星空传媒

The concept of whole life cost analysis is the time value of money. Money spent in the future has a lower value than that spent today. For example, if 拢1 were invested at 10% per annum compound interest today, it would be worth 拢1.10 next year and 拢2.59 in ten years. Therefore, if we needed 拢2.59 in ten years' time we must invest 拢1 today, so 拢1 today has the same net present value as 拢2.59 in ten years' time.

In a whole life cost analysis the level of difference in cost is immaterial - the only criterion is that there is a difference. The scheme with the lowest whole life cost is the preferred solution. The examples in this article use hvac as the basic system, but the same principles apply to any industry sector.

Example 1

It is intended that an air conditioning system be installed in a new building. It has been identified in the design phase that there are two options that will satisfy the client's functional requirements.

The client's requirement for the study period is 15 years. It has been calculated, using BS ISO 15 686 and the BRE's 鈥榯riggers for intervention' methods, that both systems will support those needs for 15 years with standard maintenance in accordance with manufacturer's schedules. To find the best solution it must be calculated which will have the lowest whole life cost.

Given the input data in figure 1, tables can be constructed to enable the calculations to be made for the base case and alternative option (figures 2 and 3 respectively).

The values under the heading 鈥榙iscount factors' are taken from H M Treasury's Green Book in the table entitled: Present value of 拢1. This gives a value, in this case of 11路5174, which is used as the multiplier to convert the value in year 15 to a net present value.

Using BSRIA's whole life cost calculator and the above rates, the two schemes can be shown side by side (figure 4). This demonstrates that the base case has the lower whole life cost. It is therefore the preferred solution, even though it has the highest energy costs.

Example 2

In this case, the same basic data applies as in the first example, but the study period is increased to 25 years.

Figure 5 demonstrates that simply by changing the length of the study period from 15 to 25 years, the result of the analysis is reversed. The alternative option now has the lower whole life cost and is therefore the preferred solution.

Example 3

The initial cost of an air treatment plant is to be phased over the two-year planning/ construction period in two equal instalments, one each at the end of years one and two.

The base case option will cost 拢310 000, while the alternative will cost 拢350 000. The study period will be 25 years and the useful lives of the two systems under examination are 15 years for the base case and 25 years for the alternative. The fan in both instances will need to be replaced in the 12th year of operation; this will cost 拢12 000 for the base case and 拢12 500 for the alternative.

A substantial portion of the base case will need to be replaced at the end of its useful life at a cost of 拢60 000 to prolong that life to at least 25 years. This work will, however, increase the residual value to 拢20 000 at the end of the study period. The residual value of the alternative case will be 拢3700.

The base case option will use 拢10 000 of electricity and 拢10 800 of gas per annum. Operation, maintenance and repair (OM&R) annual costs will be 拢6000. The alternative option will use 拢7000 of electricity and 拢9000 of gas per annum, with 拢7000 OM&R costs. A discount rate of 3路5% should be assumed in all cases.

Given in words, this example appears very complex. By compiling a cash flow diagram, however, the facts can be clearly shown (see figure 6, above). By using this diagram, the capital sums can be separated from the recurring costs. The relevant discount factor for capital and recurring costs can be ascertained once again by using the tables in H M Treasury's Green Book.

In this example the capital (lump sums), OM&R and energy costs have been separated to allow the calculation of net saving. The resultant values can then be tabulated and summed. The costs for the base case are shown in figures 7, 8 and 9. Figures 10, 11 and 12 show the alternative option.

As before, these costs are combined using the BSRIA whole life cost calculator (figure 13). In this analysis the alternative option is the preferred solution.