34 The residual value and the ultimate life of schools will depend on the adequate manufacture, installation, maintenance, repair and replacement of key components. BRE stated that most of the schools in our sample should have a typical lifetime of 50 to 60 years and beyond, if adequately maintained and free from major defects. However, there are differences in the incentives and pressures at work under PFI and traditional procurement in relation to long-term maintenance and its costs:
• Under the traditional route, the choice of whether to carry out maintenance remains with the LEA and the school, and wider budget pressures will tend to encourage deferment of expenditure until an obvious need arises. This will tend to lead to lower costs in the short term. On the other hand, especially if there are design inadequacies, deferment of expenditure could lead to a rising backlog and risk of component failure that might reduce the life-expectancy of the school and could lead to higher costs in the long term.
• Under PFI, the PFI provider should pick up the maintenance cost consequences of design inadequacies (provided they are contained in the output specification) through the risk transfer arrangements. However, schemes in which low capital investment is combined with high maintenance costs could store up problems and tensions for later, as debates begin to occur about what maintenance work needs to be undertaken to meet the original specification. PFI funders will therefore seek assurance that potential future maintenance costs have been identified, and that the annual charge to the LEA does not underestimate the risks that the PFI provider has taken on. Since future prediction is an uncertain activity, there is an incentive for providers to estimate on the high side, and so this could act as a driver for higher costs. Unlike under traditional arrangements, even if these risks do not in fact materialise, the LEA will still pay via the monthly charge. Counter-balancing this, competition between PFI bidders should act in the other direction as a driver to keep costs down.
35 Although the balance between the above variables in PFI and non-PFI procurement is different, our results show that they did not result in clear-cut differences in most types of cost in the early schemes. But there could be a different kind of benefit from PFI. A limitation of the traditional approach has tended to be a less comprehensive and transparent consideration of all of these issues, with more implicit trade-offs being made. By contrast, a bonus of the PFI process should be that these variables are better defined, far more explicit and the subject of discussion and scrutiny by a range of professionals in the public and private sectors. In our fieldwork, this was sometimes felt to be the case, but others interviewed felt that this potential PFI benefit had not been fully realised in their schemes, for example, because some PFI providers referred to commercial confidentiality in being reluctant to disclose actual costs.