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Standardised Method of

Life Cycle Costing for Construction

The UK Supplement to ISO 15686 Part 5 -


Life cycle costing for buildings and constructed assets

COST DATA STRUCTURE


EXTRACTS – Sections 1, 3 and Annex A&B

GUIDING PRINCIPLES, INSTRUCTIONS & DEFINITIONS

This is a ‘Published Document’ not a British Standard.


It will be jointly published by BCIS and the British Standards Institute
Standardised Method of Life Cycle Costing For Construction

INTRODUCTION 1
DEFINITION – from ISO 15686 Part 5 - Life Cycle Costing
What is Life Cycle Costing …… ‘Methodology for systematic economic evaluation of the life cycle
costs over a period of analysis, as defined in the agreed scoping’.

Life cycle costs are…..”cost of an asset or its parts throughout its life cycle, while fulfilling the
performance requirements”.

Note – Life cycle costing can address a period of analysis which covers the entire asset life cycle, or
periods of interest therein.

OBJECTIVES OF THE UK STANDARDISED METHOD OF LCC in CONSTRUCTION

The objectives of the UK supplement to the ISO 15686 (part 5) are to provide;

1. A UK standard cost data structure for life cycle costing, which aligns with the ISO menu
of costs and with the BCIS standard form of capital cost analysis

2. LCC practitioners with a standardised method of applying life cycle costing, applicable
to the UK construction industry and to the various stages of the procurement process

3. Process mapping the life cycle cost planning stages – to help structure how to plan,
generate, interpret and present the results for a variety of different purposes

4. How to define the Client’s specific requirements for LCC and the required outputs

5. Simplify and demystify how to do LCC – by providing practical guidance, instructions


and definitions, together with informative worked examples

6. Promote an industry accepted methodology, to facilitate a more accurate, consistent


and robust application of LCC estimations, option appraisals - thereby creating a more
effective and robust basis for life cycle cost analysis and benchmarking

This document also seeks to help eliminate confusion over scoping, terminology and to
address concerns over the uncertainty and risks that are undermining confidence in LCC.

WHY DOES THE CQS PROFESSION NEED A STANDARDISED METHOD?


To provide:
• The QS profession with industry accepted methodology for how to do LCC in practice.
• Clarity the scoping and the data sources and assumptions used in producing the LCC
• Comparability of results
• A basis for more robust and effective cost analysis and comparative benchmarking

To demystify and simplify the application of LCC in practice, - so that the practical application of life cycle
costing can become widely used across all forms of UK construction procurement, (across both private and
public sector construction procurement – and not just on PFI/PPP projects).
Standardised Method of Life Cycle Costing For Construction

LIFE CYCLE COST DATA 3


STRUCTURE AND DEFINITIONS
What costs to include/exclude and how to express them

3.1 Before attempting to do a LCC for a construction investment and/or option appraisal,
agreement should be reached as to the precise scope of what costs are to be included –
namely only those costs that relate to design and construction, operation and maintenance and
the disposal stages (end of life and/or interest in the asset) if required.

3.2 This document provides a UK cost data structure for LCC which identifies which costs are part
of Whole Life Costing (WLC) and those costs that should normally be included under the major
cost headings for Life Cycle Costing (LCC), - as shown on the diagram below:

Fig 2 from ISO 15685 Part 5 - clarifying the difference between Whole Life Costing and Life Cycle Costing.

3.3 Occupancy costs are included in the ISO as part of the ‘Non Construction Costs’ - but it is
normal practice in the UK to include them within LCC.
UK Cost Structure and Definitions
Common Cost Breakdown Structure for Life Cycle Costing in Construction

Item LCC Element Category Definition


Construction Costs All costs of initial construction work on the
building
1.1 Building Works Costs Cost of building works and external works
(Presented in the SFCA element cost structure)

1.2 Other Construction All costs payable by the client in connection with
Related Costs the building or constructed asset. For example:
• Consultancy fees
• Special client costs – launch events and
associated marketing costs
• Decanting (when not in the preliminaries)
• Infrastructure charges
• Infrastructure adoption and maintenance
costs
• Highway costs
• Utility charges
• Licenses and permits
• Planning gain and other community
financial contributions
• Party wall costs
• Rights to light costs
• Client contingency, design development
contingency, project risk register
contingency
• Others – client / user definable

Note 1 – Building works should be presented in


Standard Form of Cost Analysis (SFCA) elements
and sub elements for buildings and external
works
Note 2 – Where enabling works are included in
the construction costs they should be shown
separately. Enabling works are defined as works
required to allow the construction works to
proceed that have no future costs to the client eg
demolition costs
Note 3 - Construction costs for works that will
not be maintained by the client, which will not
therefore contribute to ongoing liabilities for LCC
should be shown separately – eg roads to be
adopted
Note 4 – The initial costs of items forming part of
Occupancy costs such as Information and
Communication Technology (ICT) or unfixed
furniture, fittings and equipment (FF&E) should
be clearly identified and shown separately.
Note 5 – Exclude VAT

2 Maintenance Costs All costs of replacement, maintenance, repair and


adaptation of the constructed asset
(Presented in the SFCA element cost structure
2.1 Major Replacement Scheduled replacement and major components.
Costs This will form the detailed asset life cycle
replacement programme
2.2 Minor Replacement and Scheduled replacement of parts and scheduled
Repairs Costs maintenance and repairs to components and
associated making good and minor redecorations
including planned preventative maintenance.
2.3 Unscheduled Allowance for unforeseen maintenance arising
Replacement, Repairs from early failure, inappropriate use etc
and Maintenance Costs
2.4 Redecorations Scheduled redecorations
2.5 Refurbishment and Scheduled refurbishment and adaptation during
Adaptation Costs the period of analysis.
Exclude refurbishment and adaptation carried out
as part of the initial construction, which should be
included under the construction costs.
Note 1 – the split between ‘Major’ and ‘Minor’
replacement will depend on the funding
arrangements and contractual interface
agreements, and should be defined on each
project. For example, if a major asset
replacement fund is set up it may be defined by
life of the components or the cost of the
replacement. It is recommended that the assets
covered should be listed.
Note 2 – Maintenance costs should generally be
shown in SFCA elements and sub elements for
buildings and external works. However where
some minor repairs and maintenance and/or
unscheduled replacement, maintenance and
repairs are calculated as an allowance for the
building as a whole these should be shown
separately.
Note 3 – Grounds maintenance and gardening
should be included in external works
Note 4 - Include all costs of and any income from
disposal of replaced components and parts
Note 5 – include all overheads, temporary works
etc in connection with replacement, maintenance
and repairs
Note 6 – Include inspections (statutory and
others) carried out as part of maintenance
contract work. General inspections commissioned
separately by or on behalf of the client should be
included in ‘3.3 Administrative costs’
Note 7 – Include contractors management of the
works and of any life cycle fund and management
of the Direct Employed Labour (DEL) whose costs
are considered direct overheads to the work.
Note 8 – Costs that relate to items not included in
the construction costs should be shown separately
Note 9 – Exclude VAT.
3 Operation Costs All costs of operating the building or facility
arising from the building itself rather than from its
occupancy, excluding maintenance costs
3.1 Cleaning Costs Cleaning costs includes periodic, routine and
specialist cleaning
3.1.1 Windows and external surfaces
Cleaning windows, curtain walling, glazed
screens, cladding, sun screening etc
Exclude the cleaning of external wall surfaces
accompanied by restoration (eg stonework); this
should be included in ‘3 Maintenance Costs’.
3.1.2 Internal Cleaning
Cleaning of internal surfaces. Includes;
• Cleaning floors, vacuum cleaning and
shampooing carpets
• Cleaning internal surfaces of windows
• Cleaning internal wall surfaces
• Dusting and cleaning ledges, furniture
and fittings
• Emptying waste bins
• Consumables to toilet facilities
• Facility and user definable items
Excludes washing down walls or paintwork done
in lieu of redecoration, which is included in
redecoration.
3.1.3 External Works Cleaning
Cleaning of roads, paved areas etc

3.2 Utilities Costs 3.2.1 Fuel


Show cost of different fuel separately eg
• Gas
• Electricity
• Fuel oil
• Solid fuel (define)
• Other
Include any income from the sale of energy.
Exclude cost of boilermen and such labour
attending on mechanical and electrical equipment,
which are included in ‘3.3 Administrative costs’
3.2.2 Water and Drainage
• Water rates
• Effluents and drainage charges
• Others

3.3 Administrative Costs User support costs related to the operation of the
building or facility
3.3.1 Property Management
All costs involved in managing the operation and
maintenance of the building.
Includes:
• Supervisory staff eg. building supervisor,
maintenance manager, facilities managers etc
• Professional staff eg architects, engineers,
surveyors etc
• Clerical staff and administrative staff.
• General and regulatory surveys commissioned
by or on behalf of the client

Excludes:
• Contractors management of the works and of
any life cycle fund and management of Direct
Employed Labour (DEL) whose costs are
considered direct overheads to the work and
should therefore be included in ‘2 Maintenance’
• Inspections, including statutory inspections,
carried out as part of maintenance
• Surveys and inspections carried out in
connection with disposal
• Strategic asset management, estate agents
fees etc

3.3.2 Staff engaged in servicing the


building
Contractors or directly employed staff attending
upon the equipment directly serving the
building. Include operatives partly responsible
for maintenance and/or operation of equipment
whose costs cannot be allocated to specific
functions such as caretakers.
Include;
• Boilermen and such labour attending upon
the mechanical and electrical equipment
• Security staff for the building
• Toilet attendants
• Caretakers
• Consumables – Materials and equipment
required by staff engaged in servicing the
building
Exclude:
• Porters
• Reception

3.3.3 Waste management/ disposal


Contractors or directly employed staff engaged in
the collection, removal and disposal of waste from
buildings or their grounds

3.4 Overheads Costs 3.4.1 Property insurance


Premiums for insuring the property

3.5 Taxes (if applicable) Rates and other local charges payable in
connection with owning the building
Note 1 – Staff costs should include salaries,
wages, expenses, overtime, insurances,
administrative support, overheads,
accommodation, supply of uniforms, travel costs
etc
Note 2 – Costs that relate to items not included in
the construction costs should be shown separately
Note 3 – Exclude costs that relate to the
occupancy of the building such as laundry and
bathroom consumables to hotel rooms
Note 4 – Exclude VAT
4 Occupancy Costs Note User support costs relating to the occupation of
Occupancy costs were the building or facility
classified in the ISO
menu of costs as part of
the ‘NON
CONSTRUCTION COST’
defined as the user
support costs – 3.
4.1 Internal moves
(churns)
4.2 Reception and
customer hosting
4.3 Manned security
4.4 Helpdesk
4.5 Switchboard/
telephones
4.6 Post room – mail
services/ courier
services
4.7 IT services
4.8 Library services
4.9 Catering
4.10 Hospitality
4.11 Vending
4.12 Furniture, Fittings and
Equipment (FF&E)
4.13 Internal plants and
landscaping
4.14 Stationery and
reprographics
4.15 Porters
4.16 Car parking charges
4.17 Others – user definable
Note 1 – Where these or similar items are
included in the LCC plan they should be clearly
identified and shown separately
Note 2 – Where an initial investment is required
eg IT services, FF&E etc that initial investment
should be shown separately under ‘Construction’
Note 3 – Exclude VAT

5 End of Life Costs Costs payable, credits accruing at end of period of


analysis
5.1 Disposal Inspections Cost of inspections carried out in connection
with demolition, dilapidations or other
contractual requirements
5.2 Demolition Cost of demolition of the building at end of
life or period of interest
5.3 Reinstatement to meet Cost of dilapidations or other contractual
contractual obligation to return the building to a set standard
requirements of repair

5.4 Other costs


Note 1 The ‘End of life’ for most LCC calculations
will be the end of the investment period ‘En not
the end of life of the building.
Whole Life Cost Elements: these costs may be relevant, if LCC is part of a wider economic study/
evaluation
WLC Element Category ISO Definition

Non Construction
Costs
Land and enabling Site costs (land and existing building)
works
Finance costs Interest or cost of money and wider economic
impact
User support costs (1) Includes in-house resources and real
– strategic estate estate/property management/general inspections,
management acquisition, disposal and removal
User support costs (2) Unitary charges, parking charges, charges for
– space charges associated facilities
Taxes Taxes on non-construction items
Other
Note 1 – ‘User support costs 3 Administration’ is
classified as ‘Non-construction cost’ in the ISO but
has been included in the UK Supplement LCC
structure as ‘4 Occupancy costs’
Income Income and Other Costs
Income from sales Residual value on disposal of interest in land,
constructed assets or salvaged materials,
including grants etc
Third party income Rent and service charges
during occupation
Taxes on income On land transactions
Disruption Downtime loss of income
Other
Externalities Costs associated with thee an asset which are not
necessarily reflected in the transaction costs
between provider and consumer.
Annex A
ISO 15686 part 5 – Menu of Whole
Life Costs & Life Cycle Costing
Annex B
COST MAPPING
ISO menu to the SFCA and SMLCC
ISO 15686 part 5 - Standard Cost Groups Normally
Life Cycle Costing (LCC) Construction Life Cycle Included
Elements Costing In An
(In the SFCA) (In the ISO) LCC Option
Analysis
Construction
Professional fees ( inc. design ) √ √ √
Temporary works √ √
Construction √ √ √
Initial adaptation or refurbishment √ √ √
Taxes √
Other (Contingencies) √ √ √
Maintenance
Replacements of major systems √ √
Adaptation or refurbishment √ √ √
Repairs and minor replacements √ √ √
Maintenance management √ √ √
Cleaning √ √ √
Grounds Maintenance √ √ √
Redecoration √ √ √
Taxes √
Other (user definable) Optional
Operation
Rent √
Insurance √
Cyclical regulatory costs √ √
Utilities √ Optional
Taxes √
Future regulation2 √
Other (user definable) √ Optional
Occupancy
Part of Non Construction Costs Optional
End of Life
Disposal inspections √ Optional
Disposal and demolition √ Optional
Reinstatement √ Optional
Taxes √
Other (user definable) Optional Optional
ISO 15686 part 5 - Standard Cost Groups Cost Categories NORMALLY
Whole Life Cost (WLC) – wider economic analysis Construction LCC INCLUDED in
Elements in Elements Life Cycle
the SFCA in the ISO Costing
Non Construction costs
Land and enabling works
Finance
Strategic property management
User Charges Optional √
User Support Costs (soft FM) 1 Optional √
Taxes
Other (user definable) Optional √
Income
Income from sales
Third party income
Taxes