Commercial and Whole Life Cost Assessment

WLC Ltd have been commissioned by the AIMCH partners to compare the whole life costs and life cycle costs of four different house types each of which was built using three different methods of construction.

The whole life cost assessment has been carried out in the wider context of the AIMCH Work Package 11 (Embodied Carbon (ECA)1 & Whole Life Cost Assessment (WLC) which, among its objectives, listed:

Evaluate “the benefits and/or impacts on the long term environmental and commercial/financial impacts of the use of MMC systems in future AIMCH housing and asset management
Provide data in support of the benefits/impact, on the procurement of housing, considerate of capital cost v WLC cost, in the context of MMC panelised construction systems, compared to conventional build methods, assessing procuring for value v procuring on cost.”

This document reports on the findings of the WLC assessment component of Work Package 11.

summary

The analysis suggests that open panel and close panel timber frame solutions’ construction costs are higher than that for a traditional solution as expected.
- On average across the four housetypes the cost increase of open panel and closed panel timber frame solutions’ construction cost are on average 5.7% and 7.9% respectively.
The analysis suggests that open panel and close panel timber frame solutions’ NPV of WLCs over a 60 year period are higher than those for a traditional solution as expected.
- On average across the four housetypes the cost increase of open panel and closed panel timber frame solutions’ whole life cost are on average 2.1% and 3.2% respectively.
One of the key benefits from MMC adoption is the reduction in on-site construction duration.
- Build-to-sell business models may benefit from earlier interest repayment of loans.
- Build-to-rent business models may benefit from earlier income from rent, depending on the geographic location.
The timber frame solutions have lower environmental costs due to having lower CO2e quantities. If the cost of CO2e associated with construction is accounted for, the open panel and closed panel timber frame cost decreases on average by 0.5% and 0.6% respectively.
The operation costs of traditionally built houses are similar to the operation costs of houses – of the same type – built using open panel and closed panel timber frame. This is principally due to the fact that regardless of the construction method, the considered houses are all designed to the same energy efficiency standard, and consequently their energy usage, associated emissions, and energy costs are the same.
The analysis of costs incurred after the end of the construction stage suggests that, over a 60 year period, there is no significant difference between the cost split of a traditional masonry house and a house built using one of the two timber frame solutions.

Introduction to whole life costing

According to ISO 15686-part 5: 2017², whole life costing (WLC) is a “methodology for systematic economic consideration of all whole-life costs and benefits over a period of analysis as defined in the agreed scope” whereas, life cycle cost (LCC) is the “cost of an asset, or its parts throughout its life cycle, while fulfilling the performance requirements”.

As shown in Figure 1, a LCC analysis includes construction costs, maintenance costs, operations costs, occupancy costs and end of life costs.

Approach and methodology

Whole life costs assessments were carried out on a range of homes and build methods agreed with the AIMCH partners. Table 1 lists the agreed four house types and the three methods of construction. Each house type is built using the three methods of construction.

Scope of the Whole Life Costing analysis

The WLC/ LCC analysis carried out as part of the commission was based on BS ISO 15686 Part 5:2017. Details of the cost items included or excluded from the analysis can be found in Table 1 along with the organisation responsible for providing the underlying relevant data/ information.

Resources

Download the report

Conclusion

The key conclusions are:

The timber frame solutions are 2-8% more expensive than traditional masonry solutions on average across the housetypes.
One of the key benefits from MMC adoption is the reduction in on-site construction duration.
- Build-to-sell business models may benefit from earlier interest repayment of loans.
- Build-to-rent business models may benefit from earlier income from rent, depending on the geographic location.
Timber frame perform better when considering environmental costs. If the cost of CO2e associated with construction is accounted for, the open panel and closed panel timber frame cost decreases on average by 0.5% and 0.6% respectively.
Operational emissions are predicted to reduce with the implementation of the Future Homes Standard, continued decarbonisation of the UK electricity grid, and increased electrification, the benefits of timber frame, in terms of carbon, over masonry construction, will become increasingly significant, as will focus on reducing the embodied emissions, from cementitious products.
Future Homes Standard will have a significant impact on both traditional and timber frame specifications, consequently impacting the cost margins between the two systems.
The operation costs of traditionally built houses are similar to the operation costs of houses – of the same type – built using open panel and closed panel timber frame. This is principally due to the fact that regardless of the construction method, the considered houses are all designed to the same energy efficiency standard, and consequently their energy usage, associated emissions, and energy costs are the same.
Geographical location has a significant influence on labour cost which make MMC a more viable solution in certain locations were labour cost are high (e.g. Southern Regions and London).
The cost data used is from a small sample, therefore further cost analysis would need to be carried out before any business decisions are carried out.
Construction cost data refers to late 2019/ early 2020 prices. Prices of materials have changed significantly since that data was collected. Therefore, it is recommended the models are update with current cost data before any business decisions are made.
Although not directly quantifiable due to the lack of data, another benefit linked to the use of timber frame solution arises from quality improvements associated with the manufacture of MMC components in a controlled environment (i.e. the manufacturing of closed panels versus the on-site erection of walls).

Outputs