Presenter – Farzan Mohammed

LIFE CYCLE COSTING.

OBJECTIVES:
1. To understand the importance of life cycle costing and its
use in the early stages of planning facilities.
2. To prepare a project cost plan for individual facilities.
3. Appreciate cost recovery issues in maintenance financing.
What is life cycle cost and how is it different from life cycle costing?

Life cycle cost: ‘the cost of an asset, or its parts throughout its life cycle,
while fulfilling the performance requirements’ (ISO 15686-5)

Life cycle costing: ‘methodology for systematic

economic evaluation of life cycle costs over a period of
analysis as defined in the agreed scope’ (ISO 15686-5)
 Business The Environment
competitiveness

The Future
Generations

A building/ products incorporated in buildings are for life not just for the
opening ceremony
VIDEO
▪ Outline business case (OBC) – option appraisal – issues of
comparing like for like
▪ Final business case – cash flow forecast prediction of the future
based upon one option – issues of loans, sinking funds, cash
flow smoothing, etc
▪ Investment for return – measures of economic performance,
payback, internal rate of return
▪ What do I need now and how much will it cost me?
▪ What will I need to do in the future because I have done it and
how much will that cost me?
▪ How long is the ‘future’?
▪ How do I evaluate future costs v current costs?
How does Planned Maintenance impact this cycle?
▪ WHEN CONSIDERING THE COSTS OF ANY FACILITY, IT IS
IMPORTANT NOT ONLY TO CONSIDER INITIAL COSTS BUT
ALSO ALL OTHER COSTS INVOLVED IN THE ESTABLISHMENT
AND USE OF A FACILITY.
 TOTAL RUNNING COST

OPERATIONS COST:
ENERGY, OCCUPANCY
MAINTENANCE
INSURANCE COST AND
RATES,ADMINISTR COST
SUNDRIES
ATION

SERVICES:
FINISHES
MAIN EXTERNAL PLUMBING
FIXTURES DECORATIONS
STRUCTURE WORKS ELECTRICAL,
FITTINGS
MECHANICAL

AIR-
ROOF LIFT AND SECURITY
FRAME WINDOWS ETC INTERNAL EXTERNAL CONDITIONING
STRUCTURE CONVEYORS TELECOM ETC
VENTILATING
 RESIDENTIA OFFICES HOTEL INDUSTIAL
L
1. CIVIL ENGINEERING 40% 30% 25% 60%
WORKS – BUILDING
ENCLOSURE

2. SERVICES – 60% 70% 75% 40%

ELECTRICAL,
MECHANICAL,
SANITARY, WATER
SUPPLY, FINISHES,
LANDSCAPE, ETC.

Cost allocation for different types of

facilities as a percentage of total cost
3.BUILDINGS
ANNUAL MAINTENANCE COSTS FOR UPKEEP AND
MAINTENANCE- 0.2 % OF INITIAL BUILDING COSTS.

4.SERVICES
ANNUAL MAINTENANCE COSTS FOR SERVICE= 0.5% OF INITIAL
SERVICE COSTS.
5. EQUIPMENT.
(A) ANNUAL MAINTENANCE COSTS FOR EQUIPMENT- 0.5 %
OF INITIAL COST OF EQUIPMENT.
(B) EQUIPMENT (CRANES ETC.) WILL NEED UPGRADING FOR
HIGHER PERFORMANCE- COSTS OF UPGRADING = 15-20%
OF INITIAL EQUIPMENT COSTS.
▪ Building -100 years
▪ Electrical Mechanical and other services 30-35 years
▪ Process equiptment-50 years upgrade after 25 years
▪ Sophisticated Equipment 5-8 years
▪ Equipment other– 8-10 years
▪ Auxiliary material forms, plates and scaffolding – 10-15 years
▪ EXAMPLE.

▪ 2010 EXAM
▪ Based on the maintenance cost plan we look to identify
equipment replacement and upkeep.

▪ Annual Subscription = Replacement Cost x r

Useful Life
r = reduction coefficient.
▪ Service Charge or User Fee, e.g. road tax, airport tax, Over heads
in construction contracts
▪ Annual Subscription – e.g. Sinking found.
▪ Annual budget allocation –e.g. Government fiscal budget in
September
▪ International loans and grants – e.g. international lending and
funding agencies
▪ Government Subsidiary for Maintenance. 20K government grant.
▪ Levy on tax outstanding.
▪ Insurance Fund based on risk.
▪ Tax Incentives – e.g. equipment used in the energy sector (2011
Budget)
▪ Fixed Deposits, reserved funds
▪ Duty Relief.
▪ Citizen Participation Programs (CPP) e.g. volunteers and
donations
▪ Maintenance of Public Facilities adopted and Maintained by
Private Firms. (e.g. Mount Hope Hospital – pediatrics cancer
centre )
 THANK YOU

END OF LECTURE