Whole life costing worked examples

Building services design option:

Air-conditioning and under-floor trunking v hot-water heating and ring main electrics

This example is kindly provided by Messrs Gardiner & Theobald. The objective is to evaluate the options for a building with a floor area of 3,000 m2, a life of 60 years and a discount rate of 4% (7% interest less 3% inflation). The information is summarised in Table 1, with an explanation of the calculation for option 1 (air-conditioning and under-floor trunking) detailed below. Any tax implications are excluded.

Explanation of the calculation for option 1

The present value for purchasing the system is obviously the same as the capital cost: £750,000

For the annual running costs:

• 25 per m2 x 3,000 m2 = £75,000
• 75,000 incurred every year for 60 years at 4% discount = £75,000 x 22.6* = £1,696,762 present value

For maintenance, the present cost of £5,000 for equipment overhaul taking place in, say, year 15 at 4% discount:

• = £5,000 x 0.55526** = £2,776

The replacement cost after 45 years:

• = £600,000 (present cost of £750,000 less allowance of, say, £150,000 for resale value) x 0.17120** = £102,719

The total present value of the capital cost, annual running cost, maintenance and replacement costs:

• = £3,125,540; showing that option 1 is the most expensive life-cycle cost

* From the discount factor table on page 45 of Part 2, Section 2 of the old Surveyors' Construction Handbook (years purchase or present value of £1 per period).

** From the discount factor table on page 46 of Part 2, Section 2 of the old Surveyors' Construction Handbook (present value of £1).