A Landmark K-12 Education Public-Private Partnership


A Landmark K-12 Education Public-Private Partnership

A private consortium will design, build, finance, and maintain six new K-12 schools in Prince George's County for 30 years.

While the private sector has played mostly a limited role in the contruction, operation and maintenance of traditional K-12 public schools, Prince George’s County Public Schools may be changing that.

Prince George’s County Public Schools (PGCPS) in Maryland entered a deal where a private consortium will design, build, finance and maintain six new K-12 schools in the county for 30 years. The contract looks to take advantage of private-sector resources in ways that have gained traction in many other public infrastructure and service arrangements, including highways, water systems, courthouses, and other government buildings. Instead of merely just entering traditional “design-build” contracts, agencies increasingly look to find ways to utilize networks of public and private actors that can remain committed to keeping infrastructure in a consistent and satisfactory state of use throughout the useful life of the infrastructure. In doing so, they’re transferring risks of designing, building, financing, and maintaining infrastructure assets into actors best equipped to handle them.

While the private sector does regularly perform those functions individually in schools, the Prince George’s County Public Schools long-term partnership agreement better aligns the private sector’s profit incentive with the public sector’s desire to keep facilities in a consistent state of good condition. Knowing they are on the hook for maintaining facilities for decades and ending the agreement with the facilities in good condition, the private partner will likely look to avoid costly deferred maintenance issues that might arise later down the road by spending more money upfront on quality construction materials, design techniques, and maintenance schedules that aim to minimize the deterioration of assets over time and ensure an effective lifespan.

Prince George’s County had a very familiar problem to school districts across the country—relying on school buildings for longer than their intended lifespan. Just as putting off maintenance on a highway can lead to greater replacement costs later, the failures of many government entities to properly plan for, and fund, more preventative maintenance actions and implement long-term solutions causes problems. And their growing size can make getting the right projects funded and selected very difficult and complex.

Educating nearly 150,000 kids is a difficult enough task in itself, but effectively operating and maintaining the billions of dollars in buildings and assets that are needed to facilitate their education is yet another vast area of needed expertise.

With 40 percent of its buildings over 50 years old and an estimated $8.5 billion needed —for which only $210 million is annually available— to repair, replace and upgrade existing facilities, the PGCPS saw an opportunity to find committed help in the private sector to handle those risks, while allowing them to better focus on educating students.

PGCPS retains ownership and control under the contract, which includes provisions that major construction elements are to be completed in under four years as opposed to the up-to 17 years it would’ve taken for construction if the district did not use the public-private partnership. As part of the agreement, PGCPS maintenance staff will complete and assist some of the work, too.

Financing is another dilemma facing school districts and state and local governments. While governments have inherent interest rate advantages over the private sector in obtaining loans, issuing new debt comes with its own credit rating risks and political risks that private financial capital considerations may be able to handle or avoid.

With PGCPS, the quicker construction timeline and overcoming deferred maintenance issues was enough to offset the more expensive cost of private capital, ultimately generating an estimated $180 million in savings over a traditional “design-build-bid” option.

This deal is a structure that works well in infrastructure globally. The public sector retains control, oversight, and of the operation, as well as the ownership of its facilities, while the private partners deliver infrastructure and services to the agencies, often with innovations, speed, and cost savings that government agencies would be unable to achieve on their own.

With K-12 schools, the advantages of entering a P3 to build and maintain schools should be clear. School districts do not build new schools very often. Therefore, while local government boards of education do have some knowledge of how to design educational facilities to their needs, other grittier details over construction and maintenance may fall mostly outside of those agencies’ typical expertise. But by tapping into private expertise through a P3, the local agencies get infrastructure delivered to its specifications, with the added assurance that repair and maintenance problems are handled by parties that have readily available resources to complete the work.

While the Prince George’s County Public Schools public-private partnership deal appears to be the first of its kind for K-12 schools, colleges have increasingly embraced the P3 model to similar ends. The fast-growing University of California-Merced completed the construction phase of a campus expansion P3 last year. That deal includes provisions that hold the private partner accountable for meeting the school’s ambitious environmental goals for sustainable growth.

Prince George’s County’s P3 is something that other school districts should explore. Tapping the private sector to design and manage school facilities and preventing the costly and problematic deferred maintenance issues many school districts confront is worth examining. By entering public-private partnerships, local governments, school boards, and districts can transfer costs and risks they are often ill-equipped to handle over to private entities, allowing school leaders to focus on education.