Public-Private Partnership Stories Brazil: Belo Horizonte Schools Photo © World Bank Belo Horizonte, the third largest city in Brazil, has made early education a priority in an effort to improve the competitiveness of its workforce in the long term and support the national government’s policy goals. With support from IFC, it turned to private sector funding and expertise to expand and strengthen its preschool and primary school system. The concession—Brazil’s first public-private partnership in the education sector—was awarded in July 2012. The Educar Consortium, led by Odebrecht, a leading Brazilian construction company, won the 20-year concession to construct primary schools and preschool facilities. It will also operate non-pedagogical services, such as maintenance and security. The partnership will expand access to early education in Belo Horizonte, reaching 18,000 additional children and creating new jobs in the education sector. This series provides an overview of public-private partnership stories in various infrastructure sectors, where IFC was the lead advisor. 18,000 children from low-income areas of the municipality will be IFC Advisory Services in Public-Private Partnerships able to attend kindergarten and elementary school. 2121 Pennsylvania Ave. NW Washington D.C. 20433 ifc.org/ppp BACKGROUND responsible for the construction and operation of non-pedagogical The municipality of Belo Horizonte, the capital of the Brazilian services, such as cleaning, surveillance, laundry, maintenance, state of Minas Gerais, has made early education a top priority and utilities management. This approach improves the overall on its agenda. Demand for better education was strong, with administrative efficiency of managing early educational facilities over 11,000 children, many underprivileged, on a waiting list to by consolidating these services under a single provider. This also enroll in school. The municipality also took a long-term view—a enables the directors of the schools to focus on teaching rather strong educational foundation would be necessary to improve the than managing multiple vendors. long-term competitiveness of the workforce in a growing region. The private partner will be measured according to a set of Strengthening education is also an important objective of Brazil’s performance and availability indicators which will then be federal government. assessed by an independent verifier. But the municipality’s efforts have been hampered by technical and financial limitations. It faced a shortage of school buildings BIDDING and only had the resources to meet approximately 35 percent of The private partner was selected through a competitive bidding demand. It also lacked the resources to manage procurement of process facilitated by IFC. Bidders that met minimum technical construction services and manage the non-pedagogical services requirements were selected on a cost basis. of new schools. To address these issues, Belo Horizonte decided to explore the possibility of a private sector role to expand and The municipality received two qualified bids from two Brazilian strengthen its early education system. construction companies—Andrade Gutierrez and Odebrecht. The Educar Consortium, consisting of Construtora Norberto Odebrecht and Odebrecht Participações e Investimentos (both of IFC’S ROLE which are subsidiaries of Odebrecht S.A.), won the concession. The municipality appointed IFC as lead advisor to explore how private sector participation could help advance Belo Horizonte’s The PPP contract was signed on July 25, 2012. early education system, and what mechanism could be used to do so. After conducting a detailed feasibility study, IFC EXPECTED POST-TENDER RESULTS recommended that the municipality enter into a public-private partnership (PPP) with a private-sector firm to address the • Provides for the construction and operation of shortage of preschools and primary schools. non-pedagogical services of 37 new schools (32 preschools and five primary schools) in less time Because a PPP had never been used in Brazil’s educational system and at lower cost. before, IFC used examples from other countries to develop a detailed model, demonstrating how a well-designed PPP • 18,000 children from low-income areas of the could help the municipality meet its objectives. IFC facilitated municipality will be able to attend kindergarten discussions that allowed stakeholders to raise their concerns. and elementary school. Expert consultants managed by IFC developed solutions to • Mobilizes $95 million in private sector investment. financial, technical and legal issues. These solutions were built into a transaction structure made available for public comments and inputs by potential investors. Following further refinement 07/2012 of the transaction structure, IFC helped draft tender documents, organize a public hearing, and manage the bidding process. TRANSACTION STRUCTURE IFC proposed a 20-year concession to finance, build, equip and operate non-pedagogical services of 32 new preschools and five primary schools. Compared with the traditional procurement process, private sector involvement will significantly shorten the time required to build and launch these new schools. The new units will be delivered within two years, which is a record in construction procurement timing by governments. Primary schools will then become operational in about one year. Under the terms of the concession, the municipality is required to provide sites for the facilities while the private sector partner is