School of the Built Environment

BUILDING REFURBISHMENT & MAINTENANCE

TEROTECHNOLOGY

(Whole life costing)

School of the Built Environment

OVERVIEW

• THE NATURE OF TEROTECHNOLOGY

• TYPES OF COSTS

• DISCOUNTING COSTS

• WHOLE LIFE CYCLE COSTS

• LIFE CYCLE COSTING TABLES

• SPREADSHEET ANALYSES

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LEARNING OUTCOMES

1. Understand the basic principles of

terotechnology as applied to buildings

2. Understand the key components of whole life

costs and their application to maintenance

management.

3. Know how to use life cycle costing tables.

4. Understand and apply the principles of whole

life cycle costing for maintenance purposes

using a spreadsheet.

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ESSENTIAL READING

• BSI (2008) BS ISO 15686-5:2008 Buildings andconstructed assets — Service-life planning — Part 5:Life-cycle costing, British Standards Institution, London.

• BS 3843: Guide to Terotechnology - the economicmanagement of assets

• H-WU: Handout on Life Cycle Costing

• OGC Procurement Guide 07:Whole Life Costing and cost management.Available from:http://www.ogc.gov.uk/documents/cp0067.pdf

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DEFINITION

It is an integrated approach to cost

control and encompasses all the cost

elements starting from design,

development of a product up to its final

disposal.

School of the Built Environment

TEROTECHNOLOGY

• DEFINITION: a combination of management, financial,

engineering, building and other practices applied to physical assets in pursuit of economic life cycle costs.

The branch of technology and engineering concerned with the installation and maintenance of equipment., building & structure.

• OBJECTIVES

• PRIMARY: Best Possible Value For Money from procurement and subsequent employment of asset.

• SECONDARY: To achieve the Lowest Asset Cost Over Life Cycle – based on defined level of performance and expected life cycle.

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TEROTECHNOLOGY

• SCOPE OF TEROTECHNOLOGY

–Selection & Provision of Permanent Assets Ensure selection based on best value rather than the lowest cost. Cheaper may cost more to maintain over their life.

–Caring for Those Assets Whole life cycle costs can be reduced by extending the useful life of component by effective maintenance.

–Co-ordinating Assets to Help Achieve Overall Minimum Costs Over Their Life Cycle Having a proactive & complimentary approach to maintenance.

–Feeding Back Information To Improve Assets. Ensure costs effective decisions continue to be made at the capital acquisition/ procurement stage.

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LCC / SERVICE LIFE PLANNING

Parts 1, 2, 3, 5, 6, 7 and 8

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DEFINITION (LCC)

Life Cycle Cost: the total cost of a building or its parts throughout its life, including the costs of planning, design, acquisition, operations, maintenance (while fulfilling the performance requirements) and disposal, less any residual value.

Residual value: the value assigned to an asset at the end of the period of analysis.

Planning

& design

Acquisition

Operations

Maintenance

Disposal

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DEFINITION (LCC)Life costs:

• Acquisition.

• Servicing.

• Fuel.

• Cleaning.

• Insurance/ road tax.

• Repairs/ replacements.

• Upgrades.

Residual value:

• Trade- in.

• Scrap value.

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DEFINITION (WLC)

Whole Life Costs: all significant and relevant initial and future costs and benefits of an asset, throughout its life cycle, while fulfilling the performance requirements.

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DEFINITION (WLC)

In addition to the costs include;

Benefits:

• Taxi fares (revenue).

• Fuel savings (improved performance).

• Reduced tax (modified fuel).

• Advertising revenue.

• Trade- in/ scrap value.

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WLC vs LCC

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WLC vs LCC

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BENEFITS OF LCC

• Long term cost over service life of asset are more reliable indicators of value for money than the initial construction cost.

• Integrated approach to design , construction ,operation and maintenance – improve health,safety, sustainability , quality and buildability.

• Well built project can achieve savings in runningcost

Service life: the period of time after installation during which a buildingor its parts meets or exceeds the performance requirements.

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BENEFITS OF LCC

•Allows comparison or evaluation of differentinvestment options – level playing field.

• Highlights through life aspects not just initialCapital costs – highest initial cost notnecessarily most expensive WLC.

• Allows estimation of future running costs –needs careful assessment and interpretation.

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WHY USE LCC ?

• Typically used as a comparative tool.

• Evaluation of different investment scenario.(renew, rebuild, repair, rent/ buy etc.)

• Evaluation of different designs, components orsystems.

• Estimate future costs (running, installation ormaintenance).

• Comparison or evaluation of the effectiveness ofprevious decisions.

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WHERE TO USE LCC

-Confidence

+

in data

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Present Value

Present Value (PV)

Example: You can get 10% interest on your money.

So $1,000 now can earn $1,000 x 10% = $100 in a year.

Your $1,000 now can become $1,100 in a year's time.

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Future Value(Payment)

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Future Back to Present

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Present Value

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DISCOUNTING COSTS OVER TIME

Discount rates used to calculate NPV

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LCC example of rainwater goods – 60yr

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LCC example of rainwater goods

• Cheapest option may not have lowest LCC.

• May prove less expensive to replace at regularintervals rather than maintain.

• Care need with discounting and costs, minorchanges could influence results.

• There may be residual (scrap, recycling) value.(Aluminium (not included) could have high value)

• Financial costs may not include ‘environmental’ cost/ impact.

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LCC- Comparison of Material

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CONCLUSION

� Terotechnology and whole life costing are an important aspects of planning and budgeting for maintenance work.

� Allow comparison of a range of solutions, techniques, replacement strategies and time frame