Jarvis Workspace FM has had to abandon its lucrative contract with the government to maintain and service the schools because its financial position "deteriorated dramatically", the company told the Labour Court last month.

Two of the schools affected are in Cork and one each is in Monaghan, Shannon and Sligo.

A Department of Education spokesman confirmed that a German multinational construction company, Hochtief, had taken over the maintenance contract for the five schools.

John White of the secondary teachers' union, the ASTI, said he was unaware of the Hochtief move and said it was essential that the same service to the schools be maintained.

Jarvis had already pulled out of the deal to build and maintain the Cork School of Music after problems which enterprise minister Micheal Martin described as "operatic in scope". Hochtief has also taken over that project, which will cost 60m to build and 7.8m a year for 25 years to maintain.

The collapse of the Jarvis deal after less than five years will be an acute embarrassment to the Department of Education, which had trumpeted the arrival of Jarvis in Ireland. The five schools were the country's first public-private partnership (PPP) deals.

Under the 2001 deal, Jarvis agreed to design and build the five new schools and service the buildings for 25 years for a fee of 10.2 million a year. The company also got a share of profits from catering and vending machine sales in the school. After 25 years the school reverts to state ownership.

A 2004 report by the Comptroller and Auditor General (C&AG) into the PPP deals with Jarvis concluded that it would work out 13% more expensive than if the department had built and maintained the schools itself.

The C&AG's report also noted that, among the three companies that bid for the multimillion-euro contract, the Jarvis bid was "not the cheapest of the bids received".

A Department of Education spokesman said that because the German company was taking over Jarvis and its existing contract with the five schools, there was no need to put the contracts out to tender again.

He said Hochtief will take over the maintenance of the schools on the same terms as Jarvis, and the state would not lose any money.

With regard to the future of PPPs, the spokesman said the department keeps them under constant review so it can learn from its mistakes.

Before Christmas, education minister Mary Hanafin revealed a list of new schools to be built under the PPP system. The spokesman said he expects the first four schools in Co Offaly to go out to tender by June.