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Key things universities should consider before entering a public-private partnership

SOURCE: Alex Mertz/Unsplash
Universities financial predicament forced colleges and universities to look for innovative new ways to fund projects like stadium and accommodation.

Not long ago they were almost unheard of in higher education, but public-private partnerships have been on the rise over the last decade as the sector grapples with funding woes and tries to map out its future in uncertain times.

While the march towards private funding in higher education has been building for some time, it was in the wake of the 2008 global financial crisis that really solidified the important role of private capital in the industry.

State budgets were slashed in an effort to recover from the devastating financial meltdown, leaving a lasting scar on education budgets.

Even today, more than a decade on, the effects are being felt. An April report from the State Higher Education Executive Officers Association found that, despite the American economic outlook having improved considerably, state funding for higher education has only halfway recovered since 2008.

“State leaders had to make tough decisions about how to finance their public systems of higher education as their economies weathered the Great Recession,” said Robert E. Anderson, president of SHEEO.

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“Many states used higher education as a balance wheel so they could preserve funding in other areas.”

According to the Center on Budget and Policy Priorities, US states have collectively scaled back their annual funding of public colleges by US$9 billion since 2008.

This financial predicament forced colleges and universities to look for innovative new ways to fund projects and made private capital an attractive financing option.

It is in this environment that higher education has turned its eye to public-private partnerships as a means to finance some of their most important projects; ensuring the high quality expected by students is met, without breaking the college coffers.

Delivery Model

Often called a PPP, or P3 in America, public-private partnerships are an arrangement that splits the cost and running of facilities between a public body and a private company. It is most commonly used in construction, in which an industry team is tasked with designing, building, financing, operating and maintaining a public facility.

The scope for PPPs within higher education is growing beyond construction into more scholarly areas. Most notably online learning and edtech, as well as administrative operations of universities, such as recruitment. Slowly but steadily, PPPs are working their way into all facets of university life.

In a recent survey, from The Chronicle of Higher Education & P3 asked 249 college executives about their approach to PPPs and found a high 83 percent of institutions are partnering more with private firms. Infrastructure remained the highest type of partnership with 53 percent carrying out campus building projects, but outsourcing online programmes (42 percent), student housing (39 percent), and predictive analytics (31 percent) also were a significant portion of the partnerships.

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These partnerships, of course, come with some major benefits. Not only does the private firms help finance a project, they also bring with them expertise and an agile business-minded approach to operations that many universities are lacking.

It is for this reason that so many PPPs have proven incredibly successful.

But this bringing together of two very different models of operating doesn’t come without challenges of its own.

For-profit companies obviously have very different motivations than colleges who are more student-focused. This clash of cultures can lead to some questionable policies, as Arizona State University (ASU) found in its partnership with learning platform Cengage.

In May, students accused the university of profiting off their contract with Cengage, which forced students to pay US$100 to access course documents and submit assignments. The university and Cengage have since been cleared of all corruption allegations following an external review of the matter. But that wasn’t before the student bodies trust in their college had been dangerously eroded.

Stories like that at ASU should be a warning to universities. While the benefits can be immense, there are some serious questions any college should be asking before entering into a PPP agreement.

Does it adhere to the college’s ethos and morals?

Colleges need to have a good grasp of what their motivation is going into a PPP and ensure the potential partner is in line with their thinking.

While financially viability is obviously very important to a college, turning a profit is not necessarily their number one priority. This can sometimes conflict with that of a private company who see students as dollar signs rather than customers to help.

Speaking to EdSurge, one college official recalled a meeting where the head of a popular online programme manager showed up wearing a gold chain and talking about the “cost of acquisition” of students. That focus on sales can be uncomfortable for traditional colleges who are more concerned with the education and experience of their students.

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Despite this different approach, it doesn’t necessarily mean a successful balance can’t be struck, as Georgia State University found when it entered a PPP with Corvias Campus Living to build new student housing.

By joining forces, the university was able to deliver the project far faster than it would have done otherwise and on a larger scale.

Given that a large proportion of GSU’s students are lower-income and grant recipients, the university wanted to keep the costs of the accommodation low and affordable. After all, as President Mark Becker pointed out: “It would be of no use to us to have a 1,100-bed facility that our students couldn’t afford to live in.”

Given Corvias financial involvement, the project was able to keep costs down while still providing their students with brand new living facilities.

Do you really need a partner?

Before sourcing a partner for a project, colleges need to have a clear picture of exactly why they are choosing this option and be able to articulate the value the partnership will bring.

If it is nothing more than what an institution can achieve alone then, there is little point, Chancellor of the University of Illinois at Chicago, Michael Amiridis, told Education Dive.

Beyond financial support, the arrangement must safeguard or enhance a college’s core values, he explained. These include affordability and access, academic freedom, and the integrity and quality of its processes.

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Who controls what?

In any type of partnership, it’s always vital to consider who controls what and if that is practical in the long run. This is particularly relevant for universities that often have a far longer life-span than private business.

In the case of construction and the running of public sites, the university is likely to be around and using those facilities far longer than most private companies.

Universities are a staple of the community and commonly can keep their doors open for centuries, private companies, on the other hand, are vulnerable to buyouts, market changes, and mergers.

As GSU’s president Becker explained in the case of the university’s PPP with Carter to develop and build private student housing, market-rate multifamily units and retail in addition to refitting the stadium:

“We said, ‘Look, in 100 years you’re probably not going to be here,'” whether they go under, get bought out or merge, Becker said. “We’re going to be here in 100 years.”

The same is true for intellectual property and resources, such as online education and course management.

Universities are a hub of knowledge and innovation. This can be their most valuable asset and it is worth protecting. For many universities, PPPs in this field simply don’t work as they are not willing to give up their content.