The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
World Green RoofCongress
Brad Bamfield+44 (0) 7803 133110
Whole Life Costs
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Presenter
• Brad Bamfield– +44 (0) 7803 133110– [email protected]
• Managing Director of The Solution Organisation Ltd
• Chairman of the Whole Life Cost Forum
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Save the world or make money
• Developers are not interested in saving the world
• But they are interested in making money
• Are they mutually exclusive?
• Not if you talk their language
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Save the world or make money
• Together we can save the world
• Together we can increase your investment yield (increase profit)
• Oh and by the way the World benefits too
• How to construct the message
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Whole Life Costs & Sustainability
• The Solution Organisation definition;
A systematic set of objectives and strategies to improve the financial performance of the
organisation while at the same time
reducing its impact on the environment and
developing a positive social effect
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
3 Elements of Sustainability
Social
Economic
Environmental
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Area of sustainability
3 Elements of Sustainability
SocialEconomic
EnvironmentalArea of sustainability
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Activities in Sustainability
Whole Life Cost
Materials
Aesthetics
Social
Environmental
Economic
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Whole Life Costs
• Definition;
“The systematic consideration of all relevant costs and revenues associated with the acquisition and ownership of an asset”.
CRISP, the Construction Research and Innovation Strategy Panel
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
What is relevant?
• Costs that can be reasonably and accurately predicted.
• What about end of life costs?– Hard to predict +10 years– Not last cost of this project but first cost
of next– Discount rate reduces impact of
differences
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Methodologies for Whole Life Costs
• Net Present Value (NPV) – Discounted Cashflow (DCF)
• Total Whole Life Cost (TWLC)
• Annualised Whole Life Cost (AWLC)
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Discount rate
• DCF predicts the future value of money by discounting the annual cashflows
• WACC weighted average cost of capital + risk.
• WACC varies from organisation to organisation due to balance between shareholders funds and borrowings
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Discount rate
• WACC + Risk– Sovereign – Bank– Corporate– Project
• Who specifies Rate?– Client, contractor or supplier?
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Capital and Revenue Costs
• Focus on capital
• Without appreciation of revenue costs how is best value achieved?
• Capital and revenue different budgets different departments
• How can I spend more capital to save you energy costs over 25 years?
• Combine capital & revenue budgets
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Service life
• Definition of functionality and condition limits states – or ‘triggers for intervention’ - for use in the prediction of whole life costsP B Bamforth, M Clift, M Gregory, D Patel
DTI Contract no Cl 39/3/370 cc2330
• Available from TSO web site 21st Sept
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Service life
Table 3 Currently used sources of information and their perceived reliability
Information sources Use Reliability
Product suppliers 81 49 Previous projects 80 71 In-house expertise 79 68 Codes and standards 75 67 Personal experience 69 64 Consultants 67 56 Research Institutes 61 68 Professional Institutions 52 63 Trade Associations 50 42 Commercial databases 40 47 Universities 28 50
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Service life
Trade Ass.Suppliers
0
20
40
60
80
100
0 20 40 60 80 100
Use
Pe
rcei
ved
rel
iab
ility
Figure 4 The relationship between the use of information and its perceived reliability
In house
Past projects
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Importance of the Supply Chain
• Who can tell us most about a product?– Product databases– Users / maintenance managers– Previous projects– Consultants– Personal experience
• The supplier & manufacturer
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Procurement
• Specification• Performance• Don’t tell me what you want –
.
• tell me what you want to do
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Whole Life Costs Benefits
• WLC analysis is a decision making tool
• It is not an arbitrary figure but a comparator, it changes with time
• Compares :-
Capital Only to Capital + Cost in Use
• Products or systems against each other
• Demonstrates value over a period of time
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Whole Life Costs Benefits
• Bridgewater Somerset
• http://livingroofs.org/livingpages/
wholelifecosts.html
• WLC financial only
• WLC + non financial
• Drainage gains were excluded
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
CapitalCost
NPV Ranking TWLC Ranking AWLC Ranking
Exposed only 1 -49,160 3 51,500 3 1,716 3
Sedum covered
2 -21,268 2 -132,000 2 -2,640 2
Bio diversecovered
3 7,453 1 -175,800 1 -3,516 1
Whole Life Costs Example
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Whole Life Costs Example
3
2
1
CapitalCost
1-3,5161-175,80017,453Bio diversecovered
2-2,6402-132,0002-21,268Sedum covered
31,716351,5003-49,160Exposed only
RankingAWLCRankingTWLCRankingNPV
3
2
1
CapitalCost
1-3,5161-175,80017,453Bio diversecovered
2-2,6402-132,0002-21,268Sedum covered
31,716351,5003-49,160Exposed only
RankingAWLCRankingTWLCRankingNPV
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Whole Life Costs Example
3
2
1
CapitalCost
1-3,5161-175,80017,453Bio diversecovered
2-2,6402-132,0002-21,268Sedum covered
31,716351,5003-49,160Exposed only
RankingAWLCRankingTWLCRankingNPV
3
2
1
CapitalCost
1-3,5161-175,80017,453Bio diversecovered
2-2,6402-132,0002-21,268Sedum covered
31,716351,5003-49,160Exposed only
RankingAWLCRankingTWLCRankingNPV
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Whole Life Costs Example
Ranking Roof type
1 Bio diverse covered
2 Sedum covered
3 Exposed only
3
2
1
CapitalCost
1-3,5161-175,80017,453Bio diversecovered
2-2,6402-132,0002-21,268Sedum covered
31,716351,5003-49,160Exposed only
RankingAWLCRankingTWLCRankingNPV
3
2
1
CapitalCost
1-3,5161-175,80017,453Bio diversecovered
2-2,6402-132,0002-21,268Sedum covered
31,716351,5003-49,160Exposed only
RankingAWLCRankingTWLCRankingNPV
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Whole Life Costs Example
Points Ranking
Exposed only 69 3
Sedum covered 80 2
Bio diverse covered 94 1
Combining Financial & Non-financial
We used the WLCF online WLC tool for the financial analysis and The Solution Organisation’s standard
qualitative multi-criteria method for the non-financial which includes environmental, performance and
social impacts of the options.
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
• Better value from NPV, TWLC and AWLC
• So on these results what did the client say?
• Of course he approved the living roof and opted to investigate 4 more
• And oh yes we will have we helped the world a little bit as well
Whole Life Costs Example
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
In Conclusion• Relationship between Whole Life Costs and
Sustainability• The meaning of Whole Life Cost• The methodologies of Whole Life Cost• Capital costs & revenue costs• Service life – who do you believe• The role of the supply chain • Procurement performance v specification• Whole Life Costs example – benefits & profits
The Solution OrganisationTo build the solution, first define the problem
The Solution OrganisationTo build the solution, first define the problem
Thank you
Brad Bamfield+44 (0) 7803 133110
WLCF on line Toolwww.wlcf.org
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