Cost components

The cost components are the major inputs to WLA. A well-structured cost breakdown was introduced in ISO 15686 – Part V (2008) to facilitate WLA in built environment projects.

Figure 6-3: Elements of whole lifecycle costs Source: ISO 15686 – Part V (2008 p.6)

As illustrated in Figure 6-3, the WLCC (whole lifecycle cost) is represented through four main cost categories: non-construction costs, lifecycle costs, externalities and expected income.

These costs are entered into the process in different time frames. As a result, the time value of money needs to be considered in WLA.

1. Non-construction costs

Costs that are not associated with the practical construction work are categorised under non-construction costs. The preliminary costs for buying land, arranging a loan and other preparatory works are included in this category. The different cost categories that fall under the category of non-construction costs are illustrated in Figure 6-4.

Figure 6-4: Non construction costs Source: ISO 15686 – Part V (2008)

a) Land cost

The land cost is the total amount of money that the building owner pays for buying new land. This can be calculated by identifying the difference between the cost of the building to be built on the land and the market price of the total property. If the client owns a piece of land, then the land cost may not be included in the calculations (March 2009). The land cost depends on the factors of geographical location, topography and the proximity of infrastructure.

b) Cost of finance

The cost of finance means the total interest that needs to be paid to the lending organisation for providing the finance. The timing of finance is important and the discounted methods are used to bring future values into present consideration. Apart from these costs, other supportive costs are considered in the non-construction cost category.

Finance

User support costs (1) Strategic property mgt.

Interest or cost of money and wider economic impacts

Includes in-house resources and real estate / property mgt./

general inspections, acquisition, disposal and removal

Unitary charges, parking charges and charges for associated facilities

User support costs (3) Administration

Reception, help desk, switchboard, post, IT services, library services, catering, hospitality, vending, equipment, furniture, stationery, refuse collection, caretaking and portering, security, ICT internal moves and snow clearance

Taxes Taxes on non-construction items

Other

c) Other

It is necessary to identify any associated extra costs to be categorised as ‘other’ because the building is designed for potential adaptations.

2. Lifecycle cost

The lifecycle cost is defined as a total cost of a facility during its whole life whilst fulfilling the performance requirements (Kirk and Dell’Isola 1995, ISO 15686 – V 2008). The cost categories of construction, maintenance, operations and end of life are taken into consideration.

a) Construction cost

The initial capital cost of the construction of a facility is the greatest outlay in WLCC. ISO 15686 – V (2008) considers the following cost categories under this section:

Figure 6-5: Cost of construction Source: ISO 15686 – Part V (2008)

Priority is given to understand what adaptable cost might be considered if the building is designed for potential adaptations (change of use). It is necessary to learn the changes to elements (flow/size/capacity) at the beginning and incorporate them in the adaptable design.

This consumes extra costs.

Taxes Taxes on construction goods and services (e.g. VAT) Including infrastructure, fixtures, fitting-out, commissioning, valuation and handover

b) Maintenance cost

The cost required to maintain the building during its whole lifespan is defined as the maintenance cost. This cost can be obtained from available databases (for example the Building Maintenance Cost Information Service - BMCIS) or from historical data;

however, ‘base cost estimates have to be supplemented with expert opinions in order to perform WLA’ (Boussabaine and Kirkham 2004 p.20).

Figure 6-6: Maintenance costs Source: ISO 15686 – Part V (2008)

A negligible cost increment could be expected in the maintenance cost category to maintain the adaptable features. For example, the change of use potential demands larger spans and also a higher storey height. This will lead to extra maintenance costs in the categories of cleaning, painting and decoration.

Adaptation or

Cyclical inspections, design of works and management of planned service contracts

Within defined site area

Grounds maintenance

Cleaning Including regular cyclical cleaning and periodic specific cleaning

Defined by value, size of area and contract terms

Including associated design and project management

c) Operational cost

As the time span increases, the operational cost becomes less certain due to uncertainty in energy costs, maintenance, fees, staff and regulatory changes (Boussabaine and Kirkham 2004). In the context of adaptability, an extra cost might be added to this category to operate extra space (heating, cooling and air condition) used in the adaptable building. The typical sub-categories for operational costs are illustrated below.

Figure 6-7: Operational costs Source: ISO 15686 – Part V (2008)

The literature proposes different cost ratios between the initial capital costs and the operation and maintenance cost of a building. These cost ratios provide a good indication of the total cost contribution from initial capital and recurrent costs to the WLC. Hughes et al. (2004) identifies that the cost ratio may help clients focus on improving building quality to reduce lifetime maintenance costs without intimidating them about the expense of including quality in the original construction. There are different ratios for identifying the cost contributions of different building typologies; however, none have been developed for adaptable buildings, which is particularly important to show the relation between design choices and the resulting lifetime cost (i.e. energy, maintenance and operation cleaning) (Kotaji et al. 2003). Having considered office buildings, Evans et al. (1998) proposes a ratio of 1: 5: 200 (initial capital cost of construction: maintenance and operation cost: business operating costs) for office buildings that have typical lifespans of over 20 years. Moreover, Saxon (2002) explains that in net present value terms, the ratio is less dramatic (1: 1.5: 60). Hughes et al. (2004 cited

Allowances for future compliances with regulatory changes

Other

Taxes Rates, local charges and environmental taxes Fire and access inspections

Including fuel for heating, cooling, power and lighting and water and sewerage costs

equivalent to a substantial proportion of structural costs. However, these ratios are not constant and are not possible to change with the type, function and the lifecycle of a facility.

Arguably, Hughes et al. (2004) disagree with the above ratios and further explain that they are based on ill definitions, lack originality and do not give precise answers for WLA in office buildings or any of the facilities under investigation. Ive (2006) critically argues that 1: 5: 200 proportions are exaggerated and that the difference in mean ratio between buildings of different functions is sufficient to require a function-specific ratio. The importance of introducing such ratios for adaptable buildings is identified; however, difficulties may arise in finding a reasonable adaptable building sample to collect the data. In a way, these ratios help to compare the total cost of adaptable and traditional (maladaptive) options.

d) End of life cost

The cost of demolition/disposal and environmental costs (e.g. landfill) need to be considered in this section. Adaptable buildings provide good benefits over scrapping and rebuilding at the end of their lives. The sub-categories for end of life costs are illustrated in Figure 6-8.

Figure 6-8: End of life costs Source: ISO 15686 – Part V (2008)

3. Externalities

Externalities highlight the possible future risk and reward costs associated with an asset that are not necessarily reflected in the transaction costs between the provider and the consumer (e.g. staff costs) (ISO 15686 – V 2008).

Disposal and demolition

Re-instatement to meet contractual requirements

Including decommissioning, disposal of materials and site clean-up

Disposal inspections Final condition inspections

Other

Taxes Taxes on goods and services

On condition criteria for end of lease

4. Income

Income generated through renting, leasing or selling the building is considered in this category. The present value of future income is taken into consideration in WLA.

Figure 6-9: Income categories

Source: ISO 15686 – Part V (2008)

Adaptable buildings have a greater chance of appealing to different markets. Thus, the expected rate of redundancy is seemingly low in adaptable options, so income can be better generated than in maladaptive options. Moreover, the residual values of adaptable buildings are considerably higher because they are able to adapt to different scenarios.