Whole life costing ( WLC ) can lend significantly to command the fiscal and non-financial hazards aims of many building, and building administrations. This is particularly relevant in footings of client service, internal concern procedures, and fiscal public presentation. WLC is altering the attack to plan, procurance, building and installations direction and presenting major benefits. Many public and private sector clients now procure on cost of ownership, non capital cost. ( Your development, 2008 ) There is a turning consciousness that unplanned and unexpected care and renovation costs may amount to half of all money spent on bing edifices, harmonizing to the Building Research Establishment. Estimates of the value of the unplanned part in UK building end product scope from & A ; lb ; 8bn to a staggering & A ; lb ; 20bn a twelvemonth. This is why whole-life costing ( WLC ) is get downing to play a important function in undertaking direction ( Bourke, 2005 ) . This clip, nevertheless, lifecycle costing/Whole life rhythm costing is here to remain, for two grounds – PFI and planetary heating. PFI has made it the footing of the commercial understanding between the client and the supplier and planetary heating has made everybody believe about the future impact of determinations to construct. ( Martin, 2008 )
Some of the thoughts behind the justification for whole life-cycle costing ( WLCC ) are synonymous with cardinal issues in today ‘s building industry. ( Boussabaine, A. , Kirkham, R.2004 )
Meeting client ‘s outlooks Clients now require edifices that are efficient during and after building. WLCC techniques can show existent cost nest eggs in design solutions.
Sustainability Achieving sustainable design solutions relies on the consideration of long term operational costs and public presentation of edifice constituents.
Monitoring public presentation of constructed assets For illustration, are PFI/PPP ( Private Finance Initiative / Public – Private Partnerships ) undertakings truly be effectual? Merely by sing the whole life costs can this be assessed. Using WLLC besides supports benchmarking and cardinal public presentation indexs.
Monitoring cost effectivity of constructed assets WLCC provides the agencies by which to invariably reexamine this and basal hereafter capital investing on this information.
Thin building By sing long term cost and physical public presentation, waste is minimised both during building and through the life of the edifice.
The UK authorities has challenged the manner its administrations deliver services, and has placed on them a responsibility to continuously better in order to supply the services that people require economically, expeditiously and efficaciously. This construct of ‘best value ‘ has dominated public sector capital investing policy in the UK since the 1990s. ( Boussabaine, A. , Kirkham, R.2004 ) As a consequence of the cardinal alterations in public procurance policy that have later taken topographic point, involvement in and demand for the usage of WLCC techniques have risen to unprecedented degrees. These policy alterations are clearly demonstrated in recent authorities publications such as ‘Construction Procurement Guidance, No 7 Whole Life Costs ‘ ( Office of Government Commerce ) , which states that ‘all procurance must be made entirely on the footing of value for money in footings of the optimal combination of whole life costs and quality to run into the user ‘s demands ‘ . This position is to the full endorsed by National Audit Office ( NAO ) policy and reinforced in their joint usher ‘Getting value for money from procurance. How hearers can assist ‘ . Consequently the award of public building contracts based on merely the lowest capital cost command is no longer recognised as good pattern ; best value must be taken into history and thereby WLCC should be to the full appraised as portion of the determination devising procedure. ( Boussabaine, A. , Kirkham, R.2004 )
2.2 HISTORY OF WHOLE LIFE COSTING
Figure 2.1 History of whole life costing, Source ( Boussabaine, A. , Kirkham, R.2004 )
Harmonizing to Ashworth ( 2008 ) during the 1960s it was frequently referred to as costs-in-use, although purely talking this term excluded anything to make with initial building costs. In the 1970s, life rhythm bing became the normally recognized nomenclature but by the terminal of the century this had been replaced with whole life costing and this is the description under which it is now most normally referred.
2.3 DEFINITION OF WHOLE LIFE COSTING
The New building research and invention Strategy Panel ( nCRISP ) defines WLC as
‘ … the systematic consideration of all relevant costs and grosss associated with the acquisition and ownership of an plus ‘ . ( Constructing Excellence in the edifice environment, 2009 )
At its most basic, WLC includes the systematic consideration of all costs and grosss associated with the acquisition, usage and care and disposal of an plus.
Ashworth ( 2004 ) , Seely ( 1997 ) , Ashworth and Hogg ( 2007 ) , Cartlidge ( 2008 ) and Ferry and Flanagan ( 1991 ) ; harmonizing to BS ISO 15686, WLC can be defined as:
‘a tool to help in measuring the cost public presentation of building work, aimed at easing picks where there are alternate agencies of accomplishing the client ‘s aims and where those options differ, non merely in their initial costs but besides in their subsequent operational costs. ‘
Whole life assessment ( bing ) is non the cosmopolitan Panacea for the building sector, but decently understood and used it is a utile and powerful tool. ( Flanagan, R. , Jewell, C. , 2005 )
Figure 2.2 The hidden costs, Source ( Ellingham, I. , and Fawcett, W.,2006 )
While initial costs are clear and seeable at an early phase, longer-term costs are non – see Figure 2.2. However, these longer-term costs can far outweigh initial capital costs, and should hold a much stronger influence on determinations with regard to installations and single elements
Figure 2.3 Whole life cost, Source ( Calford seaden, 2009 )
The sequence of the seven stages of a edifice ‘s life is described suitably in British Standard 3811.
Whole life stages
The preparation of the client ‘s
Initial costsassociated with land purchase, professional fees and building.
Requirements at origin and briefing.
Feasibility and viability of different proposals
Translating thoughts into working drawings
Cost planning including whole life costing of alternate design solutions
from outline proposals strategy and item
Associated contract procurance certification
The building procedure
Interim payments and fiscal statements
Handover of the undertaking to the client
The undertaking in usage
Recuring costs associated with fixs, running and replacing points
Changes and alterations necessary to maintain the undertaking to a good criterion
Costss associated with major renovation points
Evaluation of the undertaking for major alterations or the site for renovation
Table 2.1 Whole life stages ( Ashworth.A, 2008 )
2.4 WHY RISK ASSESSMENT IN WHOLE LIFE COSTING
Combined with WLCC, hazard appraisal should from a major component in the strategic determination doing procedure during undertaking procurance and besides in value analysis. Undertaking cost, design and operational determination parametric quantities are frequently established really early in the life of a given edifice undertaking. Often, these parametric quantities are chosen based on proprietors and undertaking squad ‘s personal experiences. While these attacks are common, they do non supply a robust model for covering with the hazards and determinations that are taken in the rating procedure. Nor do they let for a systematic rating of all the parametric quantities that are considered of import in the scrutiny of the WLCC facet of a undertaking. Capital costs and future costs must be quantified, analysed and presented as portion of the strategic determination doing procedure in today ‘s concern environment. Cost analysis and value analysis techniques are used to quantify and measure the economic deductions of investing in edifice installations in general. While these techniques do supply a footing for doing undertaking cost determinations, they most frequently do non account for many of the parametric quantities which may impact the existent undertaking value or cost ( Plenty et al.1999 ) .
Risk appraisal should be an built-in portion of the WLCC procedure. A model that uses formal determination devising procedures and hazard appraisal of each facet of the determination to be taken in executing WLCC life rhythm analysis can assist proprietors, design squads and cost contrivers in taging strategic determinations based on analysis consequences that truly the built-in hazards and costs related to the undertaking.
2.5 DATA REQUIREMENTS IN WHOLE LIFE CYCLE COSTING AND RISK ASSESSMENT
Flanagan and Norman ( 1983 ) highlighted three cardinal demands in successfully implementing a life rhythm bing methodological analysis.
A system by which the engineerings can be used: a set of regulation and processs.
Datas for the proposed undertaking under consideration: estimations of initial and running costs of elemental life rhythms, price reduction rates, rising prices indices, periods of tenancy, energy ingestion, cleansing and the similar. The information required to transport out WLCC analysis can be derived from a scope of possible beginning
Direct appraisal from know costs and constituents
Historical information from typical applications
Models based on expected public presentation, norm, etc.
Best conjectures of the hereafter trends in engineering, taging application
Professional accomplishment and opinion.
All these factors have some bearing on the quality of informations that is collected and how it is used in patterning and determination devising procedures. Whilst WLCC is now going widely used as a valuable tool in the design procedure, likely two cardinal factors have undersized its possible impact
A intuition that life rhythm cost estimations are in some sense inaccurate or based simply on guessing
The absence of sufficient and appropriate cost and public presentation informations.
2.5.1 Datas beginnings
It has been highlighted how of import the informations and its composing are to WLCC, but where can this information be obtained? Ferry and Brandon ( 1991 ) highlighted six chief end products:
Builder ‘s monetary value books
Information services such as the Building Cost Information Service ( BCIS )
Government research literature such as from the National Economic Development Office ( NEDO )
Technical information services.
Flanagan and Norman ( 1983 ) defined these into four subgroups:
Manufacturers ‘ informations
Suppliers and contractors
Manufacturers ‘ informations
These specializers as a regulation will hold detailed dislocations of the life rhythm of the merchandise, its material constituents and its public presentation features.
This information can besides be obtained from other governments that are responsible for proving the unity and stuff for building. The British Board of Agreement is a UK authorities proving organic structure which carries out independent testing of stuffs used in the industry. Materials that meet a set specification and public presentation are issued with understanding certifications, which give inside informations on service lives and other critical information. The Building Research Establishment besides carries out proving on stuffs and can be a utile beginning of information.
2.5.3 Prognosiss from theoretical accounts
In the absence of any historical or providers ‘ informations / feedback, theoretical accounts can be used as a manner to analyze the WLCC deductions of peculiar design determinations or picks of stuffs. The construct behind modeling is to ease and present a higher grade of truth in the estimations made by cost analysts when pulling up life rhythm cost profiles.
Historical informations can be obtained from a assortment of beginnings such as the BMCIS, clients and edifice occupies and in some instances the design squad themselves. The value of historical informations is relevant in that the values of initial capital cost and subsequent running cost can be categorised for certain groups of component in the edifice and this comparing can so be used to place the elements which will profit from a life rhythm cost attack.
2.6 COMPONENTS OF A WHOLE LIFE COST ANALYSIS
Figure 2.4 Components of a whole life cost analysis,
Beginning ( Boussabaine, A. , Kirkham, R.2004 )
2.6.1 Service life
The anticipation of constituent service life is a really of import facet in WLCC appraisal. One such methodological analysis presently in usage is the factor method. The ISO/CD 15686-1 factor method for the appraisal of the service life of constituents or assembly under specific conditions treats the service life as a deterministic value. In world the service life has a large spread and should be treated as a stochastic measure.
2.6.2 Capital costs
Tax returns on invested capital costs are indispensable in taging determinations on investing scenarios. Minimum capital committedness would be required if the client wanted to bear most of the cost until the edifice was handed over. In the event of limited capital budget is the premier consideration of the client, quality, in the signifier of a decreased specification, is like to be restricted. ( Ashworth and Hogg, 2002, p.192 ) .Further the cost of the undertaking is a combination of land, building, fees and finance and the employer will necessitate to equilibrate these against the assorted procurement systems available ( Ashworth,1997, p.107 ) . The capital cost aims that need to be assessed include.
Land acquisition cost. The location, and land viability may hold a direct consequence on the whole life cost and life anticipation of a installation.
Predesign costs. The sums of clip and quality of information generated at this phase have great effects on the quality and operation of a installation. The investors have a good chance to optimize the whole life cost of a installation through the choice of constituent and functional flexibleness. Ideally, the issues associating to obsolescence should be investigated, accounted for as costs at this phase.
Design costs. The quality of design in footings of mistake, detailing and buildability will hold a direct consequence on the cost of production and operation. A high quality edifice might besides necessitate higher costs in usage in order to keep its high aesthetic quality in usage ( Ashworth and Hogg, 2000 )
Development and production costs. The quality of craft is straight related to the degree of care. It is of import to guarantee that quality control is in topographic point to guarantee sound building patterns are used.
Fiscal costs, revenue enhancement, involvement, etc.
2.6.3 Operational costs
Operational costs are less certain as the clip span additions due to uncertainnesss in energy costs, care, fees, staff and regulative alterations. It is of import to see operational cost estimations in their holistic province ; several qualitative factors will hold an of import consequence on the entire operational costs. The operational cost aims that need to be assessed include ;
Factors which contribute significantly to the entire operational costs
Optimum balance between capital and operational costs
Operational hazard direction systems
Optimum plus cleansing processs
Optimum waste direction processs
Optimum public-service corporations direction processs
Optimum staffing degree
Minimal break due to denial usage of the plus.
2.6.4 Care costs
The costs and precedence of needed care, rehabilitation and replacing can be obtained from historical informations but base cost estimations have to be supplemented with adept sentiments in order to execute whole life rhythm analysis and hazard appraisal. The care cost aims that need to be assessed include.
Performance indexs for the appraisal of care costs
Staying service life of installation constituents
Frequency and replacing costs
In house or subcontracted care
Choice of exterior and interior stuffs and surfaces
Choice of light fixtures with minimal everyday fix and replacing demands.
Type of preventative care programme.
2.6.5 Financing costs and grosss
The aim here is to cover with WLCC input parametric quantities of price reduction, rising prices rates, revenue enhancements, disbursals, etc. Critical analysis of investings must include both initial and on-going costs and returns over the period of the investing. This will let stakeholders to compare different options and make up one’s mind which offers the best return for the investing. Normally price reduction rate is used for calculating the value of future grosss. This includes a big grade of hazard return. For illustration, if the price reduction rate is set excessively high or excessively low so hereafter costs may look insignificant ; this could ensue in high operational costs and capital costs, which will deter investing. Besides, if rising prices is different from the selected rates this may take to inappropriate investing picks. The funding cost aims that need to be assessed include premises about:
Inflation rates, involvement and revenue enhancements
Degree of returns and hazards
Optimum price reduction rate
Economic activity. This has a direct on the economic obsolescence of installations.
Degree of hazard funding
Cash influx versus escapes
Different rates, clip periods and hard currency flows.
The features of new or bing installations are really of import facet of WLCC calculation. For the illustration a relationship may be between constructing map and mechanical service costs, a peculiarly of import characteristic of modern installations. Little research has been published with respect to the impact of constructing features on WLCC.
2.6.6 Asset features
The features of new or bing installations are really of import facet of WLCC calculation. For the illustration a relationship may be between constructing map and mechanical service costs, a peculiarly of import characteristic of modern installations. Little research has been published with respect to the impact of constructing features on WLCC. Experience shows that an indirect nexus exists through many facets, including energy, therefore increasing WLCC and possible downtime costs in care. The features that should be assessed and included in the calculation of WLCC include.
Layout and location
Gross floor country
Number of floors and floors height
Occupancy ( m2/person )
Shape of the installation
Energy salvaging steps
Quality of constituents
Type and quality of public wellness system
Type and quality of superstructure edifice cloth
Type and quality of internal cloth
Type and quality of electrical and mechanical services
Extent of site plants
2.6.6 Economic public presentation steps
The procurance of edifice installations involves a assortment of determination devising who decide on options that generate capital and on-going costs during a undertaking ‘s life. These capital costs generative value for different stakeholders and potency for returns to the undertaking proprietor which should be lasting over the life rhythm of the plus. Therefore, economic public presentation measuring in WLCC is really of import for determination devising to measure and apportion identifiable value from capital cost and go oning costs to relevant stakeholders in the life rhythm of a installation. The nonsubjective that should be assessed under this header should include.
What type of public presentation indexs should be used to help in the choice of options
The boundaries of these indexs, i.e. lower limit and upper limit values that the stakeholders are prepared to work to
The best steps of public presentation in footings of WLCC end products
Mechanisms for WLCC benchmarking
Measures for extenuating economic hazards.
2.7 Use OF WHOLE LIFE COSTING
Ferry and Flanagan ( 1991 ) argue that application of WLC, in any environment, exists on two degrees. The lower degree of life rhythm costing is represented as a ‘Management Tool ‘ to help the determination devising procedure. The higher degree of life rhythm costing is termed the ‘Management System ‘ whose uninterrupted operation dictates that duty for plus direction should be retained. In general footings, they argue that during the direction of a typical undertaking, all phases, except undertaking induction, have a possible usage for WLC.
Whole life bing as a decision-making tool
The primary usage of WLC is to be used in the effectual pick between a figure of viing project options. Although this can be done at any phase of the undertaking, the potency of its effectual usage is Maximum during early design phases. In add-on, the ability to act upon cost lessenings continually as the undertaking progresses, from 100 % at undertaking countenance to typically 20 % or less by the clip building starts. Furthermore, one time the edifice is delivered, there is a really slender opportunity to alter the entire cost of ownership because the determination to have or to buy a edifice usually commits users to most of the entire cost of ownership. Harmonizing to Kirk Al-Hajj ( 2004 ) , 80-90 % per centum of the cost of running, keeping and mending a edifice is determined at the design phase.
Figure 2.5 the relationship between whole life cost nest eggs and clip of execution
( Source- Al-Hajj, A. , Pollock, R. , Kishk, M. , Aouad, G. , Sun, M.andBakis, N,2004 )
Whole life bing as a direction tool
WLC can besides be used as a direction tool to place the existent costs incurred in runing assets. The primary aim is to associate running costs and public presentation informations. Therefore, it could be utile for clients who want to gauge the existent running costs of the edifice and besides for budgeting intents. In add-on, it can be a valuable feedback device to help in the design ( Al-Hajj, A. , Pollock, R. , Kishk, M. , Aouad, G. , Sun, M.andBakis, N,2004 )
Barriers TO SUCCESSFUL IMPLEMENTATION OF WHOLE LIFE COSTING TECHNIQUES
2.8.1 Industry barriers
The capital cost of building is about ever separated from the running cost. It is normal pattern to accept the cheapest initial cost and so manus over the edifice to others to keep. In add-on, there is no clear definition of the purchaser, marketer, and their duties towards the operating and care costs ( Bull 1993 ) . Furthermore, there is a deficiency of motive in cost optimization because the design and cost estimating fees are normally a per centum of the entire undertaking cost. However, the enlargement of new undertaking bringing systems such as private finance enterprise ( PFI ) and construct operate and transportation ( BOT ) seems to get the better of these obstructions
2.8.2 Client barriers
Bull ( 1993 ) pointed out that there is besides a deficiency of understanding on the portion of the client. This may increase the possibility of subjective determination devising. In add-on, there are normally multiple facets of demands desired by clients. Most of these facets can non be assessed in a rigorous WLC model. This is chiefly because either they are in struggle with the chief WLC aim or because they are largely ‘non-financial ‘ . Some of these factors are even intangible such as aesthetics. In many instances, these intangibles are besides in struggle with consequences of WLC ( Picken 1989 ; Wilkinson 1996 ) .
The major obstruction confronting the analyst is the trouble of obtaining the proper degree of information upon which to establish a WLC analysis. This is because of the deficiency of appropriate, relevant and dependable historical information and information ( Bull 1993 ) . In add-on, costs of informations aggregation are tremendous ( Ferry and Flanagan 1991 ) . Furthermore, the clip needed for informations aggregation and the analysis procedure may go forth unequal clip for the indispensable duologue with the decision-maker and the re-run of alternate options. This is one of the grounds why computerised theoretical accounts are valuable. Another trouble is the demand to be able to calculate, a long manner in front in clip, many factors such as life rhythms, hereafter operating and care costs, and price reduction and rising prices rates ( Ferry and Flanagan 1991 ) . Besides, the uncertainness environing the variables in any WLC exercising should be decently assessed ( Al-Hajj, A. , Pollock, R. , Kishk, M. , Aouad, G. , Sun, M.andBakis, N,2004 )
PRODUCING COSTS – WHAT NEEDS TO BE CONSIDERED?
Before any rating of the undertaking ‘s whole life rhythm costs can be made, the undermentioned factors need careful designation.
Overall clip graduated table of the edifice or component i.e. the life rhythm ;
Statement of all costs and grosss attributable by disposal clip ;
The design lives of the assorted constituents and equipment so that any computation can include for replacings and fixs at appropriate times ;
Obsolescence – where alterations in engineering, land values, working manners make the economic life of the edifice shorter than the planned design usage ;
Tax deductions – allowances for certain points of works and equipment can be offset against revenue enhancement, thereby cut downing their costs to the edifice proprietor ;
The clip value of money ( dismissing ) – which incorporates allowances for involvement and can see rising prices
– ( three ) are comparatively easy to cipher ; ( four ) – ( six ) are much more unpredictable as they tend to be conjectures.
From these elements come the typical WLC/LCC attack ;
Measure 1 – set up the aim of the computation
Measure 2 – pick of bing method
Measure 3 – formulate premises from list above
Measure 4 – place the costs and the life rhythm
Measure 5 – comparison alternate solutions and rank
Measure 6 – sensitiveness analysis ( technique whereby costs revisited to place points likely to alter and the impact of those alterations )
Measure 7 – study costs to client
WHOLE LIFE COST / SUSTAINABILITY
Contractors, peculiarly those involved with public private partnerships are recognizing the importance of sustainability issues and the early consideration of whole life cost.
The procedure of acquiring the minimal whole life cost and environmental impact is so complex, being a three dimensional job as indicated below.
Figure 2.6 Whole life cost considerations, Source ( Cartidge, 2006 )
Each design option will hold associated impacts and costs, and tradeoffs have to be made between seemingly unrelated entities
Environmental value. This focuses on environmental facets of development such as pollution, waste and CO2 emanations. These issues involve the initial industry of building stuffs, the building of the undertaking, its usage and eventual replacing. In this context value is maximised when environmental force per unit areas are minimised to the degree of the transporting capacity of ecological systems while utilizing natural resources efficaciously and safeguarding natural capital and its productiveness.