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

b.bamfield@thesolutionorgainisation.com

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– b.bamfield@thesolutionorgainisation.com

• 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

b.bamfield@thesolutionorgainisation.com

WLCF on line Toolwww.wlcf.org