WHOLE-LIFE COSTBY RICHARD TRIVELLA

WHOLE-LIFE COST BY DEFINITION

Whole-life cost is the systematic consideration of all relevant costs and revenues associated with the acquisition and ownership of an asset.Essentially whole life costing is a means of comparing options and their associated cost and income streams over a period of time.

VALUE FOR MONEY!IS IT WORTH IT? Is a common question an individual or organisation asking.WHOLE-LIFE COST may be the answer they’re looking for. Lets consider the purchase of a new car.You may find yourself looking at the following costs of ownership:• Purchase price.• Fuel economy.• Reliability• Maintenance.• Resale price.

DECISION?After taking all this into consideration you may find that the cheap second hand BMW M3 you always wanted; for £500 with 200,000 miles on the clock, isn’t the best option after all and instead you’d be better off with that brand new Citron C1for £6,000 your mum wanted.

WHOLE-LIFE COST (ISN’T JUST FOR CARS)Whole-life costing can be used for any investment in any assest, arguably even more important the higher the capital costs are for an asset.As a result it is becoming increasingly popular with construction industry's during design stages as organisations are no longer asking just how much the capital is on a property but how much its going to cost them over their total ownership.

HISTORY OF THE WHOLE-LIFE COST• PRE 1970s – Decisions widely made on capital cost only.

• It was believed that higher capital cost realise substantial cost savings when compared to cheaper alternatives. (terotechnology the beginning of whole-life cost)

• However, this was largely ignored at the time due to an ignorance of the importance of whole-life cost

• EARLY 1970s – Cost-in-use became the thing to consider. However, this failed to accurately forecast future cost.

MID-LATE 1970s – Life cycle costing was introduced; providing a solution to Cost-in-use’s inaccuracies.• LCC used wide-ranging approach to cost appraisal from perceivable costs

from construction through to eventual disposal.LATE 1990s – The concept of WHOLE-LIFE COST was introduced.• Accounting for break down and maintenance which would cause down time

and losses of revenues.

HISTORY OF THE WHOLE-LIFE COST

CONSIDERATION OF COSTSCOSTS TO BE TAKEN INTO ACCOUNT INCLUDE:

• Initial capital or procurement costs• Opportunity costs• Future costs

Only options which meet the performance requirements for the built asset should be considered - those with lower costs over the period will be preferred.

INITIAL COSTSInitial cost include:

• Design• Construction• Installation• Purchase or leasing• Fees and charges

OPPORTUNITY COSTS

Opportunity costs represent the cost of not having the money available for alternative investments (which would earn money) or the interest payable on loans to finance work.There is a growing awareness that unplanned and unexpected maintenance and refurbishment costs may amount to half of all money spent on existing buildings. Estimates of the value of the unplanned portion in UK construction output range from £8 billion to £20 billion per annum.

FUTURE COSTS

Includes all operation costs such as:RentCleaning InspectionsMaintenance and RepairReplacements / renewalsEnergy and utilities use

Dismantling and DisposalSecurity and management over

the life of the built asset.Loss of revenue may also need

to be taken into account. (For example to reflect the non-availability of the revenue-generating building during maintenance work.)

WHERE TO GET THIS DATA FROM THOUGH?

Technical pressBuilder’s price booksInformation services - Such as the building cost information service (BCIS)Government research literatures - Such as from the national economic development office (NEDO).University researchTechnical information services

WHY SHOULD WE USE IT?

Whole life costing (WLC) is a powerful tool for calculating the lowest cost options for the entire commercial life of a building. It encourages the use of best value building designs and reduces the costs and disruption of unplanned repairs and maintenance.

BETTER BUILDING PERFORMANCE

Whole life costing will enable you to minimise disruptions from otherwise unforeseen problems, for example from unexpected failure of building components that must then be replaced or repaired. A planned and costed maintenance programme (as part of WLC) minimises the risks of unexpected costs, disturbance and loss of income.

SummaryWhole-life cost is an essential method of reducing expenditure on any assists and increase future revenue by indicating the lowest costing option.

Its done though assessment of capital cost, operation and maintenance costs and disposal or reconditioning of an asset.

It can help plan and improve operation and maintenance performance.

THANK YOU FOR LISTENING

ReferencesBuilding Research Establishment Ltd. (2014, April 16). Whole life costing and performance. Retrieved from Whole life costing and performance: http://www.bre.co.uk/page.jsp?id=48

Andrew Spowage, J. D. (2014, April 18). Life Cycle cost analysis. Retrieved from auther STREAM: http://www.authorstream.com/Presentation/aayushchandak-1449157-life-cycle-cost-analysis/

BSRIA. (2014, April 16). What is whole life cost analysis? Retrieved from BSRIA: https://www.bsria.co.uk/news/article/1886//

Constructing Excellence Limited. (2014, April 24). Whole Life Costing. Retrieved from Constructing Excellence: http://www.constructingexcellence.org.uk/resources/themes/business/wholelifecosting.jsp

Halim A. Boussabaine, R. J. (2004). Whole Life-cycle Costing Risk and Risponses. Liverpool: Blackwell Publishing.