Whole Life Cost - Finance Services - University of Exeter

Procurement Services

Whole Life Cost (WLC)

WLC takes account of the total costs of making or purchasing and then owning (or leasing), operating, maintaining and managing the requirement (including its end of life, whether that involves de-commissioning, disposal or re-sale) over a specified period of time. These costs are assessed to provide a rational comparison of alternative means of meeting the requirement.

These costs can be as detailed as required but at the very least they should cover:

Acquisition (eg. delivery costs, installation and commissioning costs)

Operating (eg. energy, spares & costs of maintenance)

End of life (eg. de-commissioning and removal costs)

There is no single approach to WLC. The tools used to analyse WLC vary according to the requirement. Procurement Services can advise on the most appropriate tool. We have a tool that is used for higher value procurement exercises which can be modified for your requirements

At its simplest level, a spreadsheet could be produced for the requirement with all the elements of cost being paid by the University, individually listed along the rows and the suppliers listed down the columns.

Where there is an element of WLC that suppliers pay for eg. when providing a service or a manufacturing process to convert raw material into a product. A qualititive question will need to be asked of a supplier to understand how well they manage the associated costs.

The benefits associated with WLC:

Evaluation of competing options	Improved awareness of total costs
WLC is relevant to most equipment purchasing decisions, whether simple or complex. The technique is also applicable to leasing decisions. Once WLC has been carried out bid proposals can be easily compared on a like for like basis.	WLC has been shown to provide buyers and decision-makers with a better grasp of the factors governing cost and the resources associated with the purchase.
Better forecasting & budget planning	Performance trade-offs against cost
WLC allows the full cost of a purchase over a period of time to be calculated with reasonable accuracy. This is obviously of considerable importance when major investment decisions need to be made.	Using WLC it is relatively straightforward to assess the reliability characteristics of a piece of equipment in the context of its cost profile.
Understanding how suppliers monitor their WLC
More efficient suppliers will support the University sustainability objectives and reduce the cost paid for goods, services and works by having lower overheads/process costs. Also provides an opportunity to engage with a supplier to reduce costs, if they are not being efficient.

A more comprehensive breakdown of whole life costs:

Pre-acquisition costs	Acquisition costs
specification and design budget allocation preparation and issuing of invitation to tenders cost of tender evaluation cost of letting contract preparation for receipt of the requirement professional external advice (eg. legal)	purchase price delivery charge insurance and taxes (inc. import duties, etc) installation and commissioning training and support internal costs associated with changing from the incumbent supplier (which should be identified prior to tenders being received) integration of systems storage requirements
Operating costs	Maintenance costs
labour materials consumables energy supply and consumption contract and supplier management transaction costs environmental costs cost of change, for instance, a decision to use alternative materials	specialist labour specialist tooling spare and replacement parts reduced output with age frequency of maintenance and recommended downtimes servicing and inspection regimes
Downtime costs	End of life costs
lost profits extra costs of overtime or sub-contracting costs associated with breakdown of equipment claims resulting from non-performance	safe disposal re-sale ongoing liabilities decommissioning removal for sale or scrap re-instatement of land or buildings for alternative use