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This Brieing Note is also available or download rom the WASHCost website at: www.washcost.ino/pubs
Lie-Cycle Costs Approach
Glossary and cost components
Catarina Fonseca, Richard Franceys, Charles Batchelor, Peter McIntyre,
Amah Klutse, Kristin Komives, Patrick Moriarty, Arjen Naas, Kwabena
Nyarko, Christelle Pezon, Alana Potter, Ratna Reddy, Mekala Snehalatha
IRC International Water and Sanitation Centre
April 2010
Brieng Note 1
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Brieng Note 1
Contact details author
Catarina Fonseca, [email protected]
Front page photo
Catarina Fonseca
Copyright 2010 IRC International Water and Sanitation Centre
This work is licensed under a Creative Commons license.
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WASHCost Lie-Cycle Costs Approach April 2010
Table o contents
Lie-cycle costs approach 3Dening lie-cycle costs (LCC) and lie-cycle costs approach (LCCA) 3
Cost components 4
Sources 5
Annexes 6
List o tables
Table 1: Checklist lie-cycle cost components water 6
Table 2: Checklist lie-cycle cost components sanitation & hygiene 10
Abbreviations, acronyms, and terms
CapEx Capital Expenditure
CapManEx Capital Maintenance Expenditure
CoC Cost o Capital
DST Decision-Support Tools
ExpDS Expenditure on Direct Support
ExpIDS Expenditure on Indirect Support
LCC Lie-Cycle Costs
LCCA Lie-Cycle Costs Approach
MIS Management Inormation Systems
OpEx Operating and Minor Maintenance Expenditure
WASH Water, sanitation, and hygiene
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Brieng Note 1
Lie-cycle costs approach
Lie-cycle costs reer to the costs o ensuring adequate water, sanitation, and hygiene (WASH) services to a specicpopulation in a determined geographical area, not just or a ew years, but indenitely. They include not only the
costs o constructing new systems but also what it costs to maintain them in the short and long term and at higher
institutional levels. Costs or both district and national level administration and planning are taken into account, as
well as the costs o replacing and extending inrastructure. This brieng note describes the costs denitions used in
WASHCost.
Dening lie-cycle costs (LCC) and lie-cycle costs approach (LCCA)
Lie-cycle costs (LCC) represent the aggregate costs o ensuring delivery o adequate, equitable and sustainable WASH
services to a population in a specied area. These costs include the construction and maintenance o systems in the
short and longer term, taking into account the need or hardware and sotware, operation and maintenance, capital
maintenance, the cost o capital, source protection, and the need or direct and indirect support, including training,
planning and institutional pro-poor support. The delivery o sustainable services also requires that nancial systems
are in place to ensure that inrastructure can be replaced at the end o its useul lie and to extend delivery systems in
response to increases in demand. This is the lie-cycle at the heart o this approach - what is needed to sustain, repair
and replace a water (or sanitation) system through the whole o its cycle o wear, repair and renewal.
Collecting and understanding these costs is a primary aim o the WASHCost project. However, the lie-cycle costs
approach (LCCA) goes beyond achieving the technical ability to quantiy and make costs readily available. It seeks to
inuence sector understanding o why lie-cycle costs assessment is central to improved and sustained service deliv-
ery and to inuence the behaviour o sector stakeholders, so that lie-cycle unit costs are mainstreamed into WASHgovernance processes at all institutional levels rom local to national to international. WASHCost aims to increase the
ability and willingness o decision makers (both users and those involved in service planning, budgeting and delivery)
to make inormed and relevant choices between diferent types and levels o WASH service.
A signicant element o the LCCA is an understanding that costs can only be compared and properly assessed when
they are related to particular levels o service. WASHCost specically aims to draw attention to the LCC o pro-poor
WASH services delivery, including water or small-scale productive uses.
WASHCost aims to help national and decentralised sector bodies to embed an understanding and use o lie-cycle
costs so that this approach becomes institutionalised, owned and actively used within countries and internationally,
and that national bodies develop and maintain their own LCC databases and incorporate them into management
inormation systems (MIS) and decision-support tools (DST).
Short defnitionsLife-cycle costs (LCC) represent the aggregate costs o ensuring delivery o adequate, equitable and sustainable
WASH services to a population in a specied area.
The life-cycle costs approach (LCCA) seeks to raise awareness o the importance o lie-cycle costs in achieving
adequate, equitable and sustainable WASH services, to make reliable cost inormation readily available and tomainstream the use o LCC in WASH governance processes at every level.
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WASHCost Lie-Cycle Costs Approach April 2010
Cost components
The main components o lie-cycle costs being proposed by WASHCost are the ollowing:
Capital expenditure hardware and software (CapEx)
The capital invested in constructing xed assets such as concrete structures, pumps and pipes. Investments in xed
assets are occasional and lumpy and include the costs o initial construction and system extension, enhancement
and augmentation.
CapEx sotware includes one-of work with stakeholders prior to construction or implementation, extension, en-
hancement and augmentation, (such as costs o one-of capacity building).
Capital maintenance expenditure (CapManEx)
Expenditure on asset renewal, replacement and rehabilitation costs, based upon serviceability and risk criteria. Cap-
ManEx covers the work that goes beyond routine maintenance to repair and replace equipment, in order to keep
systems running. Accounting rules may guide or govern what is included under capital maintenance and the extent
to which broad equivalence is achieved between charges or depreciation and expenditure on capital maintenance.
Capital maintenance expenditures and potential revenue streams to pay those costs are critical to avoid the ailures
represented by haphazard system rehabilitation.
Cost of capital (CoC)
The cost o capital is the cost o nancing a programme or project, taking into account loan repayments and the cost
o tying up capital. In the case o private sector investment the cost o capital will include an element distributed as
dividends.
Operating and minor maintenance expendure (OpEx)
Expenditure on labour, uel, chemicals, materials, regular purchases o any bulk water. Most cost estimates assume
OpEx runs at between 5% and 20% o capital investments. Minor maintenance is routine maintenance needed to
keep systems running at peak perormance, but does not include major repairs.
Expenditure on direct support (ExpDS)
Includes expenditure on post-construction support activities direct to local-level stakeholders, users or user groups.
In utility management, expenditure on direct support such as overheads is usually included in OpEx. However, these
costs are rarely included in rural water and sanitation estimates. The costs o ensuring that local government staf
have the capacities and resources to help communities when systems break down or to monitor private sector per-
ormance are usually overlooked.
Expenditure on indirect support (ExpIDS)
This includes macro-level support, planning and policy making that contributes to the service environment but is
not particular to any programme or project. Indirect support costs include government macro-level planning and
policy-making, developing and maintaining rameworks and institutional arrangements, and capacity-building or
proessionals and technicians.
The detailed elements or each o the cost components are listed in the annexes.
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Brieng Note 1
Sources
Franceys, R. ; Perry, C. ; Fonseca, C. (2006). Guidelines for user fees and cost recovery for water, sanitation and irrigationprojects. IRC/Craneld report or the Arican Development Bank. Unpublished.
Fonseca, C. (2007). Quantifying the costs of delivering safe water, sanitation and hygiene services: an overview of cost
ranges and trends. IRC report or the Bill and Melinda Gates Foundation. Unpublished.
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Brieng Note 1
Lie-cycl
ecost
components
Resources
Inrastructure
Demand/Acc
ess
CapExSo
tware
One-ofworkwith
stakeholdersprior
toconstructionor
implementation,
extension,
enhancem
entand
augmenta
tion
-Costoresourceassessments:
resourceassessmentsan
daudits
(qualityandsaeyield)to
identiy
source(s),specialistanalysis,
useoGISandremotelysensed
data,groundtruthosec
ondary
inormation
-Designcosts:sourcep
rotection
measures,acilitationo
stakeholder
participation
-Regulationcosts:esta
blishment
ogroundwaterprotec
tionzones,
sanctuariesand/orstra
tegic
reserves
-CostsoInormation,
Education
andCommunication,
institutional
developmentandcap
acity
building
-Costocompensation
orpeople
movedordamsorpr
otection
zones
-Inrastructureassessmentcosts:
Assessmentothesta
tusoexisting
inrastructure
-Demandassessmentscosts:assessment
ocurrentandutureseasonaldemands
orallusesandusersthataccessWASH
inrastructure
-Engineeringdesigncosts:Costso
preparingGISbasedm
apstosupportand
underpindesignandplanningprocesses,
technicalsurveys,etc
-Costsoactivestake
holder
participation:acilita
tedmulti-level
planning
-Costsousingspecia
listknowledge:
scenariobuildingasa
nintegralpart
oplanningprocess,m
odelingand
orecastingsupplyanddemand
-CostsoIEC,
institutionaldevelopment
andcapacitybuildin
g
-Costsordemandcreationorimproved
services:constructionoshowcasesites,
exchangevisits
-Costopurchasinglandonwhichto
locateWASHinrastructure:e.g.private
operatorbuyingland
-Costsoactivestakeholder
participation:e.g
buildingand
supportingcommunitylevel
organisationsthatparticipatein
stakeholder-drivenplanningprocesses,
acilitatingplanningprocessesetc
-Costsousin
gspecialistknowledge:by
userstodesig
ninrastructurethatthey
und
-CostsoIEC,
institutionaldevelopment
andcapacity
building:skillsneeded
aspartodev
elopingandsustaining
community-levelorganisations,inusers
O&Mactivitie
setc
CostsoC
apital
-Costointerestpaym
ents:e.g.,
WorldBankloans
-Costointerestpaym
ents:WorldBank
loans,personalloans(e.g.orsmall-scale
privateserviceprovid
ers)
-Costointerestpayments:Personal
loans(e.g.ho
useholdconnections),
micronance
(eitherpersonalorgroup/
communityb
ased)
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WASHCost Lie-Cycle Costs Approach April 2010
Lie-cycl
ecost
components
Resources
Inrastructure
Demand/Acc
ess
OpEx
Operating
and
minormaintenance
expenditures
-Costomaintainingstructures
listedinCapEx
-Costsoenorcingregu
lations
relatingtopollutionan
d
groundwaterprotectio
nzones,
transport,ground-waterlevel
recordersetc
-Possiblepaymentsto
landusers
underpaymentorenvironmental
servicesschemesaimedat
maintainingwaterqua
lityosurace
orgroundwaterresour
ces
-Costorrawwaterabstraction
(e.g.operatorpayingregulatory
authorityorabstractin
gwater)
-Fortriangulationpurposes:
governmentsubsidies
-Costooperatingan
dmaintaining
inrastructurelisted
inCapEx
-CostsoO&M:electricityoruel,water
man/waterwomenco
sts,repairs,spare
parts
-Costsoemergencyorback-upsupplies:
Paymentstovendors
orarmersor
emergencywatersu
pply
-Costsomonitoring
-Rentoland(e.g.priv
ateoperatorpaying
orlanduse)
-Costorusingosystem(e.g.operator
payingdistrictormun
icipalityoruseo
inrastructure)
-Costsobillingscheme:meterreading,
meterrepair,
billingsystem,debtcollection
-Costocomplaints/b
reakdownsystem:
ensuringthatdemandsaremet365
days/year,ensuringnormsareachieved,
breakdownnoticatio
nandresponse
system
-Costsoenorcingregulations:checking
meters,checkingorillegalconnectionsor
wateruses,pollutionm
onitoring
-Costsoleakdetection:reducing
unaccountedorwate
r(UAW)
-Fortriangulationpu
rposes:government
subsidies
-Costotrans
port(paymentorcart,
buckets,etc)
-Thecostincurredtocomplementthe
service:cost
oltration/treatment(i.e.
consumables
,chloride,buckets,
uelor
boilingwater
)
-Thecostincurredtosupplementthe
service:cont
ributiontoOpEx,costso
alternativeso
urces
-Fortriangulationpurposes:prot
marginothe
operator
CapManE
x
Assetrenewal,
replaceme
ntand
rehabilitat
ioncosts
-Costorehabilitating
orrepairing
structuresparticularly
ater
extremeeventsuchas
cyclones
-Costsorehabilitatin
g,renewingor
replacinginrastructure
-Costsorehabilitating,replacingor
renewinginrastructureincurredby
users
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Brieng Note 1
Lie-cycl
ecost
components
Resources
Inrastructure
Demand/Acc
ess
Expenditureon
directSupport
(ExpDS)
Post-const
ruction
supportac
tivities
orlocal-le
vel
stakeholders,usersor
usergroup
s
-Costsosupportingcommunity-
basedorganisations:
watershed
managementcommitt
ees,ensuring
womenandpoorparticipate
activelyinmeetings
-Costsosupportinglocal
governments:specialistsupportat
alllevels,
local-levelartisansupport
-Costsolong-termresource-
relatedIECandcapac
itybuilding
programmes
-Othergovernmentde
partments
(e.g.pollutioncontrol,planningetc)
-Costsosupportingcommunity-based
organisations:water
usercommittees,
sanitationandhygien
egroups,ensuring
womenandpoorparticipateactivelyin
meetings
-Costsosupportinglocaland
intermediatelevelgovernment
institutions:specialis
tsupportatalllevels,
local-levelartisansup
port
-Costsolong-termin
rastructure-
relatedIECandcapa
citybuilding
programmes
-Othergovernmentd
epartments(e.g.
State-governmentWA
SHdepartments)
-CostsopostconstructionIECactivities
incurredbyu
sers
Expenditureon
IndirectS
upport
(ExpIDS)
Macro-levelsupport,
planninga
ndpolicy
making
-IWRMcosts:inter-sect
oralplanning
andmanagementore
sources
atdierentscales,alignmento
theseplans,sharingo
inormation,
managingacommoninormation
base,ensuringecologicalowsare
maintained
-Monitoring(atsource
)costs:
waterqualityandquan
tity
monitoringnetworks,waterquality
laboratoriesandinob
ases
-ITsystemsandsuppo
rtcosts:
CostsocapacitybuildinginIT
systems,developingan
dupgrading
ITsystemsetc
-Othergovernmentde
partments
(e.g.
nance,planningetc
-IWRMcosts:inter-sec
toralplanning
andmanagementowater,power
etcinrastructuresatdierentscales,
alignmentotheseplans,sharingo
inormation,managin
gacommon
inormationbase,ens
uringecologicalows
aremaintained
-Monitoring(atpoint
osupply)costs:
waterqualityandqua
ntitymonitoring
networks,waterqualitylaboratoriesand
inobases
-ITsystemsandsupportcosts:costso
capacitybuildinginIT
systems,developing
andupgradingITsyst
emsetc
-Othergovernmentd
epartmentsdealing
withwater(e.g.nan
ce,planning,
education,
health,etc
)
-NGOcostsorsuppo
rtingthesector
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Brieng Note 1
Lie-cycl
ecost
components
Resources
Inrastructure
Demand/Access
CapExSo
tware
One-ofworkwith
stakeholdersprior
toconstructionor
implementation,
extension,
enhancem
entand
augmenta
tion
-Costoenvironmentalimpact
assessments:EIAandaudits(quality
andquantity)toidenti
ysaedisposal
(sites),specialistanalysis,useoGISand
remotelysenseddata.A
lsoincludes
assessmenttopreventsuraceor
groundwaterpollution
bypoordesign
orconstructionoon-sitesanitationor
drainagesystems.
-Inrastructureassessmentcosts:assessmentothestatu
so
existinginrastructure
-Demandassessm
entscosts:assessmentocurrentanduture
(seasonal)demandsorallusesandusersthataccesssanit
ation
inrastructure
-Demandcreation
costs:awarenessraising,socialmarketing,
socialmobilisation
-Designcosts:acilitationostakeholderparticipationin
alternativedesigns
-Engineeringdesigncosts:costsopreparingGISbasedm
aps
tosupportandun
derpindesignandplanningprocesses,
technicalsurveys,
etc
-Costsorhygienicbehaviorchange:costsorcampaigns
orhandwashing,
saesanitationbyall,etc.T
hesecouldbe
relatedtoCommu
nityLedTotalSanitationprogrammesand/or
attemptstoreach
NGPstatus(India).
-Costsoactivestakeholderparticipation:acilitatedmu
lti-
levelparticipation
indemandcreation,
demandassessment,
planning,etc
-Costsousingspecialistknowledge:e.g.scenariobuildingas
anintegralparto
planningprocess
-CostsoIEC,
insti
tutionaldevelopmentandcapacity
building:ordesign/implementation/managemento
(alternative)techn
ologies
-Regulationcosts:saetyduringconstruction
-Costsopurchasinglandonwhichtolocatewastewater
inrastructure
-Costsorhygienicbehavio
rchange:
communityinvestmentinca
mpaigns
orhandwashing,saesanitationby
all,etc
-Costsoactivestakeholder
participation:buildingcom
munity
levelorganisationsorpartic
ipationin
demandcreation,demanda
ssessment,
planning,etc(e.g.
ODFstrategies)
-UsercostsoIEC,
institutio
nal
developmentandcapacity
building:
especiallyinskillstomaintainbehavior
change,maintainingon-site
sanitation
acilities
CostsoC
apital
-Costointerestp
ayments:WorldBankloansandothers
-Costointerestpayments:
personal
orgrouploansore.g.
house
hold
latrinesandothermicronance
schemesrelatedwithsanitation
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