Ellingham and Fawcett ( 2006, p. 18 ) indicate that the net present value method for measuring an investing cashflow was foremost developed about 50 old ages ago and is widely used in many domains. In belongings and building undertakings it has acquired a particular name: whole-life costing. In fact, whole-life costing is merely the application of net present value analysis to building undertakings.
Many people will confused about the term of life-cycle costing, whole life costing, and whole life-cycle costing. As stated in Boussabaine and Kirkham survey ( 2004, p. 4 ) , prior to the 1970s, investing determinations made by most clients, developers and professionals was entirely on the footing of capital cost. It appear a idea that passing more in capital cost will recognize significant cost nest eggs in long term compared with a cheaper option, which we known as ‘terotechnology ‘ . This construct was mostly ignored because the deficiency of available informations and aggregation mechanisms, and it shown that investor had no involvement in the subsequent operational cost of the edifice.
In the early 1970s, the term ‘cost-in-use ‘ appear in the industry. It was recognized the construct of cost in usage could use to edifice and critical constructions as to cipher the outgo related to the operation of an plus. However, it besides failed to see the necessity for accurate hereafter cost prediction. It required some sort of engineering to ease this job ( Boussabaine and Kirkham, 2004, p. 5 ) .
Until the mid to late 1970s, ‘life-cycle costing ( LCC ) ‘ emerged as a solution to this job. It fostered a wide-ranging attack to be assessment, embracing all perceivable cost from building through to eventual disposal ‘the whole life ‘ . By utilizing a assortment of calculating techniques, the analyst was able to show how increase capital cost could be offset by long-run cost nest eggs ( Boussabaine and Kirkham, 2004, p. 5 ) . As stated by Ashworth ( 1989 ) , LCC is clearly a technique, which ( at least in theory ) has a potency for the right fiscal rating of building plants. In should be noted that the constructs of LCC are non new. The rules are based upon economic theories, which have been used in investing assessment in many countries of industrial and commercial activity. White and Ostwald ( Korpi and Ala-Risku, 2008, p.241 ) show that LCC was originally designed for procurance intents in the US Department of Defence and Woodward ( Korpi and Ala-Risku, 2008, p.241 ) indicates that LCC is used most normally in the military sector every bit good as in the building industry.
Towards the late 1990s, the construct of ‘whole life bing ‘ and ‘whole life-cycle costing ‘ emerged. The footings whole life costing and whole life-cycle costing are interchangeable ( Boussabaine and Kirkham, 2004, p. 6 ) . Whole life-cycle costing is a comparatively new construct to the building industry. It is essence an development of life-cycle bing techniques that are normally used in many countries of procurance ( Boussabaine and Kirkham, 2004, p. 3 ) .
Whole life-cycle costing
1960 1970 1980 1990 2000
Figure 1.1: The development timeline of whole life-cycle costing.
( Boussabaine and Kirkham, 2004, p. 4 )
Theoretically talking, there is no different between LCC, WLC and WLCC. Schade ( 2007, p. 2 ) , in describing Flanagan and Jewell survey, emphasizes that it is merely a alteration of term signifier “ cost in usage ” to “ life rhythm bing ” and further to “ whole life rhythm bing ” , where “ whole life assessment ” is the new term globally used today. However, many research worker prefer to utilize the traditional term, which is life-cycle costing because of it good recognize in the planetary. Therefore, in this survey, LCC is used tantamount to WLC, WLCC and WLA.
Harmonizing to Boussabaine and Kirkham ( 2004, p. eleven ) , the building industry has late experienced a paradigmatic displacement in its attack to merchandise deliver and the accomplishment of client satisfaction. Where antecedently the design and building squads placed a heavy accent on presenting edifices at the lowest capital cost, a greater consciousness and desire to see cost over the whole life of the edifice have prevailed. Clients now want edifices that demonstrate value for money over the long term, and are non interested merely in the design solution which is the least expensive. These alterations have lead to and highlighted the of import of whole life-cycle bing attacks to the design, building and operation of edifices.
Schade ( 2007 ) claims that, production cost is the chief cost factor in building and is frequently set to the lower limit in commonly, which does non needfully better the life-time public presentation of edifices. Therefore, it is of import to demo the building client in the early design phase the relationship between design picks and the resulting life-time cost.
Boussabaine and Kirkham ( 2004, p. nine ) besides note that the award of public building contracts based on merely the lowest capital cost command is no longer recognized as good pattern ; best value must be taken into history and thereby LCC should be to the full appraised as portion of the determination devising procedure.
The research of Swaffield and McDonald ( 2007, p. 132 ) identify that contractors ‘ measure surveyors by and large did see LCC when securing new products/elements for Private Finance Initiative undertakings, but in certain fortunes, such as during exceptionally busy times or when working within tight building budgets, LCC were non considered and procurement determinations for some product/elements were made on the footing of lowest capital cost.
As Byron A. Ellis ( 2007, p.1 ) said, “ Interior designers, applied scientists and builders are under force per unit area from proprietors to minimise entire undertaking cost. Unfortunately, many proprietors do non understand the construct of entire undertaking cost. As a consequence, they seek to minimise acquisition ( foremost ) cost ” . Economists Alchian and Allen ( Byron, 2007, p.1 ) argue that the term “ cost ” should ne’er be used by itself ; they noted that it should ever be identified with “ entire, ” “ norm, ” or “ fringy. ”
Harmonizing to Fischer et Al ( Tah and Aouad, 2007 ) , although the significance of LCC has been recognized every bit early as 1980s, the current execution has non been really satisfied due to two major barriers: foremost barrier is the historical information of edifice operation and care. Second barrier is the complexness of the processs and algorithms of ciphering the LCC. For illustration, a edifice concern 1000s of elements and building method and care activities. A simple alteration in the edifice stuff might take long hours of recalculations, it is hence hard to help users to pull strings the big design and LCC analysis.
However, even the thought of LCC analysis is to assist the proprietor to analyze a economically alternate, there will ever hold the possibility of misdirecting the determination devising by the mistake consequence of LCC due to miss of informations or unpredictable alterations. There have no such as 100 % truth for LCC analysis because the restriction of forecast ability of human being are impossible to calculate everything that could be happen in future.
This paper addresses the jobs above by supplying a detail treatment of LCC for helping and simplifying the application of the technique based on the LCC in building industry. At the same clip uncover the popularity of application of LCC in Malayan building industry.
To place the barriers and troubles of using life-cycle costing and to look into the popularity of application of life-cycle costing in Malayan building industry.
To reexamine the classs of cost involved in life-cycle costing analysis.
To place the barriers and troubles of using life-cycle costing in building industry.
To determine the uncertainness of using life-cycle costing in building industry.
To look into the popularity of application of life-cycle costing in Malayan building industry.
Scope of Study
The construct of life-cycle costing ( LCC ) can be use as many sector, to contract the range of survey, the survey will merely be focus on the building industries. Besides that, instance survey would non carry on to the undertaking for the computation of LCC because it will be highly hard to obtain the big measure of information across the long term of a edifice life rhythm and informations such as the undertaking operation and care cost, replacing cost, disposal cost could be confidential to its proprietors. Therefore, to manually roll up this information has to be really dearly-won and clip consuming and the missing of any consequence above will do inaccurate of consequence. This survey will concentrate on reexamining the of import of application of LCC into building industry. The first issue to be study in deep is the treatment on the rules, advantages and intents of LCC analysis. The 2nd issue is to place the mistake and the troubles of using LCC due to miss of necessary information and unpredictable alterations. The 3rd issue is to make a research on the apprehension of LCC among proprietors and their frequence of using LCC.
Benefit of Study
The completion of this survey will let me to hold an apprehension about the construct of LCC. By identify and analysis on the barriers of using LCC gives me a footing thought about the trouble of acceptance of LCC practically. In add-on, the study behavior to look into the popularity of LCC application besides allows me to reexamine the ground of slow acceptance of LCC in Malayan building industry.
The methodological analysis should be targeted at a consistent LCC attack and computations and should non be aimed at cut downing costs but at doing more informed and consistent economic, fiscal and environmental determinations. The survey was carry oning in four phases. The first stage is the literature reappraisal. Second stage will be interview pilot survey to the issue. Third stage will be building questionnaires. The last stage is to composing the research study.
The literature reappraisal started with the of import of application of LCC and required informations for a LCC analysis. Searching of article about LCC and the seeking cardinal words would be whole life-cycle costing, whole rhythm costing and life-cycle costing. And the information of hunt will be limited into building industry to filtered unneeded information. The chief beginnings for the literature research were databases, such as Emerald, web of scientific discipline, Google and library of college Tunku Abdul Rahman.
Data aggregation will take signifier of a structured postal questionnaire. However an initial pilot survey may be conducted to prove the cogency of the questionnaire through interviews with relevant parties.
Questionnaires will be behavior and direct to respondent. The chief thoughts of the questionnaires are to prove the proprietors of understanding about LCC, and besides research on the preferable of low initial cost or low LCC when proprietor make determination of taking options. The questionnaire should be highlighted more conspicuously, to do it easier for respondents to take part in the concluding questionnaire study.
This phase involves composing up the content of the thesis and should cover the chapters proposed in the undermentioned subdivision. The consequence of interview and questionnaires will be analysis and conclude. Example of LCC analysis will supply by seeking through media resources and calculate by myself with simple and world premise based on the LCC rules.