24 September 2003 Media Statement

Public-private sector tertiary education investment framework announced

The development of teaching and research partnerships between tertiary institutions and business is the aim of a new public-private sector investment framework outlined today.

The Partnerships for Excellence facility enables tertiary institutions to seek matching funding from government for large-scale investment projects (generally those valued at $10 million or more). It has been established to encourage greater private sector investment in tertiary education and to foster better linkages between tertiary institutions, business and industry.

Applications have been called today for matching government funding, closing with the Tertiary Education Commission on 21 November 2003.

Steve Maharey said the Partnerships for Excellence facility will create a climate for joint private-public sector investment to increase the capability of the public tertiary education sector to respond to New Zealand's social and economic development needs.

"Partnerships for Excellence supports the goals of the Tertiary Education Strategy to increase the capability of New Zealand's tertiary education system. It will enable institutions to access funding for significant new projects.

"It's clear from the interest already shown in the facility that some innovative projects are likely to apply for funding. For example:

- the government has already decided to contribute $25 million towards the development of a new business school at the University of Auckland, subject to matching contributions being obtained from donors, and

- Ministers will shortly be considering a proposals for $25 million "Advancement Programme' proposal by the University of Otago.

"To be eligible for a government funding contribution, projects need to be large scale, new and unable to be funded via other means. Private sector investment is expected to match that of government.

"Government funding will be provided either as a capital injection, or as a suspensory loan which may be converted to a capital injection upon the achievement of agreed outputs. An assessment panel established by the Tertiary Education Commission will consider individual projects, with funding for successful projects appropriated as part of the annual budget process," Steve Maharey said.

Detailed information about implementing Partnerships for Excellence, including the assessment criteria and timeline have been sent to all tertiary education institutions and is also available on the Tertiary Education Commission website at www.tec.govt.nz.

ATTACHED

Partnerships for Excellence

Implementation Framework

for 2003/04

1 : Assessment Criteria and Process

2 : Detailed guidance for preparation of a business case

3 : Timeline

September 2003

Annex I

Partnerships for Excellence Framework: Assessment Criteria and Process

Introduction

This document outlines the purpose of the Partnerships for Excellence facility established by Government in 2002, the assessment criteria and process, and the requirements for proposals submitted to the Tertiary Education Commission (TEC).

Purpose

The Partnerships for Excellence facility was established by Government to increase New Zealand's tertiary education system capability at world-class level, enhance innovation, and support national economic and social goals, including regional development.

The facility enables the Crown to make significant new investments in the public tertiary education sector in line with the Tertiary Education Strategy (TES) and the Statement of Tertiary Education Priorities (STEP), and where there is matching private sector investment. It is a joint private-public investment facility that will allow major advances in capability in the public tertiary education sector. Projects supported through this facility are expected to contribute to the TES at a system-wide level; that is projects funded must improve the system as a whole, not simply take from one part and give to another. This implies consideration of the role of any specific project in relation to the total portfolio of teaching or research.

The facility is expected to have a positive impact on the speed of change in strategic directions for the tertiary sector (as defined by the TES), not the direction of change itself as defined by the TES.

It is expected that TEIs will use Partnerships for Excellence as a vehicle for fostering better linkages and closer working relationships between the public tertiary education sector and private sector partners.

Eligibility Criteria

Proposals must meet all the following eligibility criteria before they can be considered for funding:

- Applicant is a Tertiary Education Institution (TEI): Support under the facility is only available for projects at TEIs or consortia of TEIs.

- Beyond general expectations and not already funded: Projects must not be part of the common expectations placed on the operation of the tertiary education system (i.e. not business as usual), or be activities that TEIs already receive funding for or could reasonably be expected to fund from other funding streams.

- Significant proposals: The Partnership proposed must be significant with a general presumption being that in most cases the Crown contribution for any given proposal will not be less than $5 million.

- Matching private sector funding: Private sector funding must at least match the Crown contribution¡Xthis need not be capital, but could be operating funds or a combination of operating and capital.

- Self-sustaining: Projects must create sufficient benefits to ensure their ongoing continuation without the need for continuous Government funding through the facility or other capability development funds.

- Offer value for money and efficiency: All projects must be free from inefficient use of resources, and resources should be directed to activities that are the most effective for achieving the objectives of the funding.

- Aligned to the Charter and Profile of the TEI(s): All projects must be consistent with the mission and role of the TEI(s) represented as outlined in their Charter and Profile (this requirement will come into force when Charters and Profile assessment processes are in place in 2004).

- Consistent with legal obligations: Projects must comply with the requirements set out in legislation, regulations and treaties to which NZ is a signatory.

As the funding will be from Vote Education, proposals should be clearly aligned with the TES and STEP. If the project does not relate to at least one priority identified in the STEP, but is nonetheless consistent with the objectives of the Tertiary Education Strategy and meets the strategic priorities of another Vote, then funding from that Vote may be more appropriate.

Assessment Criteria

Proposals will be assessed on the basis of the information provided in the Proposal/Business Case using the following criteria.

Contribution to the Tertiary Education Strategy (TES)

1. Partnership will improve excellence of the tertiary education system:

- Quality of teaching or research provision in areas related to the Partnership will be strengthened to a world class level;

- Global linkages will be improved; and

- Opportunities for creativity and innovation will be enhanced through the Partnership.

2. Partnership will improve relevance of the tertiary education system:

- Contribution to national economic and social goals, including regional development, will be significantly strengthened;

- Quality of synergistic partnerships with private sector is improved;

- Teaching provision is better linked to the current and future generic and specialist skill needs of business or other employers; and

- Research programmes are developed in partnership with business and more strongly linked to national goals.

3. Partnership will improve access in the tertiary education system:

- Opportunities for seamless life-long learning will be increased; and

- Educational opportunities for priority groups (e.g. Maori, Pacific) will be increased.

4. Partnership will improve the capability of the TEI:

- Capability of teaching or research provision will be strengthened to a world class level; and

- Capability to develop student-need focussed strategies and pathways will be strengthened.

5. Partnership will improve the portfolio of provision and capability in line with the TES:

- Proposal will enhance the overall tertiary education system portfolio of teaching or research provision, or capability in line with the TES; and

- The additional provision and capability will complement and reinforce the provision of other TEOs.

Avoids fiscal risk to the Government

6. Partnership will not create fiscal risks for the Government:

- Long-term financial performance and viability of the TEI will be enhanced; and

- The Government will be protected from increased ownership risk.

Ability to undertake the proposal successfully

7. TEI demonstrates the ability to undertake the proposal successfully:

- TEI has the ability and resources to achieve the stated outcomes;

- TEI will not face other challenges that will limit its ability to undertake the proposal;

- Partnership management arrangements and implementation plans are robust;

- All risks are matched by appropriate risk management strategies; and

- All other aspects of the business case, as outlined below, are robust.

Nature of Crown Contribution and Activities Funded

The Crown contributions will be in the form of capital. The contributions will be appropriated annually from Vote Education and determined each year as part of the budget process following the assessment and selection of successful proposals.

The funds will be provided either as a capital injection to the recipient institution or as a suspensory loan which may be converted to a capital injection upon the achievement of agreed outputs. A condition of the Crown contribution will be that the capital continues to be recognized as Crown equity, even after a suspensory loan has been converted to a capital injection.

The Crown funds may be allocated to capital projects or other investments which generate operating income for the recipient institution, such as an endowment fund. The types of capital projects that might be funded include:

- Establishment of a research or learning joint venture between TEIs and industry, which could include a joint governance structure;

- Purchase of specialist research or learning equipment and technology that could be used and managed jointly by industry and the TEI;

- Establishment of infrastructure to support a new environment of on-job education; or

- Establishment of infrastructure to support increased global linkages for TEIs and industry.

Requirements for Proposals/Business Case

The outcome of the assessment process ultimately depends upon the robustness of the proposal/business case made by TEIs. A proposal needs to provide both evidence that demonstrates alignment with the criteria outlined above, including evidence that the TEI has the ability to successfully undertake the proposal, and analysis by the TEI that supports the proposal as submitted.

Detailed guidance for preparation of the business case is provided in Annex II.

Proposal Assessment Process

1. A call for proposals will be made annually by TEC on a timeline that will allow recommendations to feed into the Government's budget process.

2. Proposals will be submitted to the TEC which will lead the evaluation process.

3. Proposals will be assessed by a review panel, which will usually comprise 4-5 people. In all cases at least one member of the panel will be an acknowledged expert in the industry or social service areas being targeted and who was not associated with the development of that proposal. The panel may seek external, national or international, expert advice to assist robust assessment of proposals.

4. The panel will be chaired by the Chairperson or another member of the Tertiary Education Commission. On occasions when the Commission itself has been closely involved in the development of a proposal, the panel will be chaired by the Secretary for Education.

5. Conflicts of interest will be managed in accordance with the legislation governing the operation of the Commission.

6. Staff of the TEC and Ministry of Education, through the Tertiary Advisory Monitoring Unit (TAMU), will assist the panel with information and analysis in consultation with other departments and specialist experts as required (e.g. the Ministry of Research, Science and Technology will be consulted on research capability proposals).

7. The assessment approach will recognise that projects do not need to contribute positively to all the aspects of the TES but may choose to concentrate on certain aspects or make trade-offs in one area in order to achieve gains in another. All proposals will be required to meet all of the eligibility criteria. For the assessment criteria, proposals will need to meet minimum standards in avoiding fiscal risk and in demonstrating the ability to conduct the project. Above these minimum levels, the extent of any risk created and the applicant's ability will be considered along with the contribution to the TES, in order to make an overall judgment.

8. The panel will assess projects against the criteria. The panel will rank projects based on consideration of proposals, and where necessary, on interviews with the key personnel and investigations into the evidence presented by applicants.

9. The assessment panel will make recommendations to the Commissioners of the TEC, who will consider these before making their final recommendations to the Minister of Finance, Minister of Education and the Associate Minister of Education (Tertiary Education) for final approval.

10. In addition the Ministry of Education (through TAMU) will provide a separate stream of advice to the Minister of Education and the Associate Minister of Education (Tertiary Education) on any on any Crown risk perspectives in relation to a PfE project. The Treasury will advise the Minister of Finance on issues with the recommendations, including the proposed capital expenditure.

11. Ministers will be in a position to make decisions on which proposals will be supported, and to what extent, as part of the annual budget process.

12. Acceptance of a proposal for consideration by the review panel will carry no obligation on the part of the Crown to participate in and fund the project.

13. Successful proposals will result in a contract between the Crown and the institution concerned, which will cover:

- the purpose to which the Crown's financial contribution may be applied;

- the timing of payments;

- reporting and monitoring requirements;

- consistency with the contract between the institution and its private partner; and

- any other conditions as required.

14. The projects funded will be monitored to ensure they meet their performance targets. TEC's and TAMU's judgements on the achievement of performance targets may affect whether all funding is handed over to the TEI.

An evaluation of the success of the Partnerships for Excellence facility will be carried out in 2005 to:

- Ensure that the criteria and settings are achieving the purposes of the initiative;

- Ensure that the monitoring regimes negotiated with successful applicants allow the Crown to accurately assess risks and benefits;

- Ensure that the risk management strategies in place are appropriate; and

- Improve the initiative for future approvals.

Annex II

Detailed guidance for preparation of a business case

The preparation of a thorough business case will be fundamental to Partnerships for Excellence proposals. This annex provides guidance on the sorts of evidence that should be used to illustrate the benefits of the proposal and to demonstrate the ability of the TEI to successfully undertake the project, and the analysis that needs to be undertaken by the TEI and included in the business case.

Evidence

Eligibility:

The case must make it clear that what is proposed meets all nine of the eligibility criteria. Issues and options that are expected to have been considered in the business case might include, for example:

- demonstration that the form of private sector funding to be invested in the partnership is consistent with any regulation or legislation that applies to the TEI.

Evidence of how the partnership will improve excellence through:

- Raising quality and performance targets for education or research to a world class level, evidence of how this will be achieved, and validated through international benchmarking;

- Expanding global relationships and how this will bring benefits to teaching or research; and

- Expanding and enhancing innovation and creativity and how this will benefit students and private sector partners.

Evidence of how the partnership will improve relevance through:

- Increasing contribution to national economic and social goals, including regional development, shown by a clear specification of outputs and outcomes in terms of the new services to be delivered (including qualitative aspects of leverage gained through the non-Crown partnership), rather than the associated assets to be purchased; and, where relevant, the increased contribution to areas that have the most impact ¡X including biotechnology, ICT, and creative industries;

- Increasing quality of synergistic partnerships with private sector, as demonstrated by the quality of the proposed long-term contractual relationship with a private sector partner(s), the level of expected private sector/business contributions, or the nature and extent of knowledge transfer and application;

- More relevant teaching provision that is better linked to the current and future generic and specialist skill needs of business or other employers, as shown by qualitative assessment of how the partnership will enable more industry-relevant teaching; and

- More relevant research programmes, including how these will be developed in partnership with the private sector.

Evidence of how the partnership will improve access through:

- Increasing opportunities for seamless life-long learning, including for example, how teaching arrangements (course structure, timing, location, content) will change to better meet the needs of those already working and better prepare all students for work in the workplace; and

- Raising educational opportunities for priority groups, including for example, targets raising participation of Maori or Pacific students and evidence of how this will be achieved.

Evidence of how the partnership will improve capability through:

- Strengthening teaching capability or research provision to a world class level, including, for example, the ability to undertake international benchmarking and encourage best practice; and

- Strengthening strategic planning, including, for example, the development of capabilities relating to assessing student needs, industry needs, or putting in place long term relationships with other TEOs.

Evidence of how the partnership will improve the overall portfolio through:

- Enhancing the overall system portfolio of teaching or research provision, or capability, as shown by:

- how the partnership matches and will build on the core strengths of the TEI;

- how it will address gaps in the current national portfolio;

- where relevant, how it will lead to better utilisation of sector assets than existing patterns (recognising the Government's desire to ensure the most effective use of national resources); or

- how it will promote effectiveness and efficiency across the education and employment sectors; and

- Complementing or reinforcing the provision of other TEOs regionally and nationally, as shown by how the enhance provision relates to the provision of other TEOs, including outlining any new partnership arrangements with other TEOs that will be put in place to ensure that benefits are dispersed widely.

Evidence that the project avoids fiscal risks for Government through:

- Enhancing the long-term financial performance and viability of the TEI, shown by, for example:

- in the case of physical assets, providing scope for alternative or additional uses of the assets;

- providing the potential to utilise surplus assets;

- providing opportunities to generate income from third parties, nationally or internationally (where the proposal supports activity that is not immediately commercial, then there may be limited potential to generate income from third parties); or

- Demonstrating the business need for the investment, through the analysis covered below.

Evidence that the TEI's can successfully undertake the proposal by:

- The ability and resources to achieve the stated outcomes, including the TEI's capability profile in relation to the proposal; and

- Robust partnership management arrangements with the private sector participants, shown by, where appropriate, Memoranda of Agreement, IP management strategies, etc.

Analysis

Establishment of business need

Institutions making proposals must show that there is a need for a change in service delivery that cannot be met just by making gradual improvements, and that this change requires major investment. They should define the scope of the project, and its relationship with the institution's other activities. Educational, and economic or social development outcomes should be clearly wider than would be the case without the partnership. The Government will be concerned in particular to ensure that successful proposals represent an effective use of Crown capital compared to the opportunity cost to the Crown.

Options appraisal

This must identify all realistic and affordable options for achieving the desired outcomes. For each option there may be other procurement methods to be considered. Proposals should not be accepted under this initiative where alternative options for government financial support are available and would be more appropriate (eg, Centres of Research Excellence).

In this regard, the Government will also expect to see evidence that the partnership is the best that the institution can achieve.

Project costing for the preferred option

This must include as a minimum:

- Project costs:

- Expected private sector/ business contributions;

- Expected contributions from other sources (including internal institutional funding); and

- Contribution sought from central government;

- An analysis of affordability over the whole life of the partnership with the impact on operating and capital budgets defined (recognising, in particular, that decisions on capital can have significant associated operating costs, especially if the project will result, as intended, in substantial added value to the institution's outputs);

- An analysis of implications of the project for other aspects of the institution's business;

- Where relevant, an analysis of the likely return on the proposed investment; and

- Evidence of international validation where relevant.

Project management and implementation plans

The required scale of project management arrangements will depend on the project, but as a minimum the project management structure should be clearly defined, identifying accountability, professional advisers, and key milestones.

Proposals must include a realistic plan for implementation, including an ongoing project review process. The outputs and outcomes of a proposal are likely to take some time to develop. The proposal therefore needs to provide for:

- A review of the business case when better costing information becomes available;

- A regular review of project viability and affordability;

- Mechanisms to provide for continued commitment in the light of any significant changes to costs or affordability; and

- Methods for measuring project outputs/outcomes against the original project proposal.

Risks and risk management strategies

Much will depend on agreeing an appropriate allocation of the risks associated with the project, including where relevant a pricing mechanism for services that provides the right incentives for the commercial partner.

Proposals must include and a risk analysis that, at a minimum:

- Identifies and assesses all the major risks associated with the proposal;

- Considers scenarios in relation to these risks; and

- Outlines proposed risk management strategies.

Annex III

Timeline

2003

Ministerial announcement 24 September

Briefing workshops for potential applicants 15 October

Applications close 21 November

2004

Report to panel from advisors (incorporating input from relevant government agencies and academic and specialist advisors)

January

Reports sent to applicants for checking January

Panel interviews with applicants mid-February

Draft panel assessments sent to applicants for checking early-March

Panel assessment finalised early-March

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