Private-public partnerships – a new approach
In the wake of significant reforms to university funding, both universities and Government are faced with a number of challenges and financial pressures. Higher Education (HE) institutions are having to develop new strategies to attract more money, students and world-class facilities – often turning to new avenues to raise funds, such as private-public partnerships (PPP). We spoke to Gleeds’ head of further & higher education Gary Church, to hear more about these unique avenues for funding.
What is a PPP and what does it involve?
A PPP is a cooperative arrangement between one or more public and private sectors, typically of a long term nature. With regard to the HE sector, it usually involves a university agreeing terms with a specialist developer to acquire one or more of their sites for a long term lease of 50 years or more. During which time, the developer may construct new student accommodation, renovate or maintain an aging campus or manage the building or lettings – generating inward investment in a favourable location that may not otherwise be available. In return, the university is able to invest a greater amount back into teaching and research – areas that appeal to prospective students. They are also able to share the risk of costs, design, construction, operations and maintenance with the private organisation. On a grander scale, the PPP can also boost the local economy by driving competition in terms of facilitating infrastructure, improving local businesses and industries associated with the development. In some cases, the PPP can turn universities and their associated private technology/innovation into powerhouses for economic growth.
Why are more universities considering this route?
PPPs are fast becoming the financial model of choice within the HE sector due to ever increasing cuts in public sector contributions. Put simply, universities are having to diversify their income sources and become less dependent on the public purse. Private sector funding allows universities to build world-class facilities – with investors receiving high yielding returns – which may not be possible otherwise. This in turn creates intense competition between institutions for students, staff and faculty. It is the constant need to have the most advanced facilities and the best student accommodation to meet the needs and expectations of the next generation of students.
What needs to be considered before choosing a PPP?
Each party needs to understand each other’s objectives and priorities - these will differ greatly between a public body and private developer. Strategies need to be implemented in order to deliver benefits for both parties, there also needs to be a strong commitment for the success of the partnership. For universities, this is usually derived from the private organisation investing into something which is integrated into the university’s teaching mission, making it core to the institutions success. In order to meet these requirements, very careful and concise planning needs to take place. It may take several months to analyse the options, clearly defining aims and goals, performance standards and identifying risks and approvals – especially if the agreement is to last 40-50 years.
Gary Church will be attending this year’s AUDE conference from Monday 10th - Wednesday 12th April at Manchester Metropolitan University. To meet Gary and Gleeds’ higher education team, visit stand 29 in The Business School Hub Atrium.