11th International Conference on Urban Drainage, Edinburgh, Scotland, UK, 2008
Life Cycle Costing of Stormwater Treatment Devices: A Practical Approach for New Zealand Ira, S. J. T.1*, Vesely, E-T.2, and Krausse, M.2 1
Koru Environmental Consultants Limited, P O Box 125147, St Heliers 1740, Auckland, New Zealand 2 Landcare Research, Private Bag 92170, Auckland, New Zealand *Corresponding author, email
[email protected]
ABSTRACT Given the lack of real cost data for stormwater management devices in New Zealand, a unit cost approach to building life cycle costing models has been taken. Unit cost data was collected from local authorities, maintenance contractors and consultants from around New Zealand. Lessons learnt from previous research were analysed and incorporated into the study in order to ensure that the models developed would be easy to use and able to support a decision-making system based on relative comparisons of different scenarios. Once a prototype of the pond and rain garden (bioretention) models was developed, these were sent out to potential users for peer review and feedback. Whilst it is important to develop a model which is empirically sound, it is just as important that the model is accessible and useable for the target audience. The received feedback is discussed to show how it contributed to the final models. Key Words: Life Cycle Costing Model; New Zealand; Stormwater Treatment Devices; Unit Costing Approach
INTRODUCTION Life cycling costing of stormwater treatment devices is recognized as a tool which can assist regulators, developers and consultants in understanding the long-term cost implications of stormwater management. Landcare Research, through its Low Impact Urban Design and Development Programme (LIUDD), is investigating the cost of constructing and maintaining stormwater management devices throughout New Zealand by building life cycle costing models. The models will contribute to a tool that links the performance of a treatment device with the cost implications of constructing and maintaining that device. This tool will give consultants, developers and decision-makers the ability to assess the relative performance and cost of different stormwater management devices. Life Cycle Costing – Benefits and Potential Uses A life cycle costing (LCC) approach has been previously used to assess costs associated with stormwater devices in Australia, the United States of America (USA) and the United Kingdom (UK) (Vesely et al., 2006). The Australian/New Zealand Standard 4536:1999 defines LCC as the process of assessing the cost of a product over its life cycle or portion thereof. The life cycle cost is the sum of the acquisition and ownership costs of an asset over its life cycle from design, manufacturing, usage, and maintenance through to disposal. The consideration of revenues is excluded from LCC. A cradle-to-grave time frame is warranted because future costs associated with the use and ownership of an asset are often greater than
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11th International Conference on Urban Drainage, Edinburgh, Scotland, UK, 2008 the initial acquisition cost and may vary significantly between alternative solutions to a given operational need (Australian National Audit Office, 2001). LCC has a number of benefits and supports a number of applications and analyses (Lampe et al 2005): • it allows for an improved understanding of long-term investment requirements; • it helps decision-makers make more cost-effective choices at the project scoping phase; • it provides for an explicit assessment of long-term risk; • it reduces uncertainties and helps local authorities determine appropriate development contributions; and • it assists local authorities in their budgeting, reporting and auditing processes. Decision making on the use of low-impact stormwater devices needs quality data on the technical and financial performance of these devices. The financial performance will depend on the sum and distribution over the life cycle of the device of costs associated with design, construction, use, maintenance, and disposal. LCC can be used for structuring and analysing this financial information. Previous Research LCC analyses of stormwater management devices have been researched in Australia, the UK and the USA. In Australia, the Centre for Catchment Hydrology collected life cycle costing data to develop a costing module for version 3 of the Model for Urban Stormwater Improvement Conceptualisation (MUSIC). The methodology used in the Australian project was based on identifying statistical relationships between the cost elements and device parameters and is described in the LCC chapter (7) of the MUSIC (version 3) User Manual (available at http://www.toolkit.net.au). Taylor (2003), surveying approximately 60 agencies across all Australian states, found little or no consistency in the way agencies record basic life cycle costing data, and there was also a general shortage of high-quality data on vegetated swales, bioretention systems and infiltration systems. The Water Environment Research Foundation (WERF) and the AWWA Research Foundation jointly funded a combined UK and USA project to develop excel spreadsheet models for whole-of-life costs of stormwater management devices (Lampe et al, 2005). The project (Lampe et al, 2005) used a unit cost approach to assess the whole-of-life costs of stormwater management, and investigated environmental costs (i.e. externalities or ‘non-tangible’ costs such as the environmental cost of using concrete or transporting materials across the UK) as well as financial costs. The study confirmed that both construction and maintenance cost data are notoriously difficult to obtain due to the ‘financial sensitivity’ of the information and the large number of variables involved in the construction and maintenance processes of some of the devices. Despite the potentially high costs of improving urban stormwater run-off (a study by the Auckland Regional Council (2004) estimated NZ$4.5million stormwater management costs in the region on an annual basis), there have been very few New Zealand based studies that have investigated the actual costs of constructing and maintaining stormwater management devices. As a result, the Auckland Regional Council (ARC) initiated a project to collate LCC data in the Auckland Region and develop a LCC tool/ model in an attempt to improve decision making on stormwater treatment devices. This joint ARC/ Landcare Research project consisted of a series of workshops with local authorities (LAs) to develop a LCC data
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11th International Conference on Urban Drainage, Edinburgh, Scotland, UK, 2008 collection protocol, collation of as much LCC data from the LAs as practicable, and statistical analysis of the data using the approach adopted for the development of the LCC module in MUSIC. In addition, Landcare Research also approached LAs around New Zealand regarding their stormwater management practices and whether or not they held costing data for the construction and maintenance of their devices. Vesely et al. (2006) describes the results of the data collection and statistical analysis phase of this study. In summary, a statistical relationship between device size and total acquisition costs (TAC) could only be generated for ponds, sand filters and gross pollutant traps. No relationships were found for any of the devices for routine or corrective maintenance costs. The project highlighted that local authorities have difficulties in collecting and retrieving construction and maintenance costing data on the stormwater devices that they own and operate. Research Objectives Given the limited number of statistical relationships identified, it was decided that a unit cost approach to assessing stormwater device costs in New Zealand would be needed. A unit costing approach is based on the premise that there are standard elements or units involved in the construction and maintenance phases of a device. These different elements can be costed by engineers using average tender rates. Taking a unit costing approach, combined with statistical relationships where available, excelbased LCC models have been developed. The first phase involved aggregating unit cost elements into a full life cycle model for ponds and rain gardens, with the remaining devices (i.e. wetlands, swales, filter strips, sand filters, rain tanks, proprietary devices) being completed in subsequent phases.
METHODOLOGY Data Collection Unit construction cost and maintenance cost protocols were developed before collecting costing data to ensure that any data collected would be comparable. The construction cost protocol was developed using quantity and payment schedules from constructed devices. This initial protocol was then given to a consulting engineering firm for peer review, and their comments were included in the final protocol. The maintenance cost protocol was developed from the maintenance activities and frequencies for the different stormwater treatment devices given in the ARC’s Technical Publication 10, Stormwater Management Devices: Design Guideline (Auckland Regional Council, 2003). The protocol divided the maintenance activities into two broad types – routine maintenance and corrective maintenance. Routine maintenance includes activities that occur on a monthly to annual basis (e.g., mowing, inspections after major storms, cleaning out of debris, weed management, making good from vandalism). Corrective maintenance includes activities such as replacement of parts, cleanout of devices, disposal of sediments, etc. that are undertaken over a timeframe longer than 1 year and are generally dependant on the flows and contaminant loads that are being routed through the device. Local authorities, maintenance contractors and consultants from around New Zealand were approached for data collection. The majority of cost data was obtained from the Auckland Region, primarily because Auckland currently has the most aggressive stormwater management programme in New Zealand. All seven Auckland-based local authorities as well as Transit New Zealand (i.e. New Zealand’s roading authority) were able to supply
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11th International Conference on Urban Drainage, Edinburgh, Scotland, UK, 2008 maintenance cost data. Four councils from outside the Auckland region (Tauranga, Nelson, Wellington and Christchurch City Councils) also provided routine maintenance cost data. Figure 1 provides an indication of the maintenance cost dataset. Figure 1 highlights that the majority of LAs are most familiar with the operation and maintenance costs of stormwater ponds. Little data was available on other types of devices (hence the need for unit costing).
Proprietary Devices Rain Tanks Swales Infiltration Trenches Sand Filters Rain Gardens Wetlands Ponds 0
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Number of Unit Maintenance Cost Datasets
Figure 1. Number of datasets of unit maintenance costs for each device. Initially all contractors who were approached for cost data declined to participate in the study either because of commercial sensitivity relating to their rates or because of time constraints. Similarly, consultants who were approached to participate in the study declined on the grounds that they were unable to disclose costing data developed for their clients, despite assurances that information would remain confidential and be used only in the development of standard rates for the model. With continued persistence, one contractor agreed to price all the construction cost protocols and one consulting engineering firm was able to supply generic costing data developed from their own experiences, to support the pond and rain garden modules. Rawlinsons New Zealand Construction Handbook (Giddens, 2007) was used to check and supplement construction unit costs. Model Development The aim of the project was to build simple, easy-to-use and comprehensive life cycle costing models that would tie in with existing and future contaminant load and device performance models developed for New Zealand. Such a model must consistently allow users to identify and combine acquisition, maintenance and, if available, decommissioning costs for each of the stormwater devices in order to determine the life cycle cost. The review of the model developed through the Lampe et al. (2005) study highlighted one criticism the developers of the WERF/ SUDS model had of their own model, namely that it appeared too complicated and difficult for the user to complete. They felt this could limit its use. As a result, the authors of the Landcare LCC models have attempted to make them simple and easy to use.
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11th International Conference on Urban Drainage, Edinburgh, Scotland, UK, 2008
RESULTS AND DISCUSSION - THE LANDCARE RESEARCH LIFE CYCLE COSTING MODELS An excel spreadsheet model has been developed for ponds and rain gardens, and is currently being developed for wetlands, sand filters, infiltration trenches, swales, rain tanks and proprietary devices. The pond and rain garden model are now being converted to a webbased system, accompanied by an on-line user manual to enhance usability and distribution. The models consist of a number of spreadsheets which require users to enter design information, general life cycle costing assumptions, total acquisition costs, maintenance costs. A “Results” spreadsheet displays a summary of the life cycle analysis and costing information. A flow chart showing this structure is provided in Figure 2 below. Cover Page: Choose device to cost
Enter the device design and costing parameters.
Enter the Total Acquisition Costs by completing the schedule of activities and associated unit costs.
Design Parameters: the user can use the model to size the device (except for ponds and wetlands). Life Cycle Costing Parameters are entered on the same page for ponds and wetlands, and on the following page for the remaining devices.
For the pond model users can also choose to model the statistical TAC relationship.
Enter the Routine and Corrective Maintenance costs by completing the schedule of maintenance activities. Enter decommissioning costs here if known.
View a tabular and graphical summary of the costing results.
Figure 2. Flow Chart of the Life Cycle Costing Model Structure General Life Cycle Costing Assumptions The Landcare LCC model uses real costs, and all default cost options given in the model have a base year of 2007. A value in real cost is the dollar amount to be paid if the reason for the cost occurred and had to be paid at the base date. Real costs allow current known cost information to be used in the analysis process. Forecast changes that are more or less than general price inflation should be incorporated into real cost estimates. While all the default model values have a base date of 2007, a calculator is provided that allows users to inflate or deflate their own costing data from a different year. The default inflation/deflation rate used
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11th International Conference on Urban Drainage, Edinburgh, Scotland, UK, 2008 in the calculator is 2.8%, given that the NZ Reserve Bank Governor is expected to keep inflation below 3% on a long-term average basis. Discounting is used to find the value at the base year of the future costs associated with the stormwater device. Future costs are discounted by a discount rate that reflects an opportunity cost comprising time preference (utility of current consumption versus future consumption) and compensation for risk (uncertainty about the future requires greater expected return). Real costs are discounted by the real discount rate; this does not include an inflation component. At present, users are given the choice of a 3.5% or 6% discount rate, or alternatively they can enter their own ‘user-defined’ discount rate. Based on feed-back from users, the range of discount rates indicated in the model will be refined to express current practices by local authorities. Due to the potentially significant impact of the discount rate on the estimated life cycle cost (e.g., a cost that is accrued 10 years from the base year is reduced by 29% if the discount rate is 3.5% per annum but by 61% if the rate is 10%), sensitivity analysis is recommended with different discount rates. Two other key parameters of the LCC analysis are the life span (LS) of the device and the life cycle analysis period (LCAP). The LCAP is the period of time (in years) over which the model will analyse the costs, while the life span is the actual period of time in years over which the device itself will function. The LS will differ depending on the type of device, and a range of options has been provided in the model. The model allows the user to have shorter LS than LCAP. Total Acquisition Costs As mentioned previously, the total acquisition costs of stormwater devices is inherently variable, and the models therefore present an estimation of the likely costs (excluding land costs) for an assumed set of design parameters and conditions. (a) Ponds Users of the pond model have two available options: • To use the statistical relationships that were developed during the previous phase of study (Vesely et al., 2006) and that relate the pond treatment zone area to total acquisition cost. These statistical relationships are based on the type of pond being constructed, i.e. on-line, off-line or dry detention pond. Users first need to choose the type of pond they are constructing and indicate the treatment zone area; they then have the option of choosing the ‘high’, ‘mean’, or ‘low’ total acquisition cost values for that pond type. • To input unit cost data, a template, based on likely planning, design and construction activities, has been developed for the user to complete. However, to complete the template and obtain accurate cost estimations, the user must know the detailed design of the pond and relevant construction details. Initially a set of model default rates was not developed. The reasons for this were two-fold. First, elements of construction for ponds were found to vary significantly, depending on local site conditions and pond configuration. Second, the number of stages and materials involved in pond construction were variable and numerous, and as such the schedule for unit costs became too lengthy and complicated for inclusion in the model. This was found to be an issue in the Lampe et al. (2005) study and the WERF/ SUDS model addressed this by attempting to simplify and eliminate elements for which there was little consistency. User feedback on the model prototype indicated that it would be desirable to include cost default values in the unit cost template. The updated version includes these default values, however, the authors still
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11th International Conference on Urban Drainage, Edinburgh, Scotland, UK, 2008 share their original concern regarding the potential for oversimplification of the pond construction process. (b) Rain Gardens The previous study documented by Vesely et al. (2006) found no statistical relationships between the size of a rain garden and its likely construction cost. As a result, this is not an option in the model. Whilst the construction elements for rain gardens are still variable and dependant on site conditions, the data collection phase highlighted that there were more ‘common’ construction elements than for ponds and thus default values for a set of ‘likely’ construction activities could be more easily generated. The total acquisition costs are therefore based on unit costs and users are given the option of inputting their own data, or using the ‘low’ or ‘high’ default costs offered by the model. The web-based version of the model includes graphs which indicate the proportion of different types of construction activities that comprise the total acquisition cost (see Figure 3 below).
Figure 3. Breakdown of the cost split between different types of construction activities which comprise the total acquisition costs (this graphical example was taken from the rain garden model but a similar graph is produced for the pond model). Maintenance and Decommissioning Costs The maintenance costs in the model have been divided into routine and corrective maintenance activities. Because routine maintenance activities are undertaken on a regular basis, the models calculate annual routine maintenance costs. Some routine maintenance (mowing and plant care) costs are related to parameters of the device, while other routine maintenance items (e.g., inspections after major storms, cleaning out of debris, weed management, making good from vandalism) are lump sum costs per device. The default maintenance activities and frequencies in the model are based on TP10 (Auckland Regional Council, 2003). The model allows for elevated routine maintenance costs for the first few years after construction to cope with the more intensive maintenance required to establish plants and weed out undesirable species. User feedback also requested that the model allow for elevated corrective maintenance in the first few years following construction. As a result, the model now allows for an initial cleanout of sediment within the first 5 years following construction. The need for this parameter is due to the large amount of sediment generated and then captured by stormwater devices during the construction phase of a development. With respect to the corrective maintenance costs, the clean out of sediment from a device is a function of total suspended solids (TSS) load entering and being treated by the device. The authors, in discussion with stormwater and sediment experts (Shaver, Timperley and Green, 2007, pers. comm.), developed an algorithm that links the sediment load discharged from the catchment to the clean-out frequency. This algorithm is based on the: • TSS load within the treatment zone area; Ira et al.
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11th International Conference on Urban Drainage, Edinburgh, Scotland, UK, 2008 • •
the efficiency of the device related to removing TSS; and a likely density of sediment from urban catchments of 1.4 g/m3 (pers comm. Timperley and Green, 2007).
At this stage the model is unable to calculate the frequency for replacing filter medias as a result of saturation from chemical contaminants such as zinc or copper. The larger data set collected for ponds meant unit maintenance cost data for ponds could be used to develop ‘high’, ‘mean’ and ‘low’ default maintenance costs in the model. Only ‘high’ and ‘low’ default maintenance costs are given in the rain garden model. Although there are a number of rain gardens constructed throughout the Auckland region, it appears many of these are privately owned, since only 2 local authorities were able to provide maintenance data for rain gardens. More local authorities may own rain gardens as part of their public infrastructure, but either they are not able to separate out the maintenance activities or are not undertaking maintenance on the devices at this time. The models provide users with the option of entering user-defined frequencies and unit costs for the different maintenance activities. The models also provide the option of entering decommissioning costs if users envisage the device will be decommissioned at the end of its life span. No default values were provided in the model as no decommissioning cost data was available. Model Outputs The model outputs provide a summary of the real and discounted total acquisition costs, total maintenance costs, decommissioning costs and life cycle costs for the specified period of analysis. In addition, a summary of the key input parameters used in the LCC model is also provided. The results are displayed in both tabular and graphic formats. A bar graph shows the temporal distribution of the costs and the relative magnitude of the discounted costs to real costs. Two pie charts (one for real costs and one for discounted costs) are used to show the percentage contribution to the life cycle cost of acquisition and maintenance costs (see Figure 4).
Figure 4. Pie and Bar graphs display the outputs from the life cycle costing model.
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11th International Conference on Urban Drainage, Edinburgh, Scotland, UK, 2008 User Feedback In order to ensure that the LCC model would meet the needs of its target audience a prototype of the pond and rain garden model was given to all stakeholders who participated in the data collection phase of the project and their feedback was sought. In addition, workshops on life cycle costing from a stormwater management perspective and how to use the model were held throughout New Zealand to obtain direct feedback on the models. The key message that came through from each workshop was that users wanted a clear, easy to use model that would allow them to cost different types of stormwater devices in order to aid device selection. Eighty percent of users found the model to be “very useful”, 10% found it to be “useful” and the remaining 10% found it to be “essential”. No participants found it to be of “no use” or “some use”. Participants considered the model to be “very useful” because it: • is helpful for budgeting and planning; • is a useful guideline for maintenance costs of stormwater treatment devices; • is easily updatable as inputs change; • is helpful to see costs graphed; • allows local authorities to gain a better understanding of the costs of stormwater management; • will help local authorities to build up contribution cost valuations for facilities vested in council but built by developers. Much of the feedback related to specific technical points (eg. inflation rates, costing values, initial cleanout of devices, etc) has been discussed in the “Results” section above. Users stated that they liked the rain garden design spreadsheet attached to the costing model and requested that this be included for all types of devices. Users also requested that land costs be included in the model. Given the inherent variability in land costs and their likelihood to skew the life cycle costing assessment, it was agreed with users that the model would allow for land costs to be entered, but they would not be part of the assessment. Given that cost is not the only selection criterion, users also wanted the model to be linked to a contaminant removal model to facilitate the analysis of performance versus cost. As a result, allowance was made for future links between the LCC Model and a stormwater treatment model that is also developed as part of Landcare’s LIUDD project. There were concerns by some local authorities that the model would be used as a tool by developers to motivate for the construction of certain devices for which a local authority did not want to accept responsibility. Whilst this may well be a possibility, the model will at least provide a consistent platform for discussion between parties (a platform that has previously not existed in New Zealand). As a result of user feedback a web-based database is also being developed where local authorities can securely enter and store stormwater cost data. It is intended that this data will then inform the update of the default values in the models, thereby continually improving the quality of the cost data.
CONCLUSIONS In summary, the aim of this project was to build a New Zealand based, simple, easy to use and comprehensive life cycle costing model for stormwater treatment devices. Data protocols for both construction and maintenance costs were developed and data were collected from Ira et al.
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11th International Conference on Urban Drainage, Edinburgh, Scotland, UK, 2008 local authorities around the country. Where possible, the collated costs were used to generate low, mean and high default values for the models. The pond and rain garden models are now complete and have been distributed for feedback to those local authorities, contractors and consultants who participated in the study. In general the feedback was positive, with 80% of users finding that the model was “very useful”. Constructive criticism was provided that has assisted in making the LCC model more accurate for local authority planning purposes and to ensure that it will be widely used across New Zealand. The next stage of the project is currently underway. The models for wetlands, swales and filter strips, infiltration trenches, sand filters, rain tanks and proprietary devices are being built. It is intended that the full package of models will be launched by the end of 2008. ACKNOWLEDGEMENTS The authors would like to thank the New Zealand Foundation for Research, Science and Technology for funding this study. In addition, the authors thank all the local and regional authorities across New Zealand who assisted with the study and who were able to provide the costing data that form the basis of the cost assumptions in our models. Finally, we thank Wood and Partners Ltd, Pattle Delamore Partners Ltd and Hickbros Ltd for their peer review of the construction cost protocol and provision of construction cost data.
REFERENCES Auckland Regional Council. (2003). Technical Publication 10: Stormwater Management Devices: Design Guideline Manual (can be downloaded from ARC web site www.arc.govt.nz) Auckland Regional Council. (2004). Auckland Regional Stormwater Action Plan. Australian National Audit Office. (2001). Canberra, Commonwealth of Australia.
Life Cycle Costing: Better Practice Guide.
Australian/New Zealand Standard. (1999). Life Cycle Costing: An Application Guide, AS/NZ 4536:1999. Standards Australia, Homebush, NSW, Australia and Standards New Zealand, Wellington, NZ. Giddens, C. (2007). Auckland.
Rawlinsons Construction Handbook.
Rawlinsons Media Ltd.
Lampe, L., Barrett, M., Woods-Ballard, B., Kellagher, R., Martin, P., Jefferies, C., Hollon, M. (2005). Performance and Whole Life Costs of Best Management Practices and Sustainable Urban Drainage Systems. WERF Report Number 01-CTS-21T. MUSIC (version 3) User Manual (available at http://www.toolkit.net.au) Taylor, A.C. (2003). An Introduction to Life cycle Costing Involving Structural Stormwater Quality Management Measures. Cooperative Research Centre for Catchment Hydrology, Melbourne, Victoria. Vesely, E-T. (2007). Life Cycle Costing of Stormwater Devices: Addison Block Development. Landcare Research Report LC0607/059. Vesely, E-T., Arnold, G., Ira, S. and Krausse, M. (2006). Costing Stormwater Devices in the Auckland Region. NZWWA Conference Paper.
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