78. The private sector is usually best placed to manage construction risk-such as building on time and on-budget-and the risk of providing maintenance over the asset's lifetime (Mr Buxton Q 91). Private contractors have a greater incentive to build a project on-time and on-budget as they only start receiving payments once construction is complete. Making the private sector responsible for maintenance aims to encourage the contractor to build a high quality asset that will require little maintenance over the course of the contract-usually 25-30 years.
79. Besides construction and maintenance, it is unclear what other risks the public sector seeks to transfer and to what extent. Ms Rachel Lomax said that when she was Permanent Secretary at the Department for Work and Pensions private finance would not be used for a core function of the Department: "There is just no way you can transfer the risk of something which is fundamental to the Department's purpose and statute." As a result the Department for Work and Pensions did not use private finance in benefit administration "because we felt that was what the Department was all about". Private finance was instead used to provide medical services, which are not a core function of the Department (Q 216).
80. With private finance projects so far, the public sector usually retains risks related to demand (Mr David Belton, Sheffield City Council, p 281). So if the local population falls so much that a PFP-built school or hospital needs to close then the public sector bears the costs of closing it before the private finance contract expires.
81. Construction and maintenance risks are usually seen as suitable for transfer to the private sector; whereas activities over which the private contractor is seen as having little or no influence have not been transferred.