Whole life performance and costs to benefit the client

For any comparison over a given time period there are only two outcomes.

Higher capital cost option results in best value:

• option A - lower capital cost, higher cumulative cost;
• option B - higher capital cost, lower cumulative cost - best value.

Lower capital cost option results in best value:

• option A - lower capital cost, lower cumulative cost - best value;
• option B - higher capital cost, higher cumulative cost.

Strictly speaking the net present value (NPV) calculation should be included as a best value measure, although experience suggests that the NPV calculation often reflects the outcome from the cumulative cost comparison. The NPV calculations are dealt with in more detail in the section on Whole life cost measures.

Variable outcomes

A third possibility does exist in that the best value option may vary depending on the time period under consideration. This typically occurs where there are different expected service lives of the two components being compared.

In the example below, Option one offers best value between years 0-15, 25-45 and 50-60. This example illustrates the need to view decision-making about best value options over a broad time frame.