In this article we will look at some of the cost elements needed for a Whole Life Cost Analysis.
Determining Element life
An essential input to WLCA is the definition of the life, in years, of the equipment or construction elements to be used.
Unfortunately, the data supplied by manufacturers and the industry in general is completely unsuitable for use in a WLC analysis.
To answer the question "how long will it last" is as easy as it is to answer as "how long is a piece of string".
That manufacturers are reluctant to provide information regarding how long their particular equipment or construction element will last beyond whatever warranty they provide is understandable, given that they will have no idea of the external and internal factors to which that equipment will be subjected.
What is disappointing is that few, if any, are able to provide the context within which they developed whatever life expectancy information is available.
The acquisition of accurate data concerning the expected "life" of equipment, materials and other components will be the most difficult activity within an analysis.
This "life" can be described by different members of the project team in different ways. Amongst these are:
- Design Life
- Service Life
- Economic life
- Useful life
- Technological life
Kirk and Dell'Isola (1) define three of these as follows:
Economic life is the estimated number of years until that item no longer represents the least expensive method of performing the functions required of it.
Technological life is the estimated number of years until technology causes an item to become obsolete.
Useful life is the estimated number of years during which an item will perform the functions required of it in accordance with some pre-established standard.
These headline statements are meaningless without some form of context.
For example, does "design life" mean that the business requirements which are served by the equipment disappear at the end of the design life?
Or that the equipment fails to meet the minimum service level at that time? But what happens to the business requirement?
Manufacturers and standard texts (e.g. CIBSE "Guide to ownership, operation and maintenance of building services") often quote a range for the life of certain types of equipment.
For example, calorifier and heat exchanger life is quoted as 20-25 years. Such ranges are of no use in WLCA.
If we look at the Whole Life capital cost of a calorifier and heat exchanger costing £10,000.00 and with 15, 20 and 25 year life respectively to replacement, its Net Present Value (2) over a 45 year costing period is: