Life cycle costing revealed
A clear picture for the building owner Introduction Usually our first involvement on a construction project (and perhaps only commission) with a client is undertaking a capital cost estimate and often does not go much further than that unless it is a government organization or under a Public Private Partnership delivery model which includes the operations and maintenance scope. So, why is this? There is a disconnect between a client’s understanding of the full costs of a building and fully appreciating that a building is not just for the opening ceremony or topping out. The building only begins its life when the contractor leaves. There has been a move from building structures with limited life expectancies and the focus now is on loose fit architecture and designing buildings for change, and the ability to change over time. Hence, it makes sense that the long-term costs of owning and operating a building should be considered. Defining ‘whole life-cycle costs’ The terms whole life cycle costs, life cycle costs and costs-in-use are often used interchangeably by many in our industry. However, there are clear differences, shown by the below: Whole Life Cost (WLC)
Non-construction Costs
Construction
Lifecycle Cost (LCC)
Operation
Maintenance
Environment (including energy and utilities) Source: BS ISO 15686-5:2008
36 | CONSTRUCTION ECONOMIST | www.ciqs.org | Spring 2018
Income
End of Life
To produce a whole life cycle cost model for a client, one must consider ALL costs for the facility, which includes a consideration of the client’s core business and ancillary activities. For example, if a hospital facility were to be considered, non–construction costs would include the reception, helpdesk, post, IT, catering, vending, equipment, furniture, internal plants, stationary, refuse collection, caretaking, security, grounds keeping and importantly salaries for both core and non-core business activities. Income from health services provided to patients would be included under income. It should be noted that there would also be other noncore business income generated from say parking revenue if an external third party has not been appointed to manage the parking facilities. Life cycle costing does not include non-construction costs and income generated, but is limited to the hard fabric, the building. Construction costs are the capital costs and start from Year 0 of the life of the building and is what clients would be most familiar with. End of life costs would be the residual value on the building, should it be demolished or the end of the assessment period (in case of P3 projects, where it is likely to be 25 to 30 years). Operation costs include things such as cleaning, changing of air filters and light bulbs. The core of what people and clients understand to be ‘life cycle costs’ are maintenance costs include which major and minor replacement such as door and hardware replacement. The final consideration within whole life cycle costs are environmental - energy and utility costs which would be the gas, electricity and water bills, and potential income e.g. energy generated by PV panels through net metering. Understanding the whole life cycle definition enables quantity surveyors to provide clients with the long term costs picture they often require.
