Your method involves finding the potholes that should have been repaired before they became issues and focuses on major issues that can only be patched.
The Councils method assesses the health of the road and where possible identifies major issues (cracking or subsidence) when they haven't affected the road surface.
I suspect the Councils approach to this is that by avoiding labour intensive checks, they can carry out more surveys on a regular basis to identify deterioration while it can be repaired and the life of the surface can be extended versus requiring a new surface - hence the quoted £1m saving over "more traditional methods"
Note: this is based on London council techniques from 15-20 years ago. Methods may have changed...