Whole Life Costing

Whole life costing is an investment appraisal and management tool which assesses the total cost of an asset over its whole life. It takes account of the initial capital cost, as well as operational, maintenance, repair, upgrade and eventual disposal costs. Whole life costing can also factor in related income streams, where appropriate.

Guidance from both HM Treasury and the Department for Communities and Local Government recognises the value of adopting a whole life cost perspective when appropriate. This guide looks at the application of whole life costing to a variety of asset appraisal and decision processes.

While much of the existing literature focuses on the use of whole life costing for large scale construction projects, this guide also considers its wider application. This includes smaller asset purchase decisions as well as reviewing assets at various stages of their useful life.

The guide also looks at the links between whole life costing and the broader sustainability agenda and considers how whole life costing can, where appropriate, support appraisal of wider economic, social and/or environmental impacts of an asset.

It looks at matters including:

• definitions of whole life costing
• different approaches – from standard whole life costing to inclusion of ‘externalised’ costs
• why use it?
• links to best value and value for money
• challenges in applying whole life costing
• when to use it including different types of asset use and procurement decisions
• how to do it, including steps in the process
• discounting, including the time value of money and net present value
• sensitivity analysis, including the steps and choosing variables
• whole life costing and sustainability, including policy drivers.

This publication is a resource for people in public service organisations who are involved in asset investment and procurement appraisal decisions, as well as those involved in asset and facilities management and those tasked with providing financial information on asset operational costs, impacts and benefits.

This title is available as a book and a bookmarked PDF.