Last edited 14 Oct 2016

Whole-life costs for buildings WLC

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Whole-life costs consider all costs associated with the life of a building, from inception to construction, occupation and operation and disposal.

Whole-life costs for a building include:

  • Procurement costs (including land acquisition, design, construction, equipment etc).
  • Maintenance and refurbishment costs.
  • Operational costs (including running costs and one-off costs associated with the project such as change management).
  • Disposal costs.

Whole-life costs are considered a better way of assessing value for money than construction costs, which can result in lower short-term costs but higher ongoing costs through the life of the building. This can also apply to things such as design fees, where saving money on fees at the beginning of a project can be outweighed by very much higher ongoing costs through construction and occupation.

An attempt to demonstrate this by making a rough assessment of the typical costs of an office building over 30 years, generated the ratio:

Ref. Report of the Royal Academy of Engineering on The long term costs of owning and using buildings (1998).

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.

Whole-life costing is a process of providing information about the likely life of a project to enable decisions to be made about value for money in the planning stages.

Information about whole-life costs will be prepared by different people at different stages of the project. In the early stages they may be produced in-house or by independent client advisers. The cost consultant may contribute information about building costs (construction and operation) during the design and construction phases. The client may contribute information about the impact of proposals on their business operation. This means that whole-life costing involves collaborative working to assess the full implications of options. On public projects, where an integrated project team may be appointed to design, build, operate and maintain a development, an assessment of whole-life costs will be a fundamental part of the contractors responsibility and tenders will be evaluated on the basis of whole-life costs.

Whole-life costing can benefit from comparison with other similar projects, however consideration needs to be given to likely future cost trends.

If whole-life costing is required, then this should be made clear in appointment documents.

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