Description
Life cycle assessment, the investigation and valuation of the environmental impacts of a given product or service caused or necessitated by its existence. Life-cycle cost include 15% construction costs, operational and maintenance costs, taxes, financing, replacement and renovation.
Study on Activity-based Life Cycle Costing of Construction Project
REN Guoqiang ZHANG Hongyan School of Management, Tianjin University of Technology, P.R.China, 300384 Abstract: The existing methods and models on Life Cycle costing don’t solve the problem on calculation of construction cost, calculation of future operational and maintenance (O&M) cost and the theory base of life cycle costing. Activity-based life cycle costing of construction project is applied to every phase of construction project life. We can calculate construction cost, annual recurring future O&M cost, non-annual recurring future O&M cost and disposal cost with activity-based costing method in every phase. Then we can calculate life cycle cost .The activity corresponding to above cost is divided into five levels: phase, category, element, task and activity. The process of activity-based costing consists of seven steps, and is an optimizing process continually. Keywords: Life cycle cost, Activity-based life cycle cost, Construction cost, Future operational and maintenance cost
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1 Introduction
Since the thought of life cycle cost management is brought up in 1970's, people have already developed a lot of methods and models on Life Cycle Costing including Probability Theory[1] and Monte Carlo simulation[2], Fuzzy Mathematics[3], Neural Networks[4] etc. But there are three fundamental problems not to be solved in these models. The first problem is the calculation problem about construction cost. At present construction cost in models is assumed to be known, but the clear answer about how to calculate construction cost isn’t be given. The second problem is on future operational and maintenance (O&M) cost. Cost breakdown structure of future O&M cost is too simple to give the actual results. The third problem is on the theory base of life cycle costing. Life cycle cost (LCC) consists of construction cost and future O&M cost. Whether construction cost or future O&M are formed by consuming and possessing resource. Whereas consuming and possessing any resource are formed by correlative activities. So life cycle costing of construction project should begin with activity breakdown and activity analysis methods of project. Then LCC of construction project can be calculated according to the special condition of project activity. Further more, the goal of LCC control can be achieved by reasonable reducing the project activity. Some domestic scholars have already suggested Activity-Based construction cost computing method of construction project[5], and several scholars[6] has given the application of Activity-Based Costing(ABC) method in O&M phase. Also a few oversea scholars have discussed the application of ABC method in construction cost and O&M cost of the project [7] [8]. But there is not relevant research result application of ABC method in life cycle costing of construction project. Jan Emblemsvag[9] 2001 has discussed the Activity-Based life cycle costing (ABLCC) method of product and service, but there are many difference between product LCC and construction project LCC, thus it is necessary to discuss the ABLCC method.
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?
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2 Definition of ABLCC method of construction project
ABLCC method is developed from the existing life cycle costing method by coupling it with the ABC concept and method [9]. The construction cost and future O&M cost can be calculated respectively by applying ABC method to construction activity and future O&M activity. Then the LCC of construction project can be calculated by traditional life cycle costing method.
3 The advantage of applying ABLCC method in construction project
ABLCC method of construction project makes us consider LCC of construction project by
150
macrocosmic and microcosmic view. From macrocosmic view, management mode of cost engineering changes from whole process management to life cycle cost management. Not only is the management content more abundance including direct cost and indirect cost. But also the time of life cycle cost management (LCCM) is longer, from delivery to disposal. It can bring benefit to achieve the goal of construction project life cycle and sustainable development of construction project. ABC method makes us solve the calculation problem of construction cost and future O&M cost effectively, and overcome the disadvantage of present life cycle cost model. All of this makes us consider cost problem actively from long view, also make LCC management more operational. ABLCC method of construction project is divided into tracing phase and calculating phase, where tracing is based on the establishment of cause-and-effect relationships between costs and cost objects. The basic difference between allocation and tracing is therefore that allocation is arbitrary while tracing relies on cause-and-effect relationships. The methods is scientific and accuracy.
4 The framework of ABLCC method of construction project
4.1Phase The idea of LCC management can be used in every phase of construction project life cycle and earlier using this method will get more save of LCC[10]. So ABLCC method can be used in every phase of construction project life cycle. Project life cycle can be divided into different phase in different literature, and we think it should be divided into decision phase, design phase, construction phase, and O&M phase.
?
4.2 The framework of ABLCC method Life cycle cost includes construction cost, future O&M cost and disposal cost. Future O&M cost is not all the same every year. We should repair the buildings and replace building component in the same year according to design requirement. To be simple, we assume that the annual recurring cost is the same in different year, and so the non-annual recurring cost. Then, we can get the model [11] as follows.
nar nnr LCC = C0 + PWA× ? A j + ? Ck × PWN k ? PWS × S j =1 k =1
(1) (2) (3) (4) (5)
Where
1 ?T PWA = (1?(1+ r ) ) r PWS =(1+ r )? T
1?(1+ r )? nk f k PWN k = 1+ r f k ?1
(
)
?int T / f , rem (T / f ) = 0 ? k k nk = ? ? ?T / f k ?1,elsewhere
(
)
C0—Initial costs; Aj—Annual recurring costs; Ck—Non-annual recurring costs; S—Salvage; T—Analysis Period; r—Discount Rate. According to above model, the framework of ABC of construction project as follows (Fig1): When adopting the method of ABC based on LCC, we should note that the project has not yet developed into maintenance phase of operation before it is handed over. Thus, the activity decompounding, needed resource and cost are only estimated values according to the existing maintenance costs, there may be some error within. However, this is the best result we can acquire. After the project develops into the maintenance period of operation, the future O&M cost acquire by method of activity-based O&M cost is a certain value. For the project has been completed and the construction cost is a fixed value, thus, what should be mainly considered is the O&M cost in the future. The decompounding of non-annual recurring O&M activity can be acquired through deletion or accession of decompounding of annual recurring O&M activity. The life cycle cost acquired through the activity decompounding of one construction, annual recurring O&M and non-annual recurring O&M is not necessarily the anticipated result. Then, we can reach further decreased life cycle cost through the adjustment of above three processes or optimization
151
of resource distribution until it is satisfactory. Above is the theory framework of ABLCC method of construction project, which does not show the levels of breakdown structure of project activity. Thus we first give the breakdown structure of project activity, then discuss the steps and methods for activity-based costing. 4.3 Cost allocation and activity hierarchy Construction cost, annual O&M cost and non-annual O&M cost are all divided into five hierarchies reference the result of Mohamed A. EL-Haram etc(2002) [12],but not the same. They are phase level, category level, element level, task level and activity level. The activity hierarchy corresponding to disposal cost may be less; it is relative to disposal process of buildings. The figure of activity hierarchy is given below (Fig. 2): 4.3.1 Level 1: Phase. Breakdown structure of each phase into its cost categories
Fig.1 the framework of activity-based life cycle costing of construction project
Fig. 2 Structure hierarchies of ABC of construction project (apply to construction and O&M activity)
Construction cost: construction cost is the total cost of design, construction and consignation of a building, which includes purchasing cost of land, design cost, construction cost, consignation and handover cost, management cost and general overhead expenses. O&M cost: O&M cost is the total O&M and support cost of the building within using period, which includes management cost, operation cost, maintenance and entire-life cycle replacing cost and other support cost or general overhead expenses. Disposal cost: disposal cost is the future value of the building or the cost for demolition of the building at end of entire-life cycle. The disposal cost can be positive or negative, which includes resale value, demolition or site cleaning cost, management cost and general overhead expenses.
152
4.3.2 Level 2: Category. Breakdown structure of each cost category into cost elements For example, construction cost is part of the capital cost, which can be decompounded into site preservation cost, site preparation cost, basic element cost, superstructure element cost, finish cost, installation or decoration cost, building service cost and external work cost. 4.3.3 Level 3: Element. Breakdown structure of each cost element into cost of tasks or activities For example, the entire-life cycle maintenance and replacing cost of superstructure can be decompounded into framework, floor, roof, stair, external wall, window, internal wall, partition, internal door, external door and other tasks of superstructure. 4.3.4 Level 4: Task. Breakdown structure of each task into cost of activity Task is the combination of several activities and each activity can be repeated for several times. For example, the task of window installation can be decompounded into purchase, transportation, installation and cleaning etc. 4.3.5 Level 5: Activity .Breakdown structure of each activity into cost of resources. All the resources consumed or occupied for the activity can be included and estimated as the total cost of the activity. 4.4 Steps of ABC ABLCC method of construction project can be applied to every phase of construction project. Therefore, we should choose which phase to be considered. And its LCC and its intensities are identified. Because different intensity of life cycle cost of construction cost needs different project activity, resource of activity, and price of resource. Unless we identify the phase, we can calculate construction cost, annual recurring O&M cost and non-annual recurring O&M cost and salvage in similar. There more, we can calculate life cycle cost of construction project. The steps of LCC are given below (Fig 3). 4.4.1 Define corresponding cost objects Define corresponding cost objects The object of life cycle cost management is to minimize life cycle cost. So all of activity Create an activity hierarchy and network every phase of life cycle is surrounded with the object. It does not only take account on the object of one phase. Take construction phase for Identify and quantify information of resources example. The building and installation of enclosing structure, roof, window or air Identify and quantify the bill of activity condition has great effect upon LCC, thus, resources during the resource distribution of these activities, the LCC goals should be considered Identify each activity of cost and emphasized. 4.4.2 Create an activity hierarchy and network Analyze the information and obtain the result An activity hierarchy is identified by breaking down activity and defining the method. It is necessary to break down the activity as Satisfy with the result or not small as possible to accord with the project No process. But if we break down the activity too Yes small, it will be difficult to classify the activity, Identify activity-based cost and the process ends up distribute the resource and deal with the data. So we can break down the activity as the above Fig3 The steps of identifying activity-based cost five-activity hierarchy. When identifying the activities, each activity should be labeled in a special manner. Also, we can mane it with capital letter. Take Aijklm for example. The letter i ,j ,k, l and m stand for the number for first-level(top) activity, second-level activity, third-level activity, fourth-level activity and fifth-level activity. This method makes it easy to see where the activities belong in the activity hierarchy and it saves a lot of space. Also, naming activities in a meaningful way is important. The names should be expressed as verbs plus an object. The methods of expressing the activity hierarchy is tree diagram and tables, we always use tree
153
diagram. We can not only see the structure clearly by this method, but also express activities’ entire resource list in one figure. When the activity hierarchy is set up, we can set up the network of the activity hierarchy. The purpose is mainly to show which products consume which activities, the order of consumption, and important decisions involved. This is important to know when designing the model because otherwise the wrong products may be associated with the wrong activities or wrong decisions, which would cause fundamental errors in the model. This step also includes the value information of construction activity, the information of identifying construction activity and the method of construction activity. 4.4.3 Identify and quantify the information of resources According to the above information of breaking down activities, we can analyze and identify the resource of each activity in construction project. Therefore, it can come into being the information of the resource of each activity in construction project. One bill of resource mainly include sorts and quantities of resources, quality and identity of resources, activities of consuming or engrossing resources, correlative information of done project , market and price of resources and so on . 4.4.4 Identify and quantify the bill of activity resources This step is to make a bill of resources according to the value information of construction activity, the information of identifying construction activity and the method of construction activity. The bill of resource is made by analyzing the task, the scope and the method in construction project. Then we can identify the sort, the quantity and the quality of consuming resource and the quantity, the quality and the time of engrossing resource. So we can gain a bill of resource which each activity is given to. 4.4.5 Identify each activity of cost This step is identified by gathering all the above information. The formula is given as follows: Cost of each activity = ? ( Qi × Pi )
i =1 n
?6?
Qi : Consumption of each activity; Pi : Price of each activity 4.4.6 Analyze the information and obtain the construction cost (or annual recurring O&M cost, nonannual recurring O&M cost and salvage) With the process of identifying each activity, we can obtain the construction cost(or annual recurring O&M cost , non- annual recurring O&M cost and salvage) by back-casting model. First, calculate the cost of each activity. There are L activities of Aijk in Aijkl .The sum of each activity is nl. The cost of Aijkl is Cijkl. Then we can obtain the formula.
Cijk = ? nl × Cijkl
l =1
L
(7)
Secondly, we can calculate the construction cost (or annual recurring O&M cost, non-annual recurring O&M cost and salvage). 4.4.7 Assessment on the result We should consider the function and cost of the project to assess the result. If the result is deemed unsatisfactory, then depending on what failed the appropriate steps must be iterated until the result is satisfactory. Once the result is satisfactory, it can be used as specified initially. We can express the process in figure 2. 4.5 Calculation of life cycle cost in construction project We calculate the construction cost, annual recurring O&M cost, non- annual recurring O&M cost and salvage by activity-based costing .Then we can calculate life cycle cost of construction project with formula No1. Because of uncertainty of the construction cost , annual recurring O&M cost, non- annual recurring O&M cost , salvage and discount rate , we can use fuzzy mathematics and Monte Carlo simulation.
5 Conclusion and future prospect
154
This paper provides the framework of ABLCC on the establishment of the disadvantage of traditional life cycle costing .And it analyzes the scope, the model, the activity hierarchy and the steps of ABLCC. The framework provides a practical method to calculate construction cost, future O&M cost and salvage. It solves the problem on the theory of identifying life cycle cost. It is beneficial to advance the accuracy of LCC .and it is better to put the theory into practice.
References
[1] Mohammed Kishk Combining various facets of uncertainty in whole-life cost modeling Construction Management & Economics Volume 22, Number 4 / May 2004 429–435 [2] RICHARD J. KIRKHAM, A. HALIM BOUSSABAINE and BELAL H.AWWAD, Probability distributions of facilities management costs for whole life cycle costing in acute care NHS hospital buildings Construction Management and Economics (2002) 20,251-261 [3] Kishk M and Al-Hajj A A fuzzy model and algorithm to handle subjectivity in life cycle costing based decision making, Journal of Financial Management of Property and Construction, 2000 No 1-2, Vol 5: 93-104 [4]Dr. A. H. Boussabaine. A neurofuzzy model for predicting the cost and duration of construction projects [M]. COBRA 97,RICS ,ISBN 0-85406-840-6 [5]Qi An Bang ,Sun Xian Wei. Theory and methods of the whole process cost management (in Chinese) .Tianjin: Tianjin demotic publishing company,2004.12. [6] Tan Dunzhi. The Application Study of Task Cost Method in Railway Project Maintenance(in Chinese) Graduation Thesis of Zhongnan University, May, 2004. [7]Tzvi Raz Dan Elnathan.Activity based costing for projects.International Journal of Project Management,1999.17 1 61-67. [8]Michael A. Kaszubski, Steve Ebben Using activity-based costing to implement behavioural cost initiatives successfully Journal of Facilities Management; Volume: 3 Issue: 2; 2004 General review [9]Jan Emblemsavg , Life cycle Costing Using Activity-based Costing and Monte Carlo Methods to Manage Future Costs and Risks . 2003:51-92P [10] Kirk S J and Dell’Isola A J (1995) Life cycle costing for design professionals, McGrew-Hill Book Company, New York [11] Kishk M and Al-Hajj A (2000) Modelling of life cycle costs of alternatives with different lives, accepted for publication, the 16th annual conference of the Association of Researchers in Construction Management, Glasgow Caledonian University, 6-8 September 2000, Vol 2: 577-586 [12] Mohamed A.El-Haram,Sasa Marenjak and Malcom W.Horner ,Development of a generic framework for collecting whole life cost data for the buildinig industry,Journal of Quality in Maintenance Engineering,Vol.8 No.2,2002,pp.144-151.
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The author can be contacted from e-mail : [email protected]
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doc_820036157.pdf
Life cycle assessment, the investigation and valuation of the environmental impacts of a given product or service caused or necessitated by its existence. Life-cycle cost include 15% construction costs, operational and maintenance costs, taxes, financing, replacement and renovation.
Study on Activity-based Life Cycle Costing of Construction Project
REN Guoqiang ZHANG Hongyan School of Management, Tianjin University of Technology, P.R.China, 300384 Abstract: The existing methods and models on Life Cycle costing don’t solve the problem on calculation of construction cost, calculation of future operational and maintenance (O&M) cost and the theory base of life cycle costing. Activity-based life cycle costing of construction project is applied to every phase of construction project life. We can calculate construction cost, annual recurring future O&M cost, non-annual recurring future O&M cost and disposal cost with activity-based costing method in every phase. Then we can calculate life cycle cost .The activity corresponding to above cost is divided into five levels: phase, category, element, task and activity. The process of activity-based costing consists of seven steps, and is an optimizing process continually. Keywords: Life cycle cost, Activity-based life cycle cost, Construction cost, Future operational and maintenance cost
?
1 Introduction
Since the thought of life cycle cost management is brought up in 1970's, people have already developed a lot of methods and models on Life Cycle Costing including Probability Theory[1] and Monte Carlo simulation[2], Fuzzy Mathematics[3], Neural Networks[4] etc. But there are three fundamental problems not to be solved in these models. The first problem is the calculation problem about construction cost. At present construction cost in models is assumed to be known, but the clear answer about how to calculate construction cost isn’t be given. The second problem is on future operational and maintenance (O&M) cost. Cost breakdown structure of future O&M cost is too simple to give the actual results. The third problem is on the theory base of life cycle costing. Life cycle cost (LCC) consists of construction cost and future O&M cost. Whether construction cost or future O&M are formed by consuming and possessing resource. Whereas consuming and possessing any resource are formed by correlative activities. So life cycle costing of construction project should begin with activity breakdown and activity analysis methods of project. Then LCC of construction project can be calculated according to the special condition of project activity. Further more, the goal of LCC control can be achieved by reasonable reducing the project activity. Some domestic scholars have already suggested Activity-Based construction cost computing method of construction project[5], and several scholars[6] has given the application of Activity-Based Costing(ABC) method in O&M phase. Also a few oversea scholars have discussed the application of ABC method in construction cost and O&M cost of the project [7] [8]. But there is not relevant research result application of ABC method in life cycle costing of construction project. Jan Emblemsvag[9] 2001 has discussed the Activity-Based life cycle costing (ABLCC) method of product and service, but there are many difference between product LCC and construction project LCC, thus it is necessary to discuss the ABLCC method.
?
?
?
2 Definition of ABLCC method of construction project
ABLCC method is developed from the existing life cycle costing method by coupling it with the ABC concept and method [9]. The construction cost and future O&M cost can be calculated respectively by applying ABC method to construction activity and future O&M activity. Then the LCC of construction project can be calculated by traditional life cycle costing method.
3 The advantage of applying ABLCC method in construction project
ABLCC method of construction project makes us consider LCC of construction project by
150
macrocosmic and microcosmic view. From macrocosmic view, management mode of cost engineering changes from whole process management to life cycle cost management. Not only is the management content more abundance including direct cost and indirect cost. But also the time of life cycle cost management (LCCM) is longer, from delivery to disposal. It can bring benefit to achieve the goal of construction project life cycle and sustainable development of construction project. ABC method makes us solve the calculation problem of construction cost and future O&M cost effectively, and overcome the disadvantage of present life cycle cost model. All of this makes us consider cost problem actively from long view, also make LCC management more operational. ABLCC method of construction project is divided into tracing phase and calculating phase, where tracing is based on the establishment of cause-and-effect relationships between costs and cost objects. The basic difference between allocation and tracing is therefore that allocation is arbitrary while tracing relies on cause-and-effect relationships. The methods is scientific and accuracy.
4 The framework of ABLCC method of construction project
4.1Phase The idea of LCC management can be used in every phase of construction project life cycle and earlier using this method will get more save of LCC[10]. So ABLCC method can be used in every phase of construction project life cycle. Project life cycle can be divided into different phase in different literature, and we think it should be divided into decision phase, design phase, construction phase, and O&M phase.
?
4.2 The framework of ABLCC method Life cycle cost includes construction cost, future O&M cost and disposal cost. Future O&M cost is not all the same every year. We should repair the buildings and replace building component in the same year according to design requirement. To be simple, we assume that the annual recurring cost is the same in different year, and so the non-annual recurring cost. Then, we can get the model [11] as follows.
nar nnr LCC = C0 + PWA× ? A j + ? Ck × PWN k ? PWS × S j =1 k =1
(1) (2) (3) (4) (5)
Where
1 ?T PWA = (1?(1+ r ) ) r PWS =(1+ r )? T
1?(1+ r )? nk f k PWN k = 1+ r f k ?1
(
)
?int T / f , rem (T / f ) = 0 ? k k nk = ? ? ?T / f k ?1,elsewhere
(
)
C0—Initial costs; Aj—Annual recurring costs; Ck—Non-annual recurring costs; S—Salvage; T—Analysis Period; r—Discount Rate. According to above model, the framework of ABC of construction project as follows (Fig1): When adopting the method of ABC based on LCC, we should note that the project has not yet developed into maintenance phase of operation before it is handed over. Thus, the activity decompounding, needed resource and cost are only estimated values according to the existing maintenance costs, there may be some error within. However, this is the best result we can acquire. After the project develops into the maintenance period of operation, the future O&M cost acquire by method of activity-based O&M cost is a certain value. For the project has been completed and the construction cost is a fixed value, thus, what should be mainly considered is the O&M cost in the future. The decompounding of non-annual recurring O&M activity can be acquired through deletion or accession of decompounding of annual recurring O&M activity. The life cycle cost acquired through the activity decompounding of one construction, annual recurring O&M and non-annual recurring O&M is not necessarily the anticipated result. Then, we can reach further decreased life cycle cost through the adjustment of above three processes or optimization
151
of resource distribution until it is satisfactory. Above is the theory framework of ABLCC method of construction project, which does not show the levels of breakdown structure of project activity. Thus we first give the breakdown structure of project activity, then discuss the steps and methods for activity-based costing. 4.3 Cost allocation and activity hierarchy Construction cost, annual O&M cost and non-annual O&M cost are all divided into five hierarchies reference the result of Mohamed A. EL-Haram etc(2002) [12],but not the same. They are phase level, category level, element level, task level and activity level. The activity hierarchy corresponding to disposal cost may be less; it is relative to disposal process of buildings. The figure of activity hierarchy is given below (Fig. 2): 4.3.1 Level 1: Phase. Breakdown structure of each phase into its cost categories
Fig.1 the framework of activity-based life cycle costing of construction project
Fig. 2 Structure hierarchies of ABC of construction project (apply to construction and O&M activity)
Construction cost: construction cost is the total cost of design, construction and consignation of a building, which includes purchasing cost of land, design cost, construction cost, consignation and handover cost, management cost and general overhead expenses. O&M cost: O&M cost is the total O&M and support cost of the building within using period, which includes management cost, operation cost, maintenance and entire-life cycle replacing cost and other support cost or general overhead expenses. Disposal cost: disposal cost is the future value of the building or the cost for demolition of the building at end of entire-life cycle. The disposal cost can be positive or negative, which includes resale value, demolition or site cleaning cost, management cost and general overhead expenses.
152
4.3.2 Level 2: Category. Breakdown structure of each cost category into cost elements For example, construction cost is part of the capital cost, which can be decompounded into site preservation cost, site preparation cost, basic element cost, superstructure element cost, finish cost, installation or decoration cost, building service cost and external work cost. 4.3.3 Level 3: Element. Breakdown structure of each cost element into cost of tasks or activities For example, the entire-life cycle maintenance and replacing cost of superstructure can be decompounded into framework, floor, roof, stair, external wall, window, internal wall, partition, internal door, external door and other tasks of superstructure. 4.3.4 Level 4: Task. Breakdown structure of each task into cost of activity Task is the combination of several activities and each activity can be repeated for several times. For example, the task of window installation can be decompounded into purchase, transportation, installation and cleaning etc. 4.3.5 Level 5: Activity .Breakdown structure of each activity into cost of resources. All the resources consumed or occupied for the activity can be included and estimated as the total cost of the activity. 4.4 Steps of ABC ABLCC method of construction project can be applied to every phase of construction project. Therefore, we should choose which phase to be considered. And its LCC and its intensities are identified. Because different intensity of life cycle cost of construction cost needs different project activity, resource of activity, and price of resource. Unless we identify the phase, we can calculate construction cost, annual recurring O&M cost and non-annual recurring O&M cost and salvage in similar. There more, we can calculate life cycle cost of construction project. The steps of LCC are given below (Fig 3). 4.4.1 Define corresponding cost objects Define corresponding cost objects The object of life cycle cost management is to minimize life cycle cost. So all of activity Create an activity hierarchy and network every phase of life cycle is surrounded with the object. It does not only take account on the object of one phase. Take construction phase for Identify and quantify information of resources example. The building and installation of enclosing structure, roof, window or air Identify and quantify the bill of activity condition has great effect upon LCC, thus, resources during the resource distribution of these activities, the LCC goals should be considered Identify each activity of cost and emphasized. 4.4.2 Create an activity hierarchy and network Analyze the information and obtain the result An activity hierarchy is identified by breaking down activity and defining the method. It is necessary to break down the activity as Satisfy with the result or not small as possible to accord with the project No process. But if we break down the activity too Yes small, it will be difficult to classify the activity, Identify activity-based cost and the process ends up distribute the resource and deal with the data. So we can break down the activity as the above Fig3 The steps of identifying activity-based cost five-activity hierarchy. When identifying the activities, each activity should be labeled in a special manner. Also, we can mane it with capital letter. Take Aijklm for example. The letter i ,j ,k, l and m stand for the number for first-level(top) activity, second-level activity, third-level activity, fourth-level activity and fifth-level activity. This method makes it easy to see where the activities belong in the activity hierarchy and it saves a lot of space. Also, naming activities in a meaningful way is important. The names should be expressed as verbs plus an object. The methods of expressing the activity hierarchy is tree diagram and tables, we always use tree
153
diagram. We can not only see the structure clearly by this method, but also express activities’ entire resource list in one figure. When the activity hierarchy is set up, we can set up the network of the activity hierarchy. The purpose is mainly to show which products consume which activities, the order of consumption, and important decisions involved. This is important to know when designing the model because otherwise the wrong products may be associated with the wrong activities or wrong decisions, which would cause fundamental errors in the model. This step also includes the value information of construction activity, the information of identifying construction activity and the method of construction activity. 4.4.3 Identify and quantify the information of resources According to the above information of breaking down activities, we can analyze and identify the resource of each activity in construction project. Therefore, it can come into being the information of the resource of each activity in construction project. One bill of resource mainly include sorts and quantities of resources, quality and identity of resources, activities of consuming or engrossing resources, correlative information of done project , market and price of resources and so on . 4.4.4 Identify and quantify the bill of activity resources This step is to make a bill of resources according to the value information of construction activity, the information of identifying construction activity and the method of construction activity. The bill of resource is made by analyzing the task, the scope and the method in construction project. Then we can identify the sort, the quantity and the quality of consuming resource and the quantity, the quality and the time of engrossing resource. So we can gain a bill of resource which each activity is given to. 4.4.5 Identify each activity of cost This step is identified by gathering all the above information. The formula is given as follows: Cost of each activity = ? ( Qi × Pi )
i =1 n
?6?
Qi : Consumption of each activity; Pi : Price of each activity 4.4.6 Analyze the information and obtain the construction cost (or annual recurring O&M cost, nonannual recurring O&M cost and salvage) With the process of identifying each activity, we can obtain the construction cost(or annual recurring O&M cost , non- annual recurring O&M cost and salvage) by back-casting model. First, calculate the cost of each activity. There are L activities of Aijk in Aijkl .The sum of each activity is nl. The cost of Aijkl is Cijkl. Then we can obtain the formula.
Cijk = ? nl × Cijkl
l =1
L
(7)
Secondly, we can calculate the construction cost (or annual recurring O&M cost, non-annual recurring O&M cost and salvage). 4.4.7 Assessment on the result We should consider the function and cost of the project to assess the result. If the result is deemed unsatisfactory, then depending on what failed the appropriate steps must be iterated until the result is satisfactory. Once the result is satisfactory, it can be used as specified initially. We can express the process in figure 2. 4.5 Calculation of life cycle cost in construction project We calculate the construction cost, annual recurring O&M cost, non- annual recurring O&M cost and salvage by activity-based costing .Then we can calculate life cycle cost of construction project with formula No1. Because of uncertainty of the construction cost , annual recurring O&M cost, non- annual recurring O&M cost , salvage and discount rate , we can use fuzzy mathematics and Monte Carlo simulation.
5 Conclusion and future prospect
154
This paper provides the framework of ABLCC on the establishment of the disadvantage of traditional life cycle costing .And it analyzes the scope, the model, the activity hierarchy and the steps of ABLCC. The framework provides a practical method to calculate construction cost, future O&M cost and salvage. It solves the problem on the theory of identifying life cycle cost. It is beneficial to advance the accuracy of LCC .and it is better to put the theory into practice.
References
[1] Mohammed Kishk Combining various facets of uncertainty in whole-life cost modeling Construction Management & Economics Volume 22, Number 4 / May 2004 429–435 [2] RICHARD J. KIRKHAM, A. HALIM BOUSSABAINE and BELAL H.AWWAD, Probability distributions of facilities management costs for whole life cycle costing in acute care NHS hospital buildings Construction Management and Economics (2002) 20,251-261 [3] Kishk M and Al-Hajj A A fuzzy model and algorithm to handle subjectivity in life cycle costing based decision making, Journal of Financial Management of Property and Construction, 2000 No 1-2, Vol 5: 93-104 [4]Dr. A. H. Boussabaine. A neurofuzzy model for predicting the cost and duration of construction projects [M]. COBRA 97,RICS ,ISBN 0-85406-840-6 [5]Qi An Bang ,Sun Xian Wei. Theory and methods of the whole process cost management (in Chinese) .Tianjin: Tianjin demotic publishing company,2004.12. [6] Tan Dunzhi. The Application Study of Task Cost Method in Railway Project Maintenance(in Chinese) Graduation Thesis of Zhongnan University, May, 2004. [7]Tzvi Raz Dan Elnathan.Activity based costing for projects.International Journal of Project Management,1999.17 1 61-67. [8]Michael A. Kaszubski, Steve Ebben Using activity-based costing to implement behavioural cost initiatives successfully Journal of Facilities Management; Volume: 3 Issue: 2; 2004 General review [9]Jan Emblemsavg , Life cycle Costing Using Activity-based Costing and Monte Carlo Methods to Manage Future Costs and Risks . 2003:51-92P [10] Kirk S J and Dell’Isola A J (1995) Life cycle costing for design professionals, McGrew-Hill Book Company, New York [11] Kishk M and Al-Hajj A (2000) Modelling of life cycle costs of alternatives with different lives, accepted for publication, the 16th annual conference of the Association of Researchers in Construction Management, Glasgow Caledonian University, 6-8 September 2000, Vol 2: 577-586 [12] Mohamed A.El-Haram,Sasa Marenjak and Malcom W.Horner ,Development of a generic framework for collecting whole life cost data for the buildinig industry,Journal of Quality in Maintenance Engineering,Vol.8 No.2,2002,pp.144-151.
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The author can be contacted from e-mail : [email protected]
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