Andy Green explains the urgent need for agreed standards in life cycle costing and why the new ISO document could be just what the industry needs to establish consistency in its approach to measuring the lifespan of buildings.

Most organisations now recognise the value of using whole life cycle costing (WLCC) in support of the investment decision making and the design appraisal processes.

However, despite the Office of Government Commerce's WLC construction procurement guidelines, all too often decisions are based primarily on initial capital cost. So the norm for our industry is that few projects are actually realising the tangible benefits of using life cycle costing (LCC) properly in practice.

The two major barriers to the application of life cycle costing are a lack of clarity on terminology and understanding of what is WLC/LCC and a lack of a common data structure for predicting costs.

Which costs?

The BCIS, with help from Faithful+Gould, has reviewed various cost structures used by countries worldwide and has now established a standard menu of whole life cycle costs - which aligns with the European Commissions Task Group 4's proposed cost data structure for LCC in construction. The intention being that the BCIS will publish this, along with the LCC guiding principles, instructions and definitions in the forthcoming update to the current BCIS Standard Form of Cost Analysis.

When will the LCC standard be published?

The barriers to the application of LCC are a lack of clarity on terminology and a lack of a common data structure for predicting costs

The standard will go to a final ballot in April and, if endorsed, will become the international standard later this year. The BCIS plans to publish the revision to its latest Standard Form of Cost Analysis in a similar time frame.

Why have a common standard?

  • To establish clear terminology and a common methodology for LCC
  • Enable the practical use of LCC so it becomes widely used
  • Enable the application of LCC techniques and methodology for a wide range of procurement methods
  • Help to improve decision making and evaluation processes, at relevant stages of any project
  • Address concerns over uncertainties and risks, to improve the confidence in LCC forecasting
  • Make the LCC assessments and the underlying assumptions more transparent and robust
  • Working together to establish the ‘standard' for the practical application of LCC in construction.
Having an industry standard for assessing WLC is close to becoming a reality. To make this possible, Faithful+Gould has collated the results of a number of LCC working groups by working with BCIS, Constructing Excellence, Building Research Establishment, the CIBSE life cycle cost forum and other QS practices, including Cyril Sweett. This has helped to establish a standardised approach and methodology, which has recently been incorporated into the final redrafting of the international standard DIS/ISO 15686 - part 5 for life cycle costing.

What does the ISO address?

  • Sets out the guiding principles, instructions, definitions for forms of LCC analysis and reporting
  • Provides the framework for consistent life cycle cost predictions and performance assessment, which will make comparative analysis and cost benchmarking easier
  • Provides a common basis for setting life cycle cost targets during design and construction, against which actual cost performance can be tracked and assessed over the asset life span
  • Provides a generic menu of costs for WLC/LCC compatible with and customisable for specific international cost codes and data structure conventions
  • Clarifies the differences between WLC and LCC.
  • When should WLC and LCC be used and for what purpose?
LCC analysis must take into account relevant factors from acquisition, all the way through to operation and maintenance, renewal and adaptation, disposal and decommissioning, with regard to the client's specified brief and the project specific service life performance requirements. LCC therefore allows consistent comparisons to be made between alternatives with different cash flows and different time frames.

Life cycle costing allows consistent comparisons to be made between alternatives with different cash flows and different time frames

There are three key stages during the whole life cycle of any constructed asset when undertaking LCC is particularly relevant:

1 Project investment planning WLC/LCC strategic options appraisals (pre construction)

2 During design and construction or LCC in construction (system and detailed elemental levels)

3 During occupancy or life cycle cost in use (post construction and beyond).

Source

QS News