Lifecycle costs: The basics

While there is a large body of literature about lifecycle costing there is little basic “nuts and bolts” information on how to do it. There are some academic text books, guidance from professional institutions and a few downloadable spreadsheets from the internet that allow users to input their own data to generate a figure. Most organisations who offer a lifecycle cost services use in-house applications.

To generate a basic lifecycle cost model from first principles based on components you need all the information from a traditional bill of quantities to get the capital costs, component description, unit installation cost and quantity.

To calculate future costs you need to know the component service life, which gives the replacement period, the replacement cost and the percentage of components replaced. Maintenance requires a description of the task, the frequency, costs and percentage carried out. Just to get started you may need 10 or more data inputs to calculate the cost for a single component. That is without considering additional costs that may be associated with the component, such as energy or management.

Typically you’ll want to carry out lifecycle costing to compare components to establish best value or determine the cost for a complete building over its life. With the former you may only have to compare two components. Assessing a complete building may result in an analysis of hundreds of components. One off-site manufacturer quoted a figure of 30,000 components in a typical building. Nobody is suggesting that a lifecycle cost appraisal should be carried out at individual component level but some compromise is required between the one figure answer required for the complete building and a meaningful breakdown

of components. Typically, whole building models consider between 50 and 300 components. This can mean a lot of lengthy calculations – for example if you are doing a discounted cash flow lifecycle cost appraisal, over 60 years for 100 components you may have to input 1,000 data items and run 6,000 calculations just to get a basic result.

Just to get started you may need 10 or more data inputs to calculate the cost for a single component

Guidance on lifecycle costing is due later in the year. Depending on the final votes it receives from the committee this could be in the form of a new standard, BS EN ISO 15686-5.

Also in preparation is the Standardised Method of Lifecycle Costing for construction, which takes a practical approach to the problem. This is to be published by the BSI and BCIS and is the UK supplement to ISO 15686-5 and provides instructions, techniques and definitions. It bases lifecycle costs on the existing BCIS capital cost plan, which takes into account about 30 building elements and then incorporates the future cost categories identified in the ISO: maintenance, occupancy, operation and end of life. What is really useful is that the UK publication will list and offer definitions of what is included in each category. This should allowing more meaningful comparisons between life cycle cost models.

The UK standardised method also describes the measures used to quantify lifecycle costs and lists the ways in which it may be applied throughout the construction process.

This brief description of costing would result in a simplified, idealised model. The reality is much more complicated, uncertain and variable. There are sophisticated mathematical algorithms that can be used to model uncertainty where the underlying data is available. For most assessments what is required is a means of taking account of risk, and the UK supplement includes chapters on risk, data sources and plans to provide examples.