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Whole Life Costing BE 3402 Level III Semester II

WLC ANALYSIS FOR A COMMERCIAL BUILDING
092401 D 092456A 092432 X 092454P 092440 U 092442 D Ahamed M.H.S. . Karunathilaka J.T.C Mehala G. Ranaweera R.P.S. Rathnayaka R.M.I.P. Sabrina N.F.

Academic Year:2009/2010

Department of Building Economics Faculty of Architecture University of Moratuwa

INTRODUCTION
This report is intended to evaluate the Whole Life Cost of the HSBC Building at Rajagiriya and analyze the sensitivity of those cost in terms of Discount Rate and Different Lifetime of the Building.

Whole Life Costing (WLC)

Choosing the most cost effective approach

from a series of alternatives

Cost elements which include in LCC are

design, development, production, operation, maintenance, support, and final disposition of a major system over its anticipated useful life span

Benefits of WLC
Optimising total cost of ownership/occupation

Ensuring risk and cost analysis

Promoting realistic budgeting for operation,

maintenance and repair Providing data on actual performance Encouraging discussion and recording of decisions about the durability of materials Encouraging analysis of business needs and communication

Drawbacks of WLC
A common drawback of most life cycle

models is that they are static Much expensive Time consuming Accuracy of data is doubtful Obtaining the data for analyzing is a tying task

Steps to Conduct LCC

Cost categories
Initial CostsPurchase, Acquisition,

Construction Costs Fuel Costs Operation, Maintenance, and Repair Costs Replacement Costs Residual ValuesResale or Salvage Values or Disposal Costs Finance ChargesLoan Interest Payments Non-Monetary Benefits or Costs

Cost Data of HSBC Building

Cost Elements
Initial Investment Costs Operations Costs Maintenance & Repair Costs Replacement Costs Residual Value 10% of the Cost

Cost (Rs)
622,750,000.00 150,870,000.00 6,467,250.00

Parameters for WLC

Discount Rate

The discount rate for HSBC Building is determined annually by the Treasury bill rate & Inflation rate ; Discount Rate calculated is 6.1% & present value of future recurring costs is PV = 9.348 Building/component life Treatment of Inflation

Present Value Calculations

Cost Elements Cost (Rs) PV Cost (Rs)

Total Initial Cost Total Operation Cost

622,750,000.00 150,870,000.00 6,467,250.00

622,750,000.00 2,331,846,720.00 99,957,816.00

Total Maintenance & Repair Cost

Yr 10 Total Replacem ent Value
49,788,600.10

Yr 15

Yr 20

Yr 25

Total PV 178,090,694.67

44,567,632.61

75,485,335.87

8,249,126.09

Yr 10

Yr 15

Yr 20

Yr 25

Yr 50

Total PV

Total Residual Value

1,431,898.78

3,512,092.92

7,572,992.53

892,887.89

223,731.68

13,633,6
03.80

LLC Calculation
Life Cycle Cost = Initial Investment +

Operating Costs + Total Maintenance & Repair Cost + (Replacement Cost Residual Value)
Life Cycle Cost = 622,750,000.00 +

2,331,846,720.00 + 99,957,816.00 + (178,090,694.67 - 13,633,603.80) = 3,219,011,626.87

Sensitivity Analysis
Cost Element
Total Initial Cost Total Operating Cost Maintenance & Repair Costs Replacement Costs Total Residual Value Total 99,957,816.00 178,090,694.67 -11,847,828.02 3,220,797,402.65

PV (Rs)
622,750,000.00 2,331,846,720.00

%
19.34% 72.40% 3.10% 5.53% -0.37% 100%

LCC In Different Life Times

5,000,000,000.00 4,500,000,000.00 4,000,000,000.00 3,500,000,000.00 3,000,000,000.00 2,500,000,000.00 2,000,000,000.00 1,500,000,000.00 4%Discount Rate 6%Discount Rate 8%Discount Rate

1,000,000,000.00
500,000,000.00 0.00 -500,000,000.00

LCC In Different Discount Rates

5,000,000,000.00 4,500,000,000.00 4,000,000,000.00 3,500,000,000.00 3,000,000,000.00 2,500,000,000.00 4%Discount Rate 2,000,000,000.00 6%Discount Rate 1,500,000,000.00 1,000,000,000.00 500,000,000.00 0.00 -500,000,000.00 8%Discount Rate

Different Discount Factor Vs Different Life Time

No 1 2 3
Life Time 45 50 55 LCC 3,220,797,402.65 3,312,082,072.90 3,462,595,647.90 Discount Rate 4% 6% 8.00% LCC 4,337,021,534.50 3,220,797,402.65 2,764,420,712.00

Conclusions & Recommendation

Life time of 45 years and discount rate of

8.00% are resulting less WLC to the HSBC Building

Though, according to the financial point of

view, the study recommended that life time of 60 years and discount rate of 6.03% are suitable to the HSBC Building

References
Life-Cycle Cost Analysis (LCCA) By Sieglinde Fuller National Institute of Standards and Technology (NIST) Last updated: 06-28-2010

Thanking You