How is it, then, that to the initiated, PFI seems both to create a tendency to cut each other's throat and produce buildings that fall woefully short of their intended purpose? The goldrush that is PFI/PPP has created a kind of internecine warfare, in which industry gladiators regularly take to the battleground for prizes that, on the surface, are hugely alluring. Just look at the headline carried by Building on 9 February (page 14): "Contractors line up for new wave of PFI hospitals".
But in the general euphoria, it is easy to gloss over the lacklustre appearance and performance of hospitals and schools. Clearly, something is happening between initial bid and finished product that is derailing the bold principles of PFI, making the process less robust and effective.
Industry pundits could probably point out many flaws, from the interminable bidding process to a lack of foresight about future needs. But there is one aspect of particular concern, and for that, you only have to look at the news item mentioned above: "A shortlist of two was to have been announced last month but the client has since asked bidders to think of ways to reduce the cost." Cost reduction is more than likely achieved by exchanging the specified building components for cheaper versions. The bidder's eagerness to pacify the client and the client's ignorance about the true cost of a cheaper bid simply puts the project on the road to ruin.
The good news is that things are changing.
A growing band of consortiums are beginning to invest time and money in whole-life performance planning, enabling them to bid realistically and, in the event of a win, to carry out their contractual obligations and make money.
These consortiums are now putting whole-life performance at the centre of their bids, making the process an integral part of cost planning and debunking the argument that cheap wins the day.
Whole-life performance is a sophisticated statement from the bidder that predicts the life-cycle costs over the term of the concession. These may include energy use, cyclical and responsive maintenance, planned preventive maintenance and predicted replacement. The whole-life costs can even include items such as recycling, recovery and salvage of components at the end of the life cycle.
All of the above factors can be assessed and priced and go on to form the basis of accurate projections. These projections will not increase the bid cost, necessarily – rather, they will show the true cost and provide a reliable basis on which to support the overall viability of the bid. In essence, we have moved from rudimentary life-cycle costing to forecasting long-term behaviour.
The earlier whole-life performance is involved in the bidding, the greater the clarity of long-term vision. Most important, it removes the assumption that squeezing costs makes a bid competitive: it doesn't. In fact, in Building Down Barriers, Defence Estates' prime contracting pilot project, increasing the capital cost was actually shown to reduce overall long-term costs. A 3% increase in capital expenditure had the effect of a 10% saving in life-cycle costs.
One example of whole-life planning can be seen in Glasgow, where cost-effectiveness – not cost – was a deciding factor in awarding Project 2002 to a consortium trading as 3ED (Glasgow). The 30-year deal to refurbish the city's secondary schools is worth £1.2bn.
The role of whole-life performance was central to the bid; its impact on component specification, maintenance planning and life-cycle costing cannot be underestimated. The original brief included building three new schools. But through life-cycle choices and option appraisals, sufficient savings were made to allow 12 new schools to be built.
Getting consortiums to take notice of whole-life performance is only half the battle. Too many awarding authorities fail to recognise its significance. If only their technical advisers knew more. Then, bids would undergo such scrutiny that only the most robust, informed and cost-effective would be selected.
Postscript
Richard Allard is a director of Building Performance Group.
