Capturing whole life costs Rob Allan 13 August 2008.

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Presentation transcript:

Capturing whole life costs Rob Allan 13 August 2008

Whole Life Costing Whole Life Costing (WLC) = taking into account and evaluating the Social, Economic and Environmental impacts of a product or service - the total ‘cost’ of the solution (This may be also referred to as “Life Cycle Analysis” or “Total Cost of Ownership”)

P O S AD P = Procurement costs A = Acquisition costs O = Ownership costs D = Disposal costs S = Sustainability assessments Whole Life Cost = (P + A + O + D) + factor to represent S A Whole Life Cost Model

A whole life cost model

Sustainability costs and benefits In addition to direct costs we need to consider Sustainability costs and benefits: Social costs & benefits Economic costs and benefits Environmental costs and benefits All three areas need to be considered to be able to evaluate the true WLC of a contract.

Risk based approach

Why a risk approach? Barriers to obtaining sustainability costs: Generic sustainability questions produced different answers Suppliers differing approach to sustainability was difficult to evaluate Legal requirement to specify requirements relevant to the nature of the contract

A risk based approach Solution: A risk based approach has been adopted to identify the key sustainability risks Risks are identified which are relevant to the contract output Specification used to seek proposals to minimise or remove the risks

Procurement Risk Log The risk log takes into account the following: Legal risks Contractual risks Financial risks Political & reputational risks Technological risks Economic Risks Environmental Risks Social Risks

Risk Log

Example Procurement of office stationery: Risks: (social) products supplied are linked to child labour (economic) difficult for local businesses to bid (environmental) products have no or minimal recycled content Costs: (social) reputational damage (economic) money going out of economy (environmental) contributor to climate change Tender needs to address: (social) bidders ethical credentials and that of their suppliers (economic) requirements split into lots (environmental) request recycled products

Questions