on Value for Money comparisons:

18. On an NPV basis, the Pilot PPP Schools construction costs are 24% lower than the Conventional School costs, whereas PPP transaction costs are 4% higher than Conventional School costs. The cost of finance (i.e., the debt payment to fund the long-term repayment of the initial construction cost) is likely to have diminished this benefit. However, the higher cost of finance must also be weighed against the risk transfer that occurred under the contract and which is not costed within this analysis. In later PPPs, a value is attached to the risk transfer within the context of the PSB.

19. While the cost of finance is not included within the scope of this Review, debt cost for the Pilot PPP Schools Bundle, based on information provided by the NDFA, is understood to be c.6%. Debt makes up the majority of funding for the scheme.

20. The Lifecycle costs for the Pilot PPP Schools Bundle are almost double that of the Conventional Schools on an NPV basis (90% higher); however, the level of works undertaken to the Pilot PPP Schools Bundle to date is greater. In addition to this, there is no risk for the Pilot PPP Schools Bundle of early failure of assets resulting in an immediate budget requirement for replacement or major repair of assets as this risk is fully passed down to the Project Company. This risk is still present for the Conventional Schools.

21. The cost of FM Service Delivery to the Pilot PPP Schools Bundle is some 137% higher than the cost of FM delivery to the Conventional Schools on an NPV basis; however, a significant number of failings in the compliance of the Conventional Schools with Statutory Requirements, PPM undertakings and good FM practice were identified in the reporting. None of the same issues were identified with the Pilot PPP Schools which were considered to be maintained to an excellent standard and demonstrated full Statutory Compliance and a high level of Contract compliance.

22. The residual value calculation undertaken shows that the Pilot PPP Schools are expected to have a higher residual value at the end of the 25-year Concession period than the Conventional Schools will at the same point in time. The residual value of the Pilot PPP Schools Bundle is 27% higher than that of the Conventional Schools. This is a result of the higher specification of the Pilot PPP Schools and resulting higher rebuild costs and the significant backlog maintenance costs at the Conventional Schools.