FACILITY MANAGEMENT SCHEMES FOR SCHOOLS IN THE UK:A STUDY OF VARIATIONS IN SUPPORT SERVICES COSTS AND CAPITAL EFFICIENCY RATIOS

Transcription

1 FACILITY MANAGEMENT SCHEMES FOR SCHOOLS IN THE UK:A STUDY OF VARIATIONS IN SUPPORT SERVICES COSTS AND CAPITAL EFFICIENCY RATIOS By Rui PdroPrira Magalhas 1 Sptmbr 2013 A Dissrtation submittd in part fulfilmnt of th Dgr of Mastr of Scinc Built Environmnt: Facility and Environmnt Managmnt Bartltt school of Graduat Studis Univrsity Collg London i

2 CONTENTS 1. INTRODUCTION IDEAS IN FACILITY MANAGEMENT COST, STIMULI PROBLEM STATEMENT AND RESEARCH QUESTION SCHOOLS AS A TARGET FOR RESEARCH SIGNIFICANCE OF THE STUDY LITERATURE REVIEW CAPITAL EFFICIENCY PFI AS A WAY OF IMPROVING FM PERFORMANCEIN PUBLIC BUILDINGS LIFE CYCLE COSTIN FM FM IN CONVENTIONAL OR PFI SCHOOLS METHODOLOGY DATA GATHERING AND THE SELECTION OF CASE STUDIES DATA WORK, VARIABLES AND CALCULATIONS RATIOS AND COMPARISONS RESULTS AND ANALYSIS FM COSTS IN PFI AND CONVENTIONALLY FUNDED SCHOOLS CAPITAL COST VS. OPERATIONAL COST IN PFI SCHOOLS IN THE PERIOD (2002 TO 2009) HIGH SCHOOL OPERATIONAL/CAPITAL RATIO PRIMARY SCHOOL OPERATIONAL/CAPITAL RATIO WHAT WAS DISCOVERED DISCUSSION PFI AND NON PFI OPERATIONAL COSTS CAPITAL EFFICIENCY RATIOS CAPITAL EFFICIENCY RATIO AND FM ARRANGEMENT TYPE INPFI HIGH SCHOOLS CAPITAL EFFICIENCY RATIO AND FM ARRANGEMENT TYPE IN PFI PRIMARY SCHOOLS RELATIONS BETWEEN TYPE OF CONTRACT AND COST CONCLUSIONS AN OVERVIEW UNEXPECTED RESULTS FLAWS IN THE INVESTIGATION FURTHER INVESTIGATIONS BIBLIOGRAPHY APPENDICES PFI SCHOOL OPERATIONAL COSTS LONDON AND WEST MIDLANDS, PFI SCHOOL OPERATIONAL COSTS YORKSHIRE AND NORTHWEST, CONVENTIONALLY FUNDED SCHOOL OPERATIONAL COSTS LONDON AND WEST MIDLANDS, CONVENTIONALLY FUNDED SCHOOL OPERATIONAL COSTS YORKSHIRE AND NORTHWEST, PFI AND CONVENTIONALLY FUNDED SCHOOLS, 20 SCHOOL DATABASE, OPERATIONAL COSTS PER STUDENT CAPACITY, PFI AND CONVENTIONALLY FUNDED SCHOOLS, 20 SCHOOL DATABASE, OPERATIONAL COSTS PER STUDENT CAPACITY (NPV TO YEAR 2002) PFI AND CONVENTIONALLY FUNDED SCHOOLS, 20 SCHOOL DATABASE, TOTAL OPERATIONAL COSTS PER STUDENT CAPACITY AND AVERAGE OF TOTAL COSTS PER STUDENT CAPACITY PER YEAR (WITH AND WITHOUT NPV TO YEAR 2002) ii

3 8.8 PFI AND CONVENTIONALLY FUNDED SCHOOLS, 20 SCHOOL DATABASE, TYPE OF OPERATIONAL COST AVERAGE PER STUDENT CAPACITY AND TOTAL COST AVERAGE PER TYPE AND PER STUDENT CAPACITY PER YEAR (WITH AND WITHOUT NPV TO YEAR 2002) OPERATIONAL COSTPER STUDENT CAPACITY FOR PFI AND CONVENTIONALLY FUNDED SCHOOLS, AVERAGES FOR PRIMARY AND HIGH SCHOOL OPERATIONAL AND CAPITAL COSTS PER STUDENT CAPACITY FOR PFI SCHOOLS OPERATIONAL AND CAPITAL COSTS PER STUDENT CAPACITY FOR PFI HIGH SCHOOLS, CAPITAL EFFICIENCY RATIOS OPERATIONAL AND CAPITAL COSTS PER STUDENT CAPACITY FOR PFI PRIMARY SCHOOLS, CAPITAL EFFICIENCY RATIOS 73 FIGURES FIGURE 1: SPV AS THE ORGANISATIONAL CORE FOR IMPLEMENTING A PFI SCHEME FIGURE 2: RELATIONSHIP BETWEEN ASSET RELIABILITY AND CAPITAL (ACQUISITION) AND OPERATIONAL (MAINTENANCE) COSTS, (WU ET AL, 2006) FIGURE 3: THE BATHTUB CURVE (US MILITARY GOV, 2005) FIGURE 4: WLCC VERSUS LCC (BS ISO ) FIGURE 5: EFFECT OF FM IN EDUCATION, AND HOW IS PROCESSED (HERMAN ET AL, 2011) FIGURE 6: FM COSTS ( /STUDENT CAPACITY) FROM 2002 TO 2009 PFI SCHOOLS (WITH NPV TO 2002) FIGURE 7: COST PER STUDENT CAPACITY EVOLUTION PFI SCHOOLS WITH AND WITHOUT NPV CALCULATION BASE YEAR ( /STUDENT CAPACITY) FIGURE 8: COMPARING AVERAGES OF RUNNING COSTS ( /STUDENT CAPACITY) IN THE 10 PFI SCHOOLS WITH THE 10 CONVENTIONALLY FUNDED SCHOOLS (NET PRESENT VALUE FOR THE BASE YEAR OF 2002) FIGURE 9: FM COSTS IN AVERAGE PFI AND AVERAGE OF CONVENTIONALLY FUNDED SCHOOLS FROM 2002 TO 2010 (NPV AND WITHOUT NPV COMPARISON), /STUDENT FIGURE 10: DISTRIBUTION OF OPERATIONAL COSTS PER TYPE AND PER YEAR FOR THE PFI GROUP OF SCHOOLS (AVERAGE OF 10 PFI SCHOOLS, /STUDENT) FIGURE 11: DISTRIBUTION OF OPERATIONAL COSTS PER TYPE AND PER YEAR FOR THE CONVENTIONALLY FUNDED GROUP OF SCHOOLS (AVERAGE OF 10 NON PFI SCHOOLS, /STUDENT) FIGURE 12: PROPORTION OF RUNNING COSTS IN THE FM SECTOR FOR PFI SCHOOLS FOR THE TOTAL PERIOD OF 8 YEARS (AVERAGE OF 10 SCHOOLS) FIGURE 13: PROPORTION OF RUNNING COSTS IN THE FM SECTOR FOR NON PFI SCHOOLS FOR THE TOTAL PERIOD OF 8 YEARS (AVERAGE OF 10 SCHOOLS) FIGURE 14: AVERAGE OF FM COSTS FOR 6 PFI AND 6 NON PFI HIGH SCHOOLS AND 4 PFI AND 4 NON PFI PRIMARY SCHOOLS, /STUDENT FIGURE 15: HIGH SCHOOL PFI CAPITAL COSTS PER STUDENT IN 6 DIFFERENT SCHOOLS AND REGIONS OF THE UK (SOURCE: UK TREASURY) FIGURE 16: HIGH SCHOOL PFI OPERATIONAL COSTS PER STUDENT IN 6 DIFFERENT SCHOOLS AND REGIONS OF THE UK.. 33 FIGURE 17: COST EFFICIENCY RATIO OPERATIONAL EXPENDITURE IN PERCENTAGE OF CAPITAL EXPENDITURE (HIGH SCHOOL PFI 2002 TO 2009) FIGURE 18: CAPITAL EFFICIENCY RATIOS UK HIGH SCHOOL DISTRIBUTION FIGURE 19: PRIMARY SCHOOL PFI CAPITAL COSTS PER STUDENT IN 4 DIFFERENT SCHOOLS AND REGIONS OF THE UK (SOURCE: UK TREASURY) FIGURE 20: PRIMARY SCHOOL PFI CAPITAL COSTS PER STUDENT IN 4 DIFFERENT SCHOOLS AND REGIONS OF THE UK FIGURE 21: COST EFFICIENCY RATIO OPERATIONAL EXPENDITURE IN PERCENTAGE OF CAPITAL EXPENDITURE (PRIMARY SCHOOL PFI ) FIGURE 22: TREND LINES FOR THE AVERAGES OF RUNNING COSTS (POUNDS PER STUDENT) IN THE 10 PFI SCHOOLS WITH THE 10 CONVENTIONALLY FUNDED SCHOOLS FIGURE 23: BATHTUB CURVE ANALOGY FOR PFI AND NON PFI SCHOOL BUILDINGS FIGURE 24: OPERATIONAL COSTS FOR PFI HIGH SCHOOLS 2002 TO 2009 ( /STUDENT CAPACITY) FIGURE 25: OPERATIONAL COSTS FOR PFI PRIMARY SCHOOLS 2002 TO 2009 ( /STUDENT CAPACITY) iii

4 TABLES TABLE 1: EXTRACT OF THE DATASET FOR THE YEAR 2002 FOR 10 PFI SCHOOLS TABLE 2: EXTRACT OF THE DATASET FOR THE YEAR 2002 FOR 10 CONVENTIONALLY FUNDED SCHOOLS TABLE 3: CASE STUDIES SELECTED AND STUDENT NUMBERS AND STUDENT CAPACITY TABLE 4: OPERATIONAL/CAPITAL EXPENDITURE RATIO FOR 8 YEARS IN HIGH SCHOOLS PFI IN DIFFERENT REGIONS OF THE UK (LONDON, WEST MIDLANDS, YORKSHIRE, NORTHWEST UK) TABLE 5: AVERAGE FOR OPERATIONAL/CAPITAL COSTS IN PFI HIGH AND PRIMARY SCHOOLS FROM 2002 TO 2009, UK ( /STUDENT CAPACITY AND %) iv

5 ABSTRACT Purpos Litratur rlating to th building srvics industry affirms that Oprational costs in Buildings ar associatd with th initial capital invstmnt, in a way that, if th oprational lif cycl is considrd whn valuating th dsign and financ it will lad to bttr prformanc and fwr oprational costs. Facility Managrs do contribut stratgically to ths projcts in a DBFO systm such as PFI. Som rcnt UK schools hav bn mad by th PFI and th objct of this rsarch is to dmonstrat it is a fact that oprational costs for ths arly plannd schms ar lowr than th convntionally fundd school facilitis. Dsign/Mthodology/Approach 10 PFI and 10 non PFI UK Schools wr studid in trms of oprational costs pr studnt comparison (yars 2002 to 2010). Capital costs from th rspctiv 10 PFI projcts wr also obtaind in ordr to assss th hypothsis that highr capital invstmnt lads to lowr oprational costs. Findings Th rsults show that PFI Schools ar not ncssarily lss xpnsiv to run, but howvr dmonstrat a dcrasing trnd. Th convntionally fundd schools although showing lowr oprational xpnsiv in avrags thy suggst a contrary incrasing trnd in oprational costs. Th Bathtub phnomnon may xplain why PFI schools ar having unxpctd arly adjustmnt costs and why convntionally fundd schools ar showing rising oprational costs Practical Implications To achiv a bttr comprhnsion of lifcycl oprational cost assssmnts and to undrstand what drivs th costs to chang from on building to anothr with th sam function and charactristics. It would giv advic on invstmnt and contract arrangmnt dcisions in what rlats with FM (Facility Managmnt) in public buildings, schools in this cas. Kywords Building Oprational Cost, Support Srvics, Building Capital Cost, Facility Managmnt, UK Schools, PFI, Lifcycl cost, Capital/ Oprational fficincy ratios

6 ACKNOWLEDGEMENTS To Ptr MacClnnan for th natural nthusiasm and xtrm mpathy, th knowldg and th contagious intrst. To Fuzhan for hlping in sing mor than what is simply in front of m. To Alx Murray for th support and patinc. To my wif for dragging m from worrying so much. 6

7 1. INTRODUCTION 1.1 Idas in Facility Managmnt Cost, Stimuli Th initial purpos for th study is to assss capital and oprational cost in buildings and to find out if thr is a rlation btwn ths two kinds of xpnditurs. Th ida that initially invsting mor in a building through its facilitis and thir bst dsign solutions, which is normally sn as a mor xpnsiv initial cost, can also lad to a lowr lif cycl cost particularly on oprational xpnditurs. Th hypothsis forsn in this cas thrfor would b, to invst mor in th facility infrastructur so it can b run with lss xpns. This initial capital invstmnt focus could b ithr on th dsign sid, with bttr dsign dtail, quality of quipmnt and matrials, cross functional participation btwn diffrnt tams such as architcts, nginrs and facility managrs in ordr to bring all th issus to th sam projct, or on th construction sid, by clos suprvision, mor dmanding contract rquirmnts and quality of th ovrall work. This lvrag ovr capital xpnditur could rsult in lowr oprational support srvic costs (FM costs), such as building maintnanc, claning and utilitis. Th way th building is financd will also affct th output of ths oprational costs, if considring that thr is a privat initiativ intrst which will adopt ths costs th as part of th sum of all costs (capital includd) for a dfind priod of tim. This will ncourag high invstmnt in th projct s bginning bcaus it should allow th sam invstor to harvst th bnfits latr on by saving mor in priodical and forthcoming fixd costs. 1.2 Problm statmnt and Rsarch Qustion Dos th way a building is fundd or th amount of invstmnt in capital will affct Facility cost in a normal building lifcycl? 7

8 Th rcnt UK PFI schms, (Privat Financ Initiativ), sk to dmonstrat th abov affirmation, and also, to claim on dlivring bttr FM prformanc whn considring that th ral FM xprtis coms from th privat sctor. Will ths nw solutions rally b cost ffctiv within an FM prspctiv? Oprational costs may ris whn projct managrs want to minimis costs in th brifing, dsign and construction procss, and consquntly, futur functional problms may translat into ncssary xtra costs. By saving in robust matrials or basic layouts th facilitis may bcom mor xpnsiv to run in th long trm. And, occasionally, not including Facility Managrs in th dsign procss will also b a factor that will lad to mor unxpctd running costs or vn lss FM prformanc from th lack of xprtis in prviwing th building whn in an oprational stag. W may b abl to compar FM costs and tst this hypothsis by slcting a similar rang of building typ, (schools in this cas study) whr w can prciv and associat oprational cost bhaviour to th rspctiv funding schm (convntional or PFI) or to th typ of school (primary or high school).smingly, ths costs will rval diffrnt pattrns of bhaviour in what it concrns to support srvics cost, such as utilitis, maintnanc, claning, and othrs. 1.3 Schools as a Targt for Rsarch Schools ar th objct of study for this projct. Ths buildings hav a public intrst, not only bcaus thy ar fundd by th govrnmnt but also bcaus thy provid a srvic to vry citizn. Evryon will want to know how wll thir mony is bing spnt. Th similarity btwn physical layouts of school buildings allows a mor accurat comparison btwn total costs whil th associatd funding/managmnt schm applid to thir oprations is an intrsting point of study to sarch for vidnc trnds in FM costs. 8

9 1.4 Significanc of th study Th study should giv information about which kind of managmnt procss would b bst for FM prformanc and cost. Th diffrnt way of organising th support srvics which in this projct is sn diffrntly on th school buildings chosn btwn PFI and convntional stat funding mthod, can giv information on which is th bst form of invstmnt according to th Facility Managmnt prspctiv. By comparing diffrnt fficincy ratios of capital, in this prcis cas, by comparing capital cost with support srvic costs in a priod from 2002 to 2010 in PFI schools, w may b abl to find maningful trnds, whthr in typ of school or rgion, or simply, an avrag ratio which will giv us information btwn th rlation of capital and ongoing FM costs.th fficincy ratios (capital vrsus oprational costs)could b usful forprviwing in asst invstmnt dcisions, on how much is rasonabl to invst in ordr to obtain bst valu for mony, particularly, on FM xpnditurs or typ of contract. 9

10 2. LITERATURE REVIEW 2.1 Capital Efficincy Du to th conomic climat, thr ar funding/budgtary constraints and th capx budgts ar much rducd compard to prvious yars. Thrfor, it is invitabl that in most cass procurmnt stratgis will rsult in contracts awardd basd on cost, just to mt th nd ( Adyy t al, 2013) Highr capital xpnditurs could dlivr lowr oprational costs, which arconsidrd in this cas as capital fficincy. If undrstanding that highr capital will b associatd with bttr quality and durability of th layouts. As Eric Too affirms (Too, 2012), infrastructur organisations nd to maximiz th invstmnts thy hav mad in thir xisting infrastructur assts in ordr to rduc thir capital and oprating xpnditurs. It is indd a concrn which must apply to th DfE, (Dpartmnt for Education), whn considring mor than buildings in th UK. Th intrst for saving in upfront costs can b a normal practic in ths public sctors, by accpting th chapst initial costs and thn handing ovr an asst to othrs to maintain, (Bull, 1993). But, on of th problms is that th full dtails of many failur xampls and lssons larnd ar not mad public, (Parfitt, 2012). Considring th initial costs of building vrsus th maintnanc costs, is sn by McGorg, as, a Lack of motivation in cost optimisation bcaus th dsign and cost stimating fs ar usually a prcntag of th total projct cost (McGorg, 1993). Thrfor, this may not ncourag govrnmnts bcausit implis spnding mor on infrastructur by thir cost addd srvics for implmntation. Howvr, ths prliminary invstmnts still must b considrd if considring th xistnt ratios btwn capital and oprational costs, as Graham Iv stablishs, 1/1.5/15, th ratio of occupying and owning buildings, whr 1 is Land Acquisition and Construction, 1.5 is for managmnt cost and 15 for Exploitation costs, (Graham, 2007). Ths ratios wr gnrally sn bfor 10

11 withvn highr proportions, such as, 1/5/200, but, ths ar without considring Nt Prsnt Valus for th initial yar, in ordr to allow sam yar comparisons. Th importanc of focusing first in long trm oprations is thrfor vital for succssful projcts. Aftr invsting in a thoughtful infrastructur, th building s oprating costs can also b minimisd by adjusting utilitis consumption, rplacing lighting and hating systms, adjust air flow, Plannd prdictd maintnanc, incntivs and policy dcisions, (Buildings, 2012). Evn in th managmnt sid (Lai and Yik, 2008) suggsts, Rathr than rducing labour rsourcs through outsourcing or ngotiation for lowr contract prics, th focus for cost minimization should b to improv building nrgy prformanc. In addition, bundling outsourcd building O&M contracts by virtu of conomic scal, should b a viabl mans for rducing xpnditur providd that th associatd transaction costs can b minimisd, (Lai and Yik, 2008). This approach could b addd at a largr scal, if considring th program of bundling dsign, construction, financ and opration. This is known as DBFO, (Dsign, Build, Financ and Oprat), and is nowadays a common stratgy for dlivring govrnmntal buildings with its intrinsic srvics as on product. Construction contractors mayb assumd to possss bttr information than anybody ls on th hiddn charactristic of th facilitis thy produc (Mobly t al, 2006), if thy ar intgratd in th sam organisation/projct as th Building Oprator, th Facility Managrs will b abl to collct mor information and thrfor, prform in a mor knowldgabl position. To conclud, th FM nds to b part of th dsign tam to nsur that th building will b conomical to maintain as wll as plasing to th y (Fnnimor, 2013). To summaris, thr ar two difficultis associatd with th construction industry: 1 - Th capital cost of construction is almost always sparatd from th running cost. (It is normal practic to accpt th chapst initial cost and thn hand ovr th building to othrs to maintain, and in addition, thr is no 11

12 clar dfinition of th buyr, sllr, and thir rsponsibilitis towards th oprating and maintnanc costs (Bull, 1993)) 2 - Lack of motivation in cost optimisation bcaus th dsign and cost stimating fs ar usually a prcntag of th total projct cost (Thrfor, a sparat srvic from th futur opration and managmnt that invstors s as an xtra cost with no ky importanc for th ovrall rsult (McGorg, 1993),) Howvr, th rcnt xpansion of nw projct dlivry systms as BOT (Build Oprat Transfr) or PFI (Privat Financial Initiativ) sm to dmonstrat that thr is a mor fficint way for th intgration of ths diffrnt srvics into on common businss targt and thrfor, dlivring mor comptitiv and cost ffctiv solutions. 2.2 PFI as a way of improving FM prformancin Public Buildings PFI offrs public sctor bodis th opportunity to procur th dsign, construction, financ and opration DBFO. (Atkin t al, 2000) Th Facility Managr will hav two distinct rols in this Privat schm fordvloping infrastructur. 1. Dvloping th Bid and Dsign 2. Utilisation of th facility and provid th agrd srvic This is mainly bcaus of growing awarnss of th nd to oprat and manag facilitis for long priods, (in cas of PFI it is normally 25 to 30 yars), which rquirs th involvmnt of facility managrs in th dsign procss (Haram and Agapiou, 2002). Thrfor, to dlivr a robust product which provids this fitnss for purpos and maximiss oprational prformanc with minimal disturbanc to th nd usr clint, thr is a rquirmnt for a proactiv intrfac btwn th dsignr, buildr and FM oprator. Similarly, in consultation with nd usrs during th dsign phas, 12

13 FM consultation must bcom informd and ngag with th clint to nsur all stakholdr xpctations can b dlivrd. (Baldwin 2003) Figur 1: SPV as th Organisational cor for implmnting a PFI schm Principls of good dsign in schools giv substantial wighting to dsign quality as w can s in th PFI Public Clint Guid, (CABE, 2002) Financial, lgal commrcial - 35% Facility Managmnt - 35% Construction and Dsign - 35% Th fact that FM is on third of th ovrall importanc whn concptualising a stat building in th UK brings a whol nw rsponsibility and a stratgic sid to th art of FM whr it is no longr only a simpl oprator. Th main factors CABE includs for th dsign is fficincy, quality contxt and only aftr, th asthtic quality. In th cas of public schools, Educational prformanc improvs at a rat of 92 prcnt fastr in fully rbuilt PFI schools than in fully rbuilt convntionally financd schools (KPMG, 2009), th author xplains: Th arrangmnts in PFI contracts bring ddicatd facilitis managmnt staff into school prmiss. This allows tachrs to focus on taching. As thy no longr hav to worry about blockd drains, tc. th prsnc of a third party, th FM 13

14 contractor on sit rdfins th rlationship btwn tachr and pupils by introducing a nw typ of accountability. (Briggs, 2009) 2.3 Lif Cycl Costin FM In PFI contracts th involvmnt of th main construction contractor is short rlativly to th duration of th PFI projct. Thrfor, thr might b a tndncy for th construction contractor to focus on initial construction costs rathr than total LCC (Lif Cycl Costing), which would includ futur opration and maintnanc costs, (Macdonal and Swafild 2008). Th considration of th opration of nw facilitis can b built in at th dsign stag, th input of rliabl lif cycl cost data into th dsign is at th hart of succssful arrangmnts, (Atkin t al, 2000) Th Dsign orintd for rliability and maintainability will lad to bttr prformancs in WLCC(Whol Lif Cycl Cost). This supports that highr Capx in th construction and dsign will lad to lowr Lif Cycl oprational costs, as th following modl dmonstrats, through th rliability of asst structurs, (Wu t al, 2006) Figur 2: Rlationship btwn Asst rliability and Capital (Acquisition) and Oprational () costs, (Wu t al, 2006) 14

15 Thrfor, th ky imptus of LCC is to rduc cost during th opration and maintnanc phas as ths ar a gratr proportion of th whol lif cost of th asst, vn if this mans incrasd capital xpnditurs at th outst, (Olubodun, 2010). This thory is undrpinnd by th classical bathtub curv introducd by th US military asst managmnt dpartmnt. This curv dscribs a particular form of th hazard function that compriss thr parts: Th first part is a dcrasing failur rat, known as arly failurs or infant mortality. Th scond part is a constant failur rat, known as random failurs. Th third part is an incrasing failur rat, known as war out failurs. Figur 3: Th Bathtub curv (US Military Gov, 2005) Th bathtub curv is oftn mployd to rprsnt th failur rat of a product during its lifcycl, namly, th product xprincs arly "infant mortality" failurs whn first introducd, thn xhibits random failurs with constant failur rat during its "usful lif", and finally xprincs "war out" failurs as th product xcds its dsign liftim. This curv can b implmntd in buildingsystms and th failurs can b dirctly translatd into costs. Early infant mortality failurs in buildings may b associatd 15

16 withadaptation and corrcting procdurs coming from th rcnt construction, which will nd highr intrvntion and consquntly highr oprational cost. And latr ahad, to kp prforming Building srvics at th sam standard will b incrasingly xpnsiv if th Building xprincs mor war out failurs whn moving along its lif cycl. Dfinition: Whol Lif Cycl is a mthodology for th systmatic conomic considration of all th whol lif costs and bnfits ovr th priod of analysis, as dfind in th agrd scop (Non Constructioncosts will rlat to occupancy costs) Dfinition: Lif cycl is a mthodology for th systmatic conomic valuation of th lif cycl costs ovr th priod of analysis, as dfind in th agrd scop. Figur 4: WLCC vrsus LCC (BS ISO ) Th scop of our study will only focus on LCC and 3 of its 5 componnts, Construction, and Opration. Th Occupancy and End of Lif will b lft asid as Occupancy can also b sn as non-construction cost and End of Lif isdisrgardd hr du to its comparativly smallr proportion in costs. 16

17 All ths mthods, howvr, hav lack of xprinc and always carry significant constraints, uncrtaintis in forcasting and difficultis in obtaining data (Strnr, 2000). It is provn that if an LCC is achivd by tchnical, static and just by cost, it may influnc diffrnt dcisions than an LCC don with conomic lif span, dynamic and cost plus incom (Pltzr, 2007). Thus, considring WLCC may b ncssary also whn assssing an invstmnt dcision bcaus diffrnt solutions will gnrat diffrnt incoms and will b bringing diffrnt outcoms to th ovrall rsult. In th schools cas, th intrsting point of viw is cost. Ths ar buildings that ar not xpctd to gnrat incom, only to provid srvic to th gnral public. In ths cass, LCC may b sufficint to study and influnc dcisions. According to (Arja t al, 2009), LCC can b obtaind by th following quation LCC= Cint+Cxp+-Vr+SUMCfac Cint Construction Cxt- Oprations Vr Rsidual Valu SUM Cfac Uncrtaintis (Tchnical, functional, law, othrs) LCC bnfits: 1- Evaluation of compting options in purchasing 2- Improvd awarnss of total costs 3- Mor accurat forcasting of cost profils 4- Prformanc trad off against cost (HM trasury, 2003) Th xpctd costs usd to forcast futur must also considr intrst rats and inflation. To b abl to compar costs from diffrnt points in tim, on has to considr th Nt Prsnt Valu. As Graham Yv commnts that th lack of discounting can also affct rsults and th way th costs ar sn, 17

18 (for xampl, whn comparing futur oprational costs with currnt construction cost). Th NPV in costs can b obtaind by th following formula: PV=SUM (1/(1+r)^n) r Discount rat, th amount of intrst th futur costs will hav discountd whn considrd in th prsnt tim n Numbr of yars th cost will b brought back to prsnt According to th Grn Book, (HM trasury, 2003), th discount rat is usd to convrt all costs and bnfits to prsnt valus, so that thy can b compard. Calculating th prsnt valu of th diffrncs btwn th strams of costs and bnfits provids th nt prsnt valu (NPV) of an option. Th NPV is th primary critrion for dciding whthr govrnmnt action can b justifid. Th rcommndd discount rat is 3.5%, and that is th rat usd in this study. 2.4 FM in Convntional or PFI Schools Sinc schools ar primarily financd by th public, it is important to adquatly invst ths public funds. Furthrmor, failing to maintain school facilitis might also discourag futur public invstmnt in th ducation systm (Lavy, 2009). On th othr hand, lowr costs of cosmtic factors (compard to structural conditions) giv fild lvl dcision and policy makrs mor lvrag in incrasing th quality of ths conditions (Duyar, 2010). This is undrstandabl as cosmtic aspcts of facilitis ar mor obvious to tachrs and studnts, thrfor, thy may caus influnc on th dlivry of instruction in public schools. In any cas, schools facilitis ar priodically rviwd and thir oprations ar subjct to rigorous statutory rquirmnts by govrning authoritis. Th ffctiv dlivry, maintnanc and opration of ths assts throughout thir lifcycl ar thrfor important (Adyy, 2013). 18

19 Figur 5: Effct of FM in Education, and how is procssd (Hrman t al, 2011) Th contribution of FM can b found in th ffcts that th us (or non-us) of facility srvics hav on th outcom of ths procsss, (Hrman t al, 2011). This may b th main justification for using othr forms of contracts in th Educational Ral Estat particularly to FM importanc in th Education sctor. Whil FM might appar to dlivr an idal solution (spcially in th PFI schms), with Total FM, bcaus it provids a singl purchasing point for th organisation, th rality can b that th contractor actually subcontracts all or most of th work (Atkin t al,2000). Convntionally fundd schools may adopt On contractor providing all srvics, whil PFI might us a Managing Contractor (F pr contract) or a Managing Agnt (a singl contract which will lad to multipl subcontracts) or just a combination of both,a Managd Budgt. (Atkin t al,2000) But ths ar also hypothss that hav to b corroboratd aftr analysing som spcific PFI school cass. Thr is th chanc that trms and conditions btwn contractor and subcontractor do not mirror thos of th main contract, and can b translatd into wors prformanc, or vn additional costs. Thrfor, MacCab and Knan point out in thir cas study, A grat dal of tim and rsourcs wr rquird to manag th contract, with th rsult that staff wr divrting from focusing on thir cor comptncis and also Addd to this was th ongoing cost of variations to th contract. (MacCab and Knan, 2010) This has ld to th point whr MacCab affirms in his study, Th introduction of PFI projcts into schools in th UK has gnratd a grat dal 19

20 of dbat as to whthr valu for mony has bn achivd (MacCab, 2010). Th Guardian rlass information as wll pointing out that Schools and hospitals will b xpctd to improv nrgy fficincy, lt out floor spac and cut th costs of dcorating buildings as part of an attmpt by ministrs to cut PFI costs by 5%, (Elliot, 2011). Thrfor, thr start to b divrgnt opinions whr although it may sm that it gnrats bttr prformanc and cost savings by dlivring support srvics from xprt organisations, it can also turn out that PFI could b a mor xpnsiv solution, (Edwards t al, 2004). 20

21 3. METHODOLOGY Th main purpos of this work involvs analysing data from th xisting stock and working upon it to xtract what it is ndd corroborat th givn thsis. Sinc schools in th UK ar our spcific building typ for th study, FM costs wr obtaind from th DfE (Dpartmnt for Education) Administration and Financ sub dpartmnt. Th Consistnt Financial Rport s Bnchmark was usd asth sourc of information. It is currntly usd by th UK s Govrnmnt to compar school s incom and xpnditur with that of similar schools. (DfE, 2013) This data st is usd to xtract FM costs in schools, which contain all spcific typ of costs in about schools in th UK from th yar 2002/2003 to th yar2010/2011. From this data, th spcific costs which ar prsntd in an annual lump sum figur ar all convrtd into cost pr studnt to allow comparison btwn diffrnt school buildings. Sam school corrspondnt capital costs wr obtaind from th UK Privat Financ Initiativ Projcts, whr th data has bn rlasd in March 2012 (UK Gov., 2012). Ths capital costs howvr wr only possibl to obtain for th rcnt PFI projcts slctd and not for th convntionally fundd schools, vn though thy hav bn oprational for svral dcads, thir capital cost today cannot b obtaind or vn practically masurd. Brifly, this projct has two distinct goals: 1- Compar Ongoing Facility Managmnt Costs btwn PFI and non PFI schools 2- Obtain and compar ratios of Capital and Oprational costs in diffrnt PFI Schools 21

22 3.1 Data gathring and th Slction of cas studis 15 Schools wr slctd from th PFI currnt projcts list, (UK Gov., 2012), from London, Wst Midlands, Yorkshir and North Wst rgions in th UK,both high and primary schools. Thy wr thn displayd in a data sht with thir corrsponding capital xpnditur. All th projcts slctd hav opration starting dats roughly btwn th yar 2000 and Som wr nwly built whil othrs wr rbuilt as displayd in th datasht. Th corrsponding FM costs obtaind from (DfE, 2013) wr obtaind through thir rspctiv LEA (Local Education Authority) numbr, with th support of th EDUBASE datast which is a rgistr of all ducational stablishmnts in England and Wals, maintaind by th Dpartmnt for Education and is accssibl for gnral Public, (Edubas2, 2013). Whn collcting th CFR bnchmarking datasht th FM costs wr slctd from th vast catgoris of xpnditur in schools, th rspctiv Facility Managmnt costs (E rfrs to xpnditur) ar as follows, (CFR, 2010): E12 Building and improvmnt (Chargs by contractors for intrnal and xtrnal rpair, maintnanc and improvmnt to buildings and fixd plant including costs of labour and matrials, rlatd profssional and tchnical srvics, cost of matrials and quipmnt usd) E13 Ground and Improvmnt ( and improvmnt on gardns and grounds, including car parking, play aras, playground quipmnt, sports filds and pitchs on th school campus, rlatd profssional and tchnical srvics, including labour costs whr supplid as part of th contract / srvic) E14 - Claning and Cartaking (Supplis usd in claning and cartaking, cost of quipmnt such as floor polishrs, vacuum clanrs and othr hardwar, chargs by contractors for providing a claning srvic, chargs by contractors for providing a cartaking srvic, rlatd profssional and tchnical srvics) 22

23 E15 and swrag (All costs rlatd to watr and swrag, mptying of sptic tanks) E16 Enrgy (All costs rlatd to ful and nrgy, including ful oil, solid ful, lctricity and gas) Ths 5 cost catgoris ar thn displayd pr yar from 2002 (which mans from 2002 to 2003) until 2010 (from 2010 to 2011) in a tabl with ach of th 15 PFI schools slctd. Th yar 2010 du to th lack of data was xcludd, and 5 schools which may hav suffrd prolongd intrvntion and showd som considrabl lack of data had also bn xcludd from th analysis. Tabl 1: Extract of th datast for th yar 2002 for 10 PFI Schools( /studnt capacity) PFI London Wst Middlands Yorkshir North wst Build Claning Grounds and Cartaking Swrag studnt capacity Currnt Studnts Enrgy LHS1 -PFI LHS2 -PFI LHS3 -PFI LPS1 -PFI WMHS1-PFI WMPS1-PFI YSHS1-PFI YSPS1-PFI NWHS1-PFI NWPS1-PFI Aftr dfining th PFI datast, by diffrnt abbrviations (L, WM, Y or NW) corrsponding to th diffrnt rgion, and by th following initials HS or PH (High School or Primary School). Following th PFI sampls of sam typ schools in convntional funding mod wr found (Non PFI) for th sam rgion with approximatly similar numbrs of studnts and ovrall charactristics. 23

24 Tabl 2: Extract of th datast for th yar 2002 for 10 convntionally fundd Schools ( /studnt capacity) Convntional London Wst Middlands Yorkshir North wst Build 2002 Claning Grounds and Cartaking Swrag studnt capacity Currnt Studnts Enrgy LHS1-CON LHS2-CON LHS3-CON LPS1-CON WMHS1-CON WMPS1-CON YSHS1-CON YSPS1-CON NWHS1-CON NWPS1-CON Th datast is thrfor consistd of 20 schools, 10 PFI and 10 Non PFI,ach consistd of 6 High schools and 4 primary schools, and thir rspctiv 5 diffrnt oprational costs from th yar 2002 to th yar Data work, Variabls and calculations Th schools slctd hav th following cods and studnt numbrs: Tabl 3:Cas Studis slctd and studnt numbrs and studnt capacity PFI Convntional London Wst Midlands Yorkshir North wst London Wst Midlands Yorkshir North wst Studnt capacity Currnt Studnts LHS1 -PFI LHS2 -PFI LHS3 -PFI LPS1 -PFI WMHS1-PFI WMPS1-PFI YSHS1-PFI YSPS1-PFI NWHS1-PFI NWPS1-PFI LHS1-CON LHS2-CON LHS3-CON LPS1-CON WMHS1-CON WMPS1-CON YSHS1-CON YSPS1-CON NWHS1-CON NWPS1-CON

25 Th currnt studnt numbr and studnt capacity wr obtaind from th EDUBASE datast, th numbrs ar obviously diffrnt, and to allow a fair comparison, th xpnss wr dtrmind by numbr of studnt capacity. (Edubas2, 2013) Sinc th numbr of currnt studnts varis from yar to yar, th studnt capacity is a rasonabl quantity to considr, bcaus it is a constant numbr and dfind in th dsign stag. Only now can th costs btwn schoolsb compard, in ordr to calculat avrags within groups of schools and rgions, and analys trnds. Figur 6: FM costs ( /studnt capacity) from 2002 to 2009 PFI Schools (with NPV to 2002) /studnt capacity LHS1 -PFI LHS2 -PFI LHS3 -PFI LPS1 -PFI WMHS1-PFI WMPS1-PFI YSHS1-PFI YSPS1-PFI NWHS1-PFI Aftr dtrmining costs pr studnt capacity, all costs from th yars aftr 2002 wr convrtd. For th convrsion th NPV formula was usd, including a discount rat introducd by th Trasury for this typ of Public Invstmnt (HM Trasury, 2003)). In fact th costs with th NPV calculation bcom lss xpnsiv with tim, compard to th incurrd costs. This is bcaus, th invstor has th anticipation of how much will b spnt and that can gnrat intrst bfor th dat of liquidity. Sinc th costs (from 2002 to 2009) ar not a forcast but historically vrifid, it is considrd that inflation is includd in ths costs, thrfor, inflation was not considrd in th NPV calculation. Th importanc of th Nt Prsnt Valu is that th costs ar bing rturnd to th sam bas yar and this allows a rational 25

26 assssmnt of th diffrnt cost dvlopmnt in th following yars starting from th bas yar Figur 7: Cost pr studnt capacity volution PFI Schools with and without NPV calculation bas yar ( /studnt capacity) PFI NPV PFI With th valus obtaind it is thrfor possibl to dmonstrat th following: - PFI and non PFI cost pr FM srvic - PFI and non PFI cost pr FM total cost - Primary vs. High school FM cost (also btwn PFI and non PFI) - UK Rgion (also btwn PFI and non PFI) 3.3 Ratios and comparisons Th corrsponding capital costs from th PFI Schools wr considrd in ordr to allow comparison with thir rspctiv oprational costs. For th priod from 2002 to 2010 th costs wr addd as a total FM xpnditur, this was mad possibl by th NPV calculation. Th total 2002 to 2010 FM cost is dividd by th total capital cost for th sam school (high school and primary school sparatly). Th ratio obtaind is a prcntag of th 8 yar FM cost within th total Capital cost (PFI only). 26

27 Tabl 4: Oprational/Capital xpnditur ratio for 8 yars in High Schools PFI in diffrnt rgions of th UK (London, Wst Midlands, Yorkshir, Northwst UK) Total High School FM cost pr studnt 2002 to 2010 High School Capital cost pr currnt studnt High school Oprational FM/Capital LHS1 -PFI 2, , % LHS2 -PFI 1, , % LHS3 -PFI 1, , % WMHS1-PFI , % YSHS1-PFI 1, , % NWHS1-PFI 1, , % It is ncssary to sparat Primary schools from High schools bcaus thy incur diffrnt costs as th buildings may b diffrnt and consquntly will b showing diffrncs in th cost whthr from th FM sid or from th capital sid. This datast also nabls th study to compar on how th oprational/capital xpnditurs in PFI schools ar distributd for ths 8 yars in th diffrnt rgions in UK. Th diffrncs can b influncd by th typ of PFI contract in what concrns FM, and a clos study on how th contract is mad. This was also don to find rlvant charactristics which may xplain th ffct causd in th diffrnt pattrns of cost trnd in ths PFI schools ovr th considrd priod. Th dgr of construction intrvntion, (If th building is nwly built or if it is a rconstruction) will for sur hav a major impact on th rsult of ths ratios. 27

28 4. RESULTS AND ANALYSIS In this chaptr th rsults from th datast collctd ar rviwd and workd. Ths following rsults ar spcifically th xpnditurs of th cas studis considrd within th FM sctor in th priod considrd for analysis. Ths valus ar usd for comparing typ of building funding schm, typ of school or UK Rgion. 4.1 FM costs in PFI and Convntionally fundd schools Th valus bllow rprsnt th avrag of th 5 Oprational costs considrd (Building, Grounds, Claning, and Enrgy) for all PFI and non PFI schools. Th trnd is distinct for on of ach typ. Although highr in oprational cost, it is important to notic that PFI running costs dcrasd whilst non PFI running costs incrasd in th priod givn. Figur 8: Comparing avrags of running costs ( /Studnt capacity) in th 10 PFI schools with th 10 Convntionally Fundd schools (Nt Prsnt Valu for th bas yar of 2002) PFI Convntional It is important to rviw th discrpancis btwn ths costs whn comparing th rsults with and without th calculation of costs to th yar 2002 with th discount rat considrd. As furthr in tim th costs incur, th 28

29 widr is th gap btwn th actual cost and th cost considrd with NPV from th yar All th costs ar thrfor calculatd basd in th yar 2002 so thy can b compard assssd corrctly. Figur 9: FM costs in avrag PFI and avrag of convntionally fundd schools from 2002 to 2010 (NPV and without NPV comparison), ( /studnt capacity) PFI NPV Convntional NPV PFI Convntional Th NPV assssmnt can mak a significant diffrnc in th intrprtation of rsults, whras PFI without Nt Prsnt Valu to th yar 2002 kps incrasing th costs, whn analysd with NPV it rvals an obvious dcrasing trnd (light blu lin). Th diffrnc btwn using NPV or not with th discount rat considrd in th stimationmay disclosur th potntial savings of th PFI. Howvr, it is anothr discussion to b mad, if ths savings ar to b attributd for th public or for th privat sctor. Distinguishing th FM costs by typ may also b suitabl for valuating which of th xpnss hav mor impact. In th two graphs bllow thr is a comparison btwn PFI and Non PFI funding mod to dmonstrat how th FM xpnss wr distributd ovr th yars considrd. 29

30 Figur 10: Distribution of Oprational costs pr typ and pr yar for th PFI group of schools (Avrag of 10 PFI schools, /studnt) PFI School Enrgy Swrag Claning and Cartaking Grounds Build Figur 11: Distribution of Oprational costs pr typ and pr yar for th convntionally fundd group of schools (Avrag of 10 non PFI schools, /studnt) Convntional School Enrgy Swrag Claning and Cartaking Grounds Build Considring both bar charts, building maintnanc in th PFI is much highr but it dcrasd throughout th yars. This aspct has to b discussd furthrmor bcaus it may b rlatd to prmatur anomalis or rcnt building working adjustmnts. Th last 3 yars for nrgy had mor impact in 30

31 th ovrall, and mor costly for th non PFI schools. Claning costs and watr howvr, wr r roughly similar for both groups. By displaying th avrag of oprational cost typ for ach group of schools ovr th considrd priod, It is dmonstratd again, that total build maintnanc xpnditur was highr for PFI schools. Enrgyon th othr hand rmaind lowr for PFI Schools. All th othr 3 typs of xpnditur had roughly th sam wighting on th ovrall xpnditur as it can b sn by th figurs blow. Figur 12: Proportion of running costs in th FM sctor for PFI schools for th total priod of 8 yars (avrag of 10 schools) 4% 23% 24% 7% 42% Build Grounds Claning and Cartaking Swrag Enrgy Figur 13: Proportion of running costs in th FM sctor for non PFI schools for th total priod of 8 yars (avrag of 10 schools) 30% 5% 25% 34% 6% Build Grounds Claning and Cartaking Swrag Enrgy 31

32 Th following bar chart is an valuation of PFI and non PFI sparatly for primary and high schools from th datast givn. Th trndsfollow contrary pattrns in th PFI, th primary schools lowrd th oprational costs, but th high schools showdincrasd costs in 2008 and Th trnd in non PFI is consistntly upwards, maning both incrasd thir oprating costs from 2002 to 2009 constantly. Figur 14: Avrag of FM Costs for 6 PFI and 6 Non PFI High Schools and 4 PFI and 4 Non PFI Primary schools( /studnt capacity) High School PFI Primary School PFI High School CON Primary School CON Capital cost Vs. Oprational Cost in PFI schools in th priod (2002 to 2009) Th nxt analysis rfrs only to PFI fundd schoolsit is an assssmnt of th rlation btwn capital invstmnt and th corrsponding oprational and on-going cost with th school facilitis. Th rsults ar givn firstly by capital cost of ach facility pr studnt capacity in /studnt and thn compard with th total corrsponding oprating cost also in /studnt. Th ratio will b a fraction of th scond by th first, in prcntag. This rlation dmonstrats th importanc of 8 yars in cost in trms of capital invstmnt, in on cas it can b as much as 50% of total capital invstmnt only for th initial 8 yars of oprations, thus rvaling th tru importanc of FM and oprational wighting in ths typs of projcts. 32

33 4.2.1 High School Oprational/Capital ratio Th analysis sparats high school from primary school, as thy rvald diffrnt pattrns of costs and volution. Firstly, in this subchaptr it will b apprciatd th ratios of Opx/Capx for high school and th sam for primary schools in Figur 15: High School PFI Capital costs pr studnt in 6 diffrnt Schools and Rgions of th UK (Sourc: UK Trasury), ( /studnt capacity) 18, , , , , , , , , LHS1 -PFI LHS2 -PFI LHS3 -PFI WMHS1-PFI YSHS1-PFI NWHS1-PFI Figur 16: High School PFI Oprational costs pr studnt in 6 diffrnt Schools and Rgions of th UK( /studnt capacity) 2, , , , LHS1 -PFI LHS2 -PFI LHS3 -PFI WMHS1-PFI YSHS1-PFI NWHS1-PFI 33

34 Figur 17: Cost fficincy ratio Oprational xpnditur in prcntag of Capital xpnditur (High School PFI 2002 to 2009) 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% LHS1 -PFI LHS2 -PFI LHS3 -PFI WMHS1-PFI YSHS1-PFI NWHS1-PFI Th valus attaind for ths ratios ar within th sam gratnss of valu for London and Yorkshir. Th North-Wst cas should b rgardd singularly. At a prliminary conclusion, th NWHS1-PFI had only a light construction intrvntion, or was probably just rfurbishd, which would justify why th proportion of oprational costs had bn so high for ths projcts 34

35 Figur 18: Capital Efficincy ratios UK High school distribution Primary School Oprational/Capital ratio Th valus pr studnt for primary schools in what concrns capital cost ar much highr than for high schools, and as a first analysis, that could hav to b with th studnt numbr pr facility. 35

36 Figur 19: Primary School PFI Capital costs pr studnt in 4 diffrnt Schools and Rgions of th UK (Sourc:UK Trasury), ( /studnt capacity) 50, , , , , , , , , , LPS1 -PFI WMPS1-PFI YSPS1-PFI NWPS1-PFI Thr ar som oprational costs which ar lowr than thos associatd with high schools, spcifically th NWPS1-PFI which is significantly lowr compar to all primary and also with high school oprating costs. This cas too, will hav to b assssd indpndntly. Figur 20: Primary School PFI Capital costs pr studnt in 4 diffrnt Schools and Rgions of th UK ( /studnt capacity) 2, , , , LPS1 -PFI WMPS1-PFI YSPS1-PFI NWPS1-PFI 36

37 Figur 21: Cost fficincy ratio Oprational xpnditur in prcntag of Capital xpnditur (Primary School PFI ) 14% 12% 10% 8% 6% 4% 2% 0% LPS1 -PFI WMPS1-PFI YSPS1-PFI NWPS1-PFI In th cas of primary schools, sinc th capital cost, spcifically construction and land purchas is much highr than of high schools, th oprational ratio is xpctd to b lowr, in two cass, it is lowr than 5%. It may suggst that ths facilitis hav bn compltly nw built and in proportion, th oprational costs ar considrably infrior. 4.3 What was discovrd Avrag for high schools is 18% whras for primary schools 6% of oprational costs for total capital cost. This is just for 8 yars of oprating costs, and in kping with this trnd, in 30 yars, which is normally th lngth for PFI contracts and it will rprsnt almost 70% of th total capital costs, just for oprating costs (Building, Grounds, Claning, and Elctricity). This ratio is howvr not as much as th introducd by Graham Iv (2003) on which oprational costs should b rprsnting 150% of th total capital costs, but that is bcaus thr may b othr srvic costs rlatd which may b missing and a diffrnt typ of building is considrd hr. Also, th lngth of th building lif cycl should b mor than 30 yars, 37

38 and that may b translatd into a highr significanc of oprating costs vrsus th capital cost. Evn though thr may b mor physical intrvntions in th facility such as rfurbishmnts or quipmnt substitution, th utility prics for lctricity or watr may as wll ris as suggstd, thusgiving mor wight to th oprational xpnditur ovr ths facilitis lifcycls. Th FM arrangmnt contract within ths PFI Schools must hav influnc on th cost, th styl of managmnt and th way srvics ar procurd. Th most important aspct to valuat in ths rsults is th rlation btwn capital invstmnt and th oprational costs that dscnd from ach particular invstmnt. In th nxt chaptr all th PFI will b rgardd sparatly as pr thir FM arrangmnt within th PFI and also how th dgr of ach capital invstmnt had influnc in th oprating cost. For xampl why NWHS1-PFI has such a high ratio of oprational/capital or why NWPS1-PFI has a vry low oprational/capital ratio comparativ to th othr cass. 38

39 5. DISCUSSION In this projct th main focus was to dmonstrat thatprivat Financd Schools would dlivr a bttr fficincy in trms of maintnanc and utility xpnditur. Th ida that it is a whol projct thought sinc th bginning in ordr to gnrat lss xpnditur in th long trm and thrfor, bringing down th Lif Cycl, it will allow mor incom in th whol projct s lifspan. Th fact discovrd is that it currntly dos not work in that way, and that actually som convntionally fundd schools ar running with som of th xpnss lowr thanpfi schools. Th ovrallgraph trnds on th othr hand dmonstrat that ths xpnditurs may not kp th sam distributions byond 2009, and probably nowadays thy disclosur diffrnt valus. It is ssntial to analys th PFI and convntional schools closr and forcast diffrnt and possibl futur outcoms It will b studid ach PFI will b studid closly, in ordr to find out if thr is a possibl rlationship btwn th typ of FM contract and th corrsponding oprational cost. Also for th PFI, it is worth to acknowldg th dgr of capital invstmnt mad in ach projct, and that may xplain th diffrncs in th capital fficincy ratios obtaind. 5.1 PFI and Non PFI oprational costs By analysing th comparison of running cost avrag (pounds pr studnt) of 10 PFI schools with th 10 convntionally fundd schools a trnd lin can b drawn. This lin supports th ida that cost dvlopmnts ar following opposit paths on ths 2 groups andthat may lad in th futur to vn mor discrpant diffrnt oprational xpnditur dvlopmnt. Th major fact is that according to th linar trnd lins, th PFI oprating costs ar dcrasing whil in convntionally fundd schools th costs ar rising in a constant mod. 39

40 Figur 22: Trnd lins for th avrags of running costs ( /studnt capacity) in th 10 PFI schools with th 10 convntionally Fundd schools PFI Convntional Linar (PFI) Linar (Convntional) Th Bathtub phnomnon could b applid to ach typ of schools. In this databas, th PFI group is mad of rcnt dvlopmnts, and som ar vn nw built, whil in th 10 convntionally fundd xistnt schools, in som cass, thy hav svral dcads of xistnc. Th high running costs for Facility Managmnt in th arly yars may driv from th arly infant anomaly rat mntiond in chaptr 2. In th bginning of th building lifcycl, th infrastructur is mor likly to b adapting and corrcting construction faturs that didn t dlivr total functionality. Th factor of building aging in th convntionally old schools may b lading to highr xpnditurs on corrcting maintnanc issus and ractiv maintnanc to aging parts and suddn failurs. What is mor is, th buildings mayb losing fficincy on th FM srvics bcaus prics ar rising and thy ar alrady on th limit of cutting on srvics such as hating, claning or watr consumption. 40