A Perfect Example of a Public Private Partnership
Back in early 2001, Natomas School District in Sacramento CA faced a population growth that led to over-crowding in the high school. The school district desperately needed a new high school building that would ease the student load but it faced significant challenges that constrained it from taking on a new construction project. First of all, it was under credit watch from the county as it had already raised enough money through renovation/reconstruction bonds for its existing schools. Secondly, all this construction work had stretched the staff thin, leaving little capacity to take on a new project. And finally, there was the issue of significant delays and budget overruns in the construction projects then underway. The school district did not want to take on any more such projects.
Natomas School District is not the only one in this boat, according to Center on Budget and Policy Priorities (CBPP), for FY2013 about 30 states have a budgeted shortfall of $54 billion. This budget shortfall was about $103 billion across 42 states for FY2012. Not only that, in a survey conducted by National League of cities in 2011, 60 percent of the cities said that they delayed or cancelled capital projects due to fiscal constraints that year. So this constrained environment is across many different states, cities and public sector institutions.
Customer Experience Needs
Over the last few years, I have been researching how customer experience drives better innovation and I have recently published a book on this topic titled “Shift: Innovation That Disrupts Markets, Topples Giants, and Makes You #1”. I used the framework in this book to evaluate Natomas school district’s customer experience needs and found that the constrained environment changed their overall needs.
They needed an innovative solution that would solve their overcrowding problems while delivering better customer experience across four factors
- Requirements: It needed a top of the line high school that would meet its capacity needs over the long-term. So it needed a best-in-class customer experience on Requirements factor.
- Price: It did not have enough capital to finance the construction, so it needed the vendors to come up with innovative solutions for funding the construction. Hence it needed a best-in-class customer experience on this factor.
- Availability: The school district had long delays on its prior construction projects, which was not a good customer experience. So it desired a better customer experience and expected the vendors to finish the construction on time for the new school year.
- Convenience: The school districts staff was stretched thin; it needed the vendor to take on the work load related to the construction with minimal oversight from its staff. It wanted the building construction to be convenient for its operations hence requiring best-in-class experience on this factor.
Comparison of the Natomas School District’s current and desired customer experience is shown in the figure below.
Public Private Partnership to the rescue
It was clear to the executives at Natomas School District that what they desired is something they could not get via traditional construction processes, so they looked at Public Private Partnership as a solution. In the deal the private parties were responsible for constructing the building and then leasing it back to the school district. The school district was not required to provide any capital or supervision for the construction. On top of that the school district was able to specify performance and completion targets for the project.
This partnership led to the construction of state-of-the-art 2000 student Inderkum High School located in a 200 acre community, which was completed one month ahead of schedule and $2 million under budget, at the total construction cost of $80 million. The new school has 72 classrooms, sports stadium, regulation football field and track, 2 baseball fields, gymnasium, theaters and much more. It is an energy efficient building with a 465 kW solar system and underground geothermal system, which helped the school district cut down its energy consumption and earn rebates from the local utility.
By delivering this extraordinary facility on-time and under budget, the private partners were able to not only meet but exceed Natomas School District’s customer experience needs (as shown in figure below). They also helped the district’s social goal of reducing its carbon footprint by cutting down on fossil fuel based energy consumption, hence delivering a best-in-class experience on Social Responsibility. Inderkum High School is a perfect example of a successful Public Private Partnership.