Life cycle costs in construction procurement guide 07. D eds procs 29th annual arcom conference, 24 september 20, reading, uk. Using whole life costing and lifecycle assessment for sustainable hospital building design client skanska kvaerner construction project kvaerner construction was invited to tender for a new hospital building. The industrys construction strategy for 2025 calls for a 33% cut in capital costs but also an equal fall. The other parts of iso 15686 that are most relevant for lifecycle costing are iso. Whole life costing and clear objectives key to environmental and financial benefits the senedd, national assembly for wales, cardiff background completed in 2006, the senedd is the main public building of the national assembly for wales. Life liftin g fact or fact ored life real base lcc e i spv facto r sca factor nominal escalate d lcc present value discount ed lcc cur % cost plan items x.
Marginal costing and break even analysis 259304 study note budgets and budgetary control 305348 study note 14 standard costing 349396 study note 15 uniform costing and inter firm comparison 397406 study note 16 activity based costing 407416 study note 17 transfer pricing 417428 sets of objective questions cost and management accounting. Whole life costing has been a subject waiting to come of age for many years. Whole life costing wlc refers to the predicted costs, not just in constructing the building, but in commissioning it, its financing deals, its profitability, maintenance, refurbishment costs and even the cost of demolition. Product life cycle costing traces costs and revenues of each product over several calendar periods throughout their entire life cycle. Briefing note 1a lifecycle costs approach irc wash. Whole life costing free download as powerpoint presentation. This paper is intended to be an overview of this subject but it is hoped it will help frame the key issues and explain the history, approach and language used in this. It is also known as a lifecycle cost, which includes.
Whole life costing considers part of this and provides an understanding of how materials may perform and what allowances are needed at the end of their life. Anyone tendering for government projects or for pfi schemes needs to include a consideration of the whole life costs of that project. Whole life costing introduction the cips practice documents are written as a statement in time. The application of whole life costing wlc technique is widely practised in other industries. Whole life costing is a key component in the economic appraisal associated with evaluating asset acquisition proposals. Whole life costing enables these costs to be evaluated. In fact, operational and maintenance costs can be as. The industrys construction strategy for 2025 calls for a 33% cut in capital costs but also an equal fall in whole life costs.
What is the difference between life cycle costing and. First published in building, these articles, by peter mayer of blp building defects insurance, are based on the premise that for any component, the market supplies. A guide to whole life costing wlc 1 introduction 1. Whole life costing takes into account the total cost of a product or service over its lifetime, from concept through to disposal including purchase, hire or lease, maintenance, operation, utilities, training and disposal. Whole life costing should be applied at a strategic level to assess different options for example, do nothing, new build or refurbishment as part of an options appraisal exercise in, for example, major. Wholelife cost is the total expense of owning an asset over its entire life, from purchase to disposal, as determined by financial analysis. Whole life costing and clear objectives key to environmental and financial benefits the senedd, national assembly for wales, cardiff background completed in 2006, the senedd is the main public building of.
This research will evolve a methodology for a judgement to be made on the basis of the full. What was previously of mainly academic interest is now becoming a key business tool in the procurement and construction of. It is important not to confuse the discount rate with inflation. Contents 01 the achieving excellence procurement guides 02 introduction 03 principles 05 wholelife. Life cycle costing is not yet considered to be a critical component of spp3. Bs iso 15686 service life planning of buildings and constructed assets.
Whole life costing, it is argued, would be a better guide to what is truly economic and more sustainable. This fact sheet introduces the principles of whole life costing for organisations that are new to the subject or in the early stages of working with whole life costing. For equipment, for example, it includes the costs of maintaining and operating the product as well as its outright purchase, hire or lease price. The concept is also known as lifecycle cost lcc or lifetime cost, and is commonly referred to as cradle to grave or womb to tomb. It is about identifying future costs and referring them back to present day costs using standard accounting techniques such as present value. Sets the context by defining what whole life might mean for the construction. Life cycle costing is a subset of whole life costing and it is a method of systematically doing economic evaluation. Prepared by nurul fadhlina bt abd fatah safiqca bt adam siti faridah bt mamat syed mohd hashim b wan othman tan peng kiat vincey chew wan nor adzahari bin wan tajuddin. The principle of using whole life costing is based upon the comparison of a cost model of the proposed design against an established historic reference cost of previous mod properties. Whole life costing takes into account the total cost of a product or service over its lifetime, from concept through to disposal including purchase, hire or lease, maintenance, operation, utilities, training and. Life cycle costing lcc is the consideration of all relevant costs and.
Cips has produced a guide to whole life costing which is available for download at. Whole of life costs can include ongoing operating and maintenance, refurbishments, rehabilitation and disposal costs. This fact sheet introduces the principles of whole life costing for organisations that are new to the subject or in the. Whole life costing and clear objectives key to environmental. Guidelines for life cycle cost analysis sustainable stanford. Whole of life costing and your council it is noted that during the 20 financial year, the local government sector delivered capital works in excess of four billion dollars. The development of this framework was motivated by the fact that the absence of.
Explores whole life costing theory, looking at the need to understand material use and the importance of resource management. In fact, the prime objective of the governments new procurement regime states. This research will evolve a methodology for a judgement to be made on the basis of the full knowledge of the characteristics of the system proposed and its associated whole life costs. Life cycle costing lcc, by definition, refers to an analysis technique which encom passes all costs associated with a product from its inception to its disposal. This paper is intended to be an overview of this subject but it is hoped it will help frame the key issues and explain the history, approach and language used in this important tool to aid decision making in the rail sector as well as construction and engineering projects elsewhere generally. Life cycle assessment of timber, modified timber and aluminiumclad timber windows. Wholelife costs consider all costs associated with the life of a building, from inception to construction. Wholeoflife costs can include ongoing operating and maintenance, refurbishments, rehabilitation and disposal costs. To calculate the discount factor used in the model at 3. The costs are included in different stages of the product life cycle. Introduction in a previous paper alhajj et al, 2001, the authors proposed a 5step framework for implementing wlc in the design model within oscon aouad et al. Wholelife costing and cost management achieving excellence in construction procurement guide. Building and constructed assets service life planning, lifecycle costing ns 3454. Encourages the analysis and questioning of business requirements helping to optimise decisionmaking and avoid costly specification mistakes.
The application of whole life costing in pfippp projects xianhai meng1 and fiona. They are a collection of views on good practice within a particular subject area and are intended to provide direction on good practice with some guidance for context and interest. Whole life costing for option appraisal of maintenance. The factor method is used to obtain an estimated service life esl of a component or a design object by modifying a reference service level rsl by. The general concept of a life cycle cost is not new. Using whole life costing and lifecycle assessment for. It is normal practise to exclude inflation when undertaking whole life costing except when comparing two very different commodities with differing inflation rates. Life cycle costing is methodology for systematic economic evaluation of the life cycle costs over a period of analysis, as defined in the agreed scoping. Best value for money is the optimum combination of whole life costs and quality to meet the customers requirements. Life cycle assessment of timber, modified timber and. Whole life costing for sustainable drainage whole life costing involves estimating the total cost of a system or structure throughout its entire life.
Benefits whole life costing provides many benefits, including. Why decisions on life cycle costing lcc are needed now. The sector has developed a tender evaluation model for use when making procurement decisions. Sets the context by defining what whole life might mean for the construction industry and looks at the options to address issues for sustainability, energy and waste. Lccas relationship to other land and buildings documents. Ijaec the application of whole life costing in the uk. With the advent of publicprivate partnerships ppp and in particular of private fiance initiative pfi, details of the project life need to be assessed and tied in to. D eds procs 29th annual arcom conference, 24 september 20, reading, uk, association of researchers in construction management, 769778. Value for money in construction procurement, lists whole life costing as a key feature in achieving value for money. In fact, operational and maintenance costs can be as much as 80% of the total life costs of a typical assets service life. The activitybased costing approach to cost accounting has been designed to give more accurate information on the costs for the purpose of managing a company.
Introduction in a previous paper alhajj et al, 2001, the authors proposed a 5step framework for implementing wlc. What is the difference between life cycle costing and whole. Life cycle cost for building and civil engineering work principles and classification task group 4. The terms are often used interchangeably but in general whole life costing incorporates all of the costs over the life of a building including capital cost of construction, cost of maintenance and cleaning. How whole life cost helps procurement decisionmaking. The whole life cost wlc of an asset is defined as the present value of the total cost of that asset over its operating life including initial capital cost, maintenance and replacement cost, energy cost and the cost or benefit of the eventual disposal of the. The terms are often used interchangeably but in general whole life costing incorporates all of the costs over the life of a building including capital cost of construction, cost of maintenance and cleaning, energy costs, and lifecycle replacement. Whole life costing who should read this fact sheet. The whole life cost wlc of an asset is defined as the present value of the total cost of that asset over its operating life. Life cycle costing lcc hereafter was first used in the united states by the department of defense. Whole of life cycle cost analysis in bridge rehabilitation v executive summary the report presents a methodology for whole of life cycle cost analysis of alternative treatment options for bridge structures.
Life cycle costing, especially within pfi procurement, often just refers to. Meng x and harshaw f 20 the application of whole life costing in pfippp projects in. Whole life costing operational and running costs over the life of an asset of course far outweigh those produced from the initial construction phase. At the outset of the procurement, the welsh government set certain aims and objectives for the.
What was previously of mainly academic interest is now becoming a key business tool in the procurement and construction of significant projects. It is important for procurement to take all these elements into consideration when making decisions and comparing the costs. Additional sources of information are referenced in section 6. Wholelife costing is covered by a british and international standard. Bs iso 156865 is the first international standard for property life cycle costing. Wholelife costs for buildings wlc designing buildings wiki. Whole life costing wlc refers to the predicted costs, not just in. This book sets out the practical issues involved in the selection of materials, their performance, and the issues that need to be taken into account. Whole life costing can help you to factor ongoing operating costs when making capital investment procurement decisions. Definition and demand this information is only available to paying isurv subscribers. Bim and the whole life costing conundrum comment building. Whole life costing present value net present value. Whole life costing is defined in the draft international standard, iso15686 part v see. It involves a structured approach to identify the direct and indirect costs that may.
First published in building, these articles, by peter mayer of blp building defects insurance, are based on the premise that for any component, the market supplies a range of options with different whole life performance and cost consequences. Whole of life cycle cost analysis in bridge rehabilitation report 2002005c03 the research described in this report was carried out by project leader dr. Utilising life cycle costing and life cycle assessment. Whole life costing takes account of the total cost of a product or service over its life from determining the need for it through to its eventual disposal and replacement. Life cycle costing is methodology for systematic economic. Wholelife cost is the total cost of ownership over the life of an asset. Through lcc one seeks to minimize the cost of obtaining a cer tain level of output. An economic appraisal is generally a broader based assessment, considering benefits and indirect or intangible costs as well as direct costs. Wholeoflife costing and your council it is noted that. Whole life costing takes account of the cost of a product or service over its life, from determining the need for it through to its eventual disposal and replacement. Wholelife costing is a process of providing information.
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