Just for starters: Funding, legal, and ethical problems

One parent below helpfully points out the hefty hurdles and legal problems the Labor party face in shooting for this extremely ambitious plan. There is a blistering two year, eight month schedule to develop and build a large multifunctional collaborative project involving disparate groups with an experimental untested design. This is not  off-the-shelf. In a rushed, botched version, the Labor party could leave the state with a leased white elephant commitment rumoured to cost in the order of $13m a year just for the rent bill. At the same time, it drives a pike through community fundraising and bequests that take the pressure off the public purse.

In brief: To ensure value-for-money from using taxpayer funds, government, through the Department of Treasury, has a  Strategic Assessment Management Framework (SAMF) which describes best practice….

…there is a danger that an outgoing Labor government in 2021 could bequeath an unwanted lease obligation to a new government.

…there will be an expropriation of parent funded assets by a WA Labor government. This is undemocratic and unAustralian.

…if there is no respect of legacy endowments, gifts and donations, there will be a commensurate disincentive to undertake these activities in the future: all will be poorer for it.

…A test of cost-benefit analysis in economics is to apply weights to assessment of benefits. With no consultation, no weight has been applied to the wishes of the Perth Modern school community. Nor does there appear to have been active consultation with other affected school communities so far – just a presumption that they will support Labor’s proposal. Thus the proposal is simply a political move and has nothing to do with improving educational outcomes. Parents of Perth Modern should resist this project. Parents of other affected schools should be given an opportunity to be heard too.

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How not to develop a project – WA Labor’s proposal to replace Perth Modern

project noun ˈprɒdʒɛkt/

an individual or collaborative enterprise that is carefully planned to achieve a particular aim.

Best practice suggests that projects are typically bounded in scope, time and cost. Projects go through a lifecycle: identification, planning and feasibility, conceptual engineering, detailed design, procurement and construction, commissioning and start-up, working life and decommissioning. Projects, to be successful, are conceived with input from stakeholders, professionals and users. Projects need coordination.

Taxpayers often feel that their hard earned dollars aren’t being respected by the government officials charged with spending those dollars. In a story that feeds into that narrative, the city of Montreal has recently completed the demolition of an overpass that was only built a year previously. Having built the new overpass officials found that the positioning of the overpass is not in accordance with a redesign of the road access to the nearby Champlain Bridge that is also under redevelopment. The finalized design of the Champlain Bridge access has resulted in the newly constructed Highway 15 overpass being demolished just 1 year after it was opened to the public.

Source: International Project Management Leadership Academy

WA Labor proposes to develop “Perth Academic College”, occupying the top storeys of a 25 storey building located on a lot at Perth City Link. The project is to be funded by diverting funds that have been allocated to the City Beach School Project. Not much more is known.

So let’s examine WA Labor’s announcement from a best practice perspective and then also compare it to the WA State government’s own best practice template, the Strategic Asset Management Framework (http://www.treasury.wa.gov.au/Treasury/Strategic_Asset_Management/SAMF_Overview/).

1. Projects are typically bounded in scope, time and cost.

Perth Modern has over a 1000 pupils and all the academic, sporting and ancillary facilities that one would expect of a school. Additionally its alumni and community have fund raised to add to the asset base: most notably the “Raise the Roof” campaign to fund a multi-purpose auditorium and the new Tyler McCusker Sports Centre. So far no detail has been forthcoming as to how Perth Academic College will provide complementary and replacement facilities for its 1500 student planned intake.

It is proposed that the new school will be occupied in 2020. This will be built within the Metropolitan Redevelopment Authority Perth City Link development. Since WA Labor is not in government, even if a preferred developer has been identified by the MRA (Perth Academic College will occupy leased space), there will then have to be discussions with the developer to ensure that the proposed space is suitable for the use proposed. More likely, there is no preferred developer and a competitive process will be required to determine a developer capable and willing to deliver to an incoming Labor government brief. Given the stop-start nature of the site development at Elizabeth Quay, there is a question mark as to whether any such process can be completed in 2017. This would then put pressure on a 2020 opening. The apparent timeline of this project is ambitious and with funding only through until 2021 (the term of a new parliament), there is a danger that an outgoing Labor government in 2021 could bequeath an unwanted lease obligation to a new government.

So far all that is known as to cost is WA Labor’s plan to divert funds from the current government’s City Beach School project. The $45m would be spent as $25m on fitout and the balance to meet lease obligations until 2021. $60m has been earmarked by the current government for City Beach. WA Labor has not said what it will do with the $15m saved. However without independent cost estimates it is impossible to know what the fitout cost will be nor what expected leasing costs will be even though it would be normal for developers to offer tenant incentives. And given the unique nature of the facility, it is likely that fitout costs will be high (for instance, to accommodate air extraction from science laboratories) and – worse – because, for example, sports and performance facilities require high ceilings, the floor to ceiling slab heights are likely to be non-standard –making the building less attractive to future tenants and hence reducing the developer’s profit (causing him to charge a higher rental). Finally, unlike office workers, school children are frequently in motion – from classroom to classroom, classroom to break etc. There will be high occupancy costs due to wear and tear and electricity usage.

2. Project lifecycle

WA Labor has identified this as its preferred solution to the crowded schools of the Western Suburbs. The Liberal party is crying foul that it is about winning the seats of Perth and Mount Lawley (held by the Liberals by 2.6% and 9.4% respectively). WA Labor may have done its own internal analysis of the merits of the project proposed but that will need to be confirmed by public servants in the departments of Education and Treasury or Finance since it is they that will need to operate the school and will also need to deliver the fitout. This will take time to assess. And best practice suggests that it should be done prior to going to the market for commercial developers to propose solutions – otherwise government risks negotiating from a position of weakness or, worse, accepting a proposal that is less than optimal. To protect against this, the Department of Treasury in Western Australia publishes its Strategic Assessment Management Framework (SAMF). SAMF is described on Treasury’s website as follows:

“The key themes are that:

• Government policy objectives and practical service delivery to the Western Australian community are the primary drivers of asset investment planning and management;
• SAMF application by agencies starts with corporate planning – which provides the overall context for the strategic appraisal of the assets that are required in order to deliver services over the next decade;
• An asset investment proposal is considered with reference to three critical decision-points: whether an investment proposal has strategic justification; whether a business case provides the basis for a sound investment decision; and whether the proposal has sufficient priority to receive funding approval; and
• An agency’s Chief Executive Officer and other senior investment decision-makers (such as the Chief Finance Officer and Chief Information Officer) lead and are actively involved in the annual refresh of an agency’s strategic asset plan and the development of asset investment advice and proposals to the Minister and ultimately Cabinet.”

Source: Treasury, SAMF Overview

According to the published SAMF “Overview” (downloadable at the above website), the main purpose of the SAMF process is to ensure a “sound basis for decisions”. It prioritises “government policy objectives and practical service delivery”. In particular:

“For an agency, SAMF application should start with corporate planning which provides the overall context for a strategic appraisal of the assets needed to deliver services over the next ten years.

Once the strategic setting is established, SAMF emphasises the need to optimise the benefits gained from existing assets throughout their lives, rather than concentrating on the creation of new ones.

An agency should examine objectively whether existing assets can continue to contribute effectively to the achievement of service delivery objectives (perhaps with smarter use or some enhancement) and, if so, for how long and at what cost.”

Source: SAMF Overview, Executive Summary, page 1

It is clear that SAMF is a disciplined approach that focuses on using existing assets efficiently before money is spent creating new assets. To reinforce the point, the authors conclude the Executive Summary with:

“This approach ensures that a new asset investment option is selected only after objective consideration of its merits relative to other cost effective alternatives. It also distinguishes between investment proposals that have high relative priority, and those that do not (and should not proceed).

To support a decision to invest in an existing or new asset, SAMF requires a whole-of-life approach to planning that should cover the project delivery, ongoing operation, maintenance and eventual disposal of the asset.

The SAMF approach requires rigour and discipline. Any recommendation to invest in an asset must have a clear strategic justification in terms of meeting the Government’s objectives, and demonstrate that the recommended option offers strong value for money.”

Source: SAMF Overview, Executive Summary, page 1

It is clear that none of this has happened to date. Steps to deliver a project with the SAMF include a Business Case, possibly a Project Definition Plan, and there is a robust process for monitoring delivery and benefits in use. Unfortunately SAMF recognises that some projects may be fast-tracked through Cabinet and election commitments are specifically mentioned as one (“Overview” page 10).  However a safeguard is provided for:

“…if approved by Cabinet, the proposal is provided with sufficient resources to ensure that rapid development achieves the level of rigour and discipline necessary to meet the SAMF objectives for a business case and a project definition plan.”

Source: SAMF Overview, Executive Summary, page 10

It is clear that there is no room for complacency: even though the project itself will be managed rigorously, a bad project can still be forced through.

3. Successful projects need consultation

There has been no consultation with the affected student and school community regarding WA Labor’s proposal. Additionally, with that same community raising funds for asset improvements, there will be an expropriation of those assets by a WA Labor government. This will raise all manner of questions in the minds of those currently fundraising in other schools and for other worthy causes – if there is no respect of legacy endowments, gifts and donations, there will be a commensurate disincentive to undertake these activities in the future: all will be poorer for it.

Perth Modern School is a wonderful educational institution with a proud history and much to offer. If WA Labor is elected, it has an obligation to be a good steward of public assets and also respect the wishes of those affected. In economics, a Pareto welfare criterion is one where some people gain and no one loses. This is often an impossibly high bar for a project to climb over. A Hicks-Kaldor criterion is therefore often preferred. In this a project is supported if the gainers could, in principle, compensate the losers. In the case of Perth Modern, WA Labor may argue that Perth Academic College is that compensation. However another good test of cost-benefit analysis in economics is to apply weights to assessment of benefits. With no consultation, no weight has been applied to the wishes of the Perth Modern school community. Nor does there appear to have been active consultation with other affected school communities so far – just a presumption that they will support Labor’s proposal. Thus the proposal is nothing more than a political move and has nothing to do with improving educational outcomes. Parents of Perth Modern should resist this project. Parents of other affected schools should be given an opportunity to be heard too.

— Parent, Perth.