- Project plans
- Project activities
- Legislation and standards
- Industry context
Last edited 26 Feb 2018
Operational expenditure for built assets
Operational expenditure (opex, sometimes referred to as revenue expenditure) is expenditure incurred as a result of the day-to-day operations of a business. Operational expenditure might include expenditure such as; wages, utilities costs, maintenance and repairs, rent, sales, general and administrative expenses.
Operational expenditure is often distinguished form capital expenditure (capex), which is expenditure incurred in the acquisition, construction or enhancement of significant fixed assets including land, buildings and equipment that will be of use or benefit for more than one financial year.
Whilst it is generally relatively straight forward to identify expenditure to acquire or construct fixed assets, distinguishing between enhancements and operational expenditure such as repairs, maintenance, or replacement can be difficult. Very broadly, enhancements should either:
- Significantly lengthen the life of the asset
- Significantly increase the value of the asset.
- Significantly increase usefulness of the asset.
In construction, capex and opex can be considered to be associated with separate, distinct stages, with capital expenditure during acquisition and construction, and then a ‘handover’ to operational expenditure when the client takes possession of the completed development.
Capex and opex can be seen as competing needs, with higher capital expenditure often resulting in lower operational expenditure, as a higher quality asset may have lower maintenance and repair costs, lower utilities costs, and so on. Whilst sometimes the division between capital and operational expenditure can be one of necessity, based on the resources available to the client at the time, it can be based on an assessment of whole-life costs
- Insurance, inflation and financing.
- Fixtures, fittings and equipment.
Whilst it is often tempting to seek savings in the early stages of a project, the relative benefit of this tends to be outweighed by the long-term impact.
This is sometimes demonstrated by a rough assessment of the typical costs of an office building over 30 years, in the ratio:
- 0.1 to 0.15 for design costs (ref OGC Achieving Excellence Guide 7 - Whole-Life costing).
- 1 for construction costs.
- 5 for maintenance and building operating costs during the lifetime of the building.
- 200 for the cost of operating the business during the lifetime of the building.
However, this has been criticised as misleading, not least because the construction industry accounts for around 7% of GDP, implying a much more significant proportion of business costs than the ratio suggests. Other ratios of construction costs to operational costs to business costs have suggested figures as low as 1:0.6:6 for some types of buildings. However, the usefulness of these ratios is questionable, other than if they are calculated based on actual figures for specific businesses.
 Related articles on Designing Buildings Wiki
Featured articles and news
The construction methods have changed a lot since the first roads were built around 4,000 BC.
How to deliver a five-fold multiplier effect from investment in water infrastructure.
RSHP's Leadenhall building is named a 2018 RIBA National Award winner.
Gary Neville's controversial Manchester tower gets the green light to go ahead.
Health and safety is everyone’s responsibility.
BSRIA guide to energy storage in buildings - a technology overview.
The UK’s largest Passivhaus accredited affordable housing scheme.
ICE set out 5 recommendations for the Government Construction Strategy 2018 update.
Balfour Beatty fined £500,000 for exposing workers to hand-arm vibration.
James Brokenshire launches a consultation on banning combustible cladding.
A year after Grenfell, we have a collection of 30 articles telling you everything you need to know.