Last edited 02 Apr 2019

Whole-life costs for buildings WLC

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

NRM3: Order of cost estimating and cost planning for building maintenance works, defines a ‘whole life cost’ as; ‘…all significant and relevant initial and future costs and benefits of a building facility or an asset, throughout its life cycle, while fulfilling the performance requirements.’

NRM3 defines ‘whole life costing’ as; ‘…a methodology for the systematic economic evaluation used to establish the total cost of ownership, or the whole life costing of option appraisals. It is a structured approach addressing all costs in connection with a building or facility (including construction, maintenance, renewals, operation, occupancy, environmental and end of life). It can be used to produce expenditure profiles of a building or facility over its anticipated life span or defined period of analysis.’

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:

0.1 to 0.15 for design (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.

(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.