Whole of life (WOL) cost includes Life-cycle cost (LCC) and refers to the total cost of ownership over the life of an asset, with the additional considerations of quality, value for money and “fit for purpose” The asset may be a material, plant, equipment, a functional space, a building, a school etc.
The total Whole of Life cost includes:
Whole of Life planning refers to the considered analysis of the life cycle and introducing measures to add Value for Money so as to maximise the efficiency and effectiveness of the investment. Whole of Life considerations should be applied to all design work including materials, plant and equipment selection.
The purpose of Whole of Life is to improve the functional performance of the buildings and facilities for the entire life of the building, including the construction of new school buildings or refurbishments of existing school buildings, with a focus on:
Whole of life planning enables the creation, operation and disposal costs of various alternatives to be determined so as to enable accurate and timely decision making as to how overall life cycle costs can be minimised.
At the completion of the design phase activities, more than half of an asset’s life costs are already committed to, (with respect to an asset's features), performance, reliability, technology and support resources. Financially, it should make good business sense for the DoE to be advised as to where costs can be reduced and where additional costs should be invested for a healthier whole of life.
Whole of life planning can assist in better school spaces being built, to a higher quality, resulting in improved education benefits.
Value for Money is defined as a utility derived from every purchase or every sum of money spent. Value for Money is based not only on the minimum purchase price, but also on the maximum efficiency and effectiveness of the purchase.
The overarching requirement for procurement is that the DoE achieves Value for Money. NSW government agencies are required by law to ensure that they obtain Value for Money in the exercise of their functions in relation to the procurement of goods and services - s149(2) Public Sector Employment and Management Act 2002 (the Act).
In simple terms, Value for Money is the difference between the total benefit derived from a product (or a service) against its total cost, when assessed over the period the product is to be utilised.
Benefits, costs and risks include money and non-monetary factors. While most non-monetary factors can be translated into money equivalent amounts, others cannot be easily translated. These factors still remain relevant to the assessment of Value for Money.
Achieving value for money does not always means that the ‘highest quality’ good or service is selected. A lower initial cost option, which still meets the quality requirements, may be appropriate where DoE has limited funds available for a particular project. Value for Money is achieved when the ‘right type” of procurement solution is selected to meet the identified need.
Value for Money considerations include:
In summary, Value for Money is imperative within the Whole of Life consideration.
Within all design considerations there should be a review of the effectiveness of existing processes/ solutions and an impetus to improve them where necessary to establish a systematic Whole of Life, Value for Money framework that takes into account enhancement of learning and teaching, planning and development, Life-Cycle costing, sustainability and facilities management.
The construction component must be of the highest appropriate quality, cost efficient and effective (Fit for purpose). It must provide ultimate longevity, low maintenance and represent value for money to the school and its users.
The above general construction consideration should be followed along with further specific consideration of:
To determine the life cycle cost, the asset should be broken down into its constituent cost elements over time. The level to which it is broken down will depend on the purpose and scope of the cost study and requires identification of:
Costs associated with the life cycle cost elements may be further allocated between recurring and non-recurring costs and between fixed and variable costs.
A key requirement for successful LCC is the availability of information on the significant cost drivers influencing the life-cycle cost of the alternatives under consideration. Much of this data will come from the designer/manufacturer of major assets and from suppliers of equipment and materials to be acquired.
Data to be considered includes:
Detailed cost data may be limited during the design phase. Cost data will need to be based on the cost performance of similar asset components currently in operation. Where new technology is being employed, cost data can only be based on estimated unit cost parameters such as $/construction unit, construction unit/labour hours, specified or suggested by the technology.
LCC = capital cost + life-time operating costs + life-time maintenance costs + disposal cost - residual value.
Value for Money will involve evaluating alternatives that have an impact on this cost of ownership.
Life cycle cost analysis is especially useful when project alternatives that fulfil the same performance requirements, but differ with respect to initial costs and operating costs, have to be compared in order to select the one that maximizes net savings.
The purpose of Life Cycle Costing is to estimate the overall costs of project alternatives and to select the design that ensures the facility will provide the lowest overall cost of ownership consistent with its quality and function