A lesson in lifecycle costing

A spotlight is shining on lifecycle costs due to recent government initiatives and the growing demand from the private sector for greater predictability in the running costs of buildings. For example, PFI best value tests all require some examination of the whole life cost of a building.

The RICS defines the lifecycle cost of an asset as "the present value of the total cost of the asset over its operating life, including initial capital cost, occupation costs, operating costs and the cost or benefit of the eventual disposal of the asset at the end of its life". The RICS guidance note on lifecycle costing contains examples of some of the major uses of lifecycle costing techniques:

• evaluating design options at the elemental or component level

• evaluating total building options, for example, refurbishment versus new build

• determining optimum maintenance strategies

• determining sinking fund requirements to finance planned maintenance programmes.

To produce a lifecycle cost calculation you must establish:

• the life of the building

• the building capital cost

• the discount rate (which, expressed simply, is the difference between the interest and inflation rate and is used to convert future payments to present values)

• the cost and frequency of future payments (at the component, elemental or totalbuilding level as appropriate)

• any tax implications.

A barrier to lifecycle costing is the lack of data in a suitable format on maintenance, replacement and energy costs. However, the problem is rather one of structure and presentation than availability. There is in fact a huge amount of information, but it is unstructured, presented in different formats and it is often conflicting (see right).

BCIS Online provides information for estimating the capital cost of new schemes from a simple £/m2 figure (see below) to a full elemental analysis. BMI produces two annual reviews setting out information and providing estimates of the annual maintenance and occupancy costs for a range of building types.

BMI is also producing a series of occupancy cost plans for typical buildings, estimating total occupancy costs over 20 years. They contain detailed information, based on typical specifications and design, on frequency and cost for: redecoration, fabric maintenance, services maintenance, cleaning, energy costs and administrative costs.