Operating and maintenance (O&M) costs are partially driven by construction standards. There is therefore a three-way trade-off between achieving construction cost savings, minimising operating and maintenance costs and maximising user benefits. A contractor who effectively owns a risk in the asset, at least for the duration of the contract, and is paid for the delivery of services only, has the right incentives to optimise construction costs in order to achieve whole-of-life cost minimisation, and the incentive to strike the right balance between cost minimisation and user benefit maximisation.
When assessing the extent of potential whole-of-life economies, account needs to be taken of the extent to which the client imposes minimum construction standards and other input specifications, or the extent to which the contract will reduce the contractor's exposure to risk through profit/revenue sharing and refinancing gains sharing arrangements, as these factors reduce the scope for achieving whole-of-life economies.