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Whole Life Costing

Prepared by
Nurul Fadhlina Bt Abd Fatah
Safiqca Bt Adam
Siti Faridah Bt Mamat
Syed Mohd Hashim B Wan Othman
Tan Peng Kiat
Vincey Chew
Wan Nor Adzahari Bin Wan Tajuddin
Wan Wei Lynn
Won Huey Si

114742
114766
110726
110738
110740
114815
110748
110749
110750

Definitions

The total cost of ownership over the life of an asset


- Association of Local Government Engineers New Zealand: "Infrastructure Asset
Management Manual"

the systematic consideration of all relevant costs and revenues associated


with the acquisition and ownership of an asset Constructing Excellence, 2006

A method of evaluating or comparing building materials and components by


looking at installation costs, lifespans, running and maintenance costs

Linkhousing, 2014

WLC is the systematic economic consideration of all whole life costs and benefits
during the period of analysis
RICS iConsult, 2013

Initial Cost

Initial Cost is estimated &


Planned Functional Life is decided

Initial Cost
Planned functional Life

Occasional Future Cost

Occasional Future Cost is predicted & adjusted


to Present Worth using Present Value table.
Example
Example
Roof
Roof (flashing)
(flashing)
Rainwater
Rainwater goods
goods
Sewerage
Sewerage
Water
Water reticulation
reticulation

Initial Cost
Planned functional Life

Present Worth

Present Worth is using Present Value


schedule. (Table C)

Present Worth
Initial Cost
Planned functional Life

To pg 16

PRESENT VALUE OF $1 Table

To pg 19

Present Value of $1
The amount should be invested TODAY in order
to received $1 at the end of n year, at an interest
rate of i % per annum
end of year n

Beginning of year 1

Value
TODAY??

$1

$?

Interest rate = i %

Present Value of $1

Source: http://www.investopedia.com/calculator/pvcal.aspx

Equal Annual Costs

Equal annual costs are predicted and changed into


Present Worth by using Present Value schedule.

Present Worth

Examples:
Examples:
Air-conditioning
Air-conditioning system
system
Lift
Lift service
service
Escalator
Escalator service
service
Fire
Fire fighting
fighting system
system
Painting
Painting

Present Worth
Initial Cost
Planned functional Life

Present Value of $1 per Annum/ Present Value of Annuity


Present value of a future stream of expenses

Interest rate i %
End of yearr 2
3
4
1

$?
Value
TODAY??

Present Value of $1 per Annum/ Present Value of Annuity

Source: http://www.pine-grove.com/online-calculators/pv-calculator.htm

Cost in Use

Present Worth is using Present Value schedule. (Table C)

Present Worth

Present Worth
Initial Cost
Planned functional Life

Cost in Use

The Total Equivalent Capital Cost are breakdown into


Annual Equivalent

Present Worth

Present Worth
Initial Cost
Planned functional Life

Cost in Use

Cost in Use

Present Worth
Cost in use
Present Worth
Initial Cost
Planned functional Life

Examples

Page 15

Example 1
Example 1
Find the Present Worth of costs of a
building given the following
information:
Life of building
40 years
Initial cost
40 000
Annual cleaning cost
300
Internal and external painting 2000
every 5 years
New roof covering
8000 every
15 years
Interest
5%

est

5.00%; 40 years
Calculation :
Initial cost
Cleaning 300 17.16
PaintingYr 5
0.784
Yr 10 0.614
Yr 15 0.481
Yr 20 0.377
Yr 25 0.295
Yr 30 0.231
Yr 35 0.181
2000
2.963

40 000
5148

5926

New roof Yr 15 0.481


Yr 30 0.231
8000
0.712

5696

Total Present Worth

56 770

Example 1
From the table of
Present Value of
Annuity

From the
table of
Present
Value

Example 1

Interest
10.00%;
Calculation : 40 years
Initial cost
Cleaning 300 9.7791
PaintingYr 5
0.6209
Yr 10 0.3855
Yr 15 0.2394
Yr 20 0.1486
Yr 25 0.0923
Yr 30 0.0573
Yr 35 0.0356
2000
1.5796

40,000
2,933.73

3,159.20

New roof Yr 15 0.2394


Yr 30 0.0573
8000
0.2967

2,373.60

Total Present Worth

48 466 (10%)

Example 2
Example 2
Find the Present Worth of costs of a
building given the following information:
Life of building
Initial cost

Annual cleaning cost


Internal and external
every 5 years
New roof covering
30years
Interest

50 years
50 000
200
painting
1000
10 000 every
5%

Example 2
Items

Year

Discount
Factor @ 5%

Discount
Factor @10%

50,000

Initial Cost

50,000

Cleaning
200
Painting

1000

18.26

3,652

9.9148

1,982.96

0.784

0.6209

10

0.614

0.3855

15

0.481

0.2394

20

0.377

0.1486

25

0.295

0.0923

30

0.231

0.0573

35

0.181

0.0356

40

0.142

0.0221

45

0.111

0.0137

3.216

3,216

1.6154

1,615.40

0.231

2,310

0.0573

573.09

Total Present Worth:

59,178

From the table


of Present
Value

New roof
10,000

From the table of


Present Value of
Annuity

54,171.45

Example 3
Example 3
Assume that example 1 and 2 represent
alternative proposals for a certain
project. It will be seen that the first
proposal appears cheaper valuable
comparison ca be made by convering
each of costs to an annual equivalent
over its expected life span. Calculate the
Cost in Use for each proposal.
Interest 5%

Example 3
Calculations:
Proposal described in Example 1
56770 0.0583
Cost in Use = 3310
@ 10% = 4953
Proposal described in Example 2
59178 0.0548
Cost in Use = 3243
@ 10% = 5466

Conclusion
COST-IN-USE
LIFE-CYCLE COSTING
WHOLE-LIFE COSTING

NOTE
For Net Present Value a higher NPV would be preferable
(e.g. gross PV less investment cost)
For Present Value / Worth a lower NPV would be preferable
as it would mean a cheaper alternative over the long-run

Thanks

To pg 16

PRESENT VALUE OF $1 Table

To pg 19

Present Value of Annuity

To pg 16
To pg 19