Sassda announces R125 000 Lifecycle Costing competition winner!

Along with sixty other accurate finalists in sassda’s 2017 Lifecycle Costing Competition, the overall winner Amrish Punwasi proved that while stainless steel can be costlier than other materials initially, it often delivers lower long-term costs in the life-cycle of the construction.

The competition required that entrants download sassda’s Lifecycle Costing app to calculate the cost savings that could have been achieved if the Eiffel Tower had been constructed out of stainless steel, either 3CR12 or LDX 2101, rather than mild steel. The calculation needed to take the current inflation rate, the cost of capital and the real interest rate into account, together with its ongoing maintenance and painting expenditure.

Speaking about his R125 000 win, Punwasi who works for the Western Cape Provincial Government’s Department of Health in security management explains; “I am not an engineer, my wife is the engineer and she gets monthly magazines that I often read. I saw the competition announced in the Civil Engineering SAICE magazine and decided to enter myself for the fun of it and to see how easy the app was to use…which it was!” Amrish and his wife have been to Paris before on short trips but are both really looking forward to seeing the Eiffel Tower again with their newly gained insight into its true structural costs.

Runner up Marichen van der Westhuizen was really surprised to win a premium Chad-o-Chef stainless steel gas braai in the Sassda LCC competition. Marichen is a senior faculty member at the Huguenot College in Wellington and has a PhD is in social study research. She is married to Wynand van der Westhuizen, an engineer at a sassda member company, HG Molenaar, in Paarl. Marichen learned about the app from her nephew and completed it with Wynand’s assistance. She says she really enjoyed the prize giving event without any thought of winning, until her name was called out. As she likes cooking and experimenting with food, but not making fires, this prize comes as an exciting new addition to her kitchen.

Net Benefits of Sustainable Construction

Congratulating all the competition entrants, sassda Executive Director, John Tarboton said; “We developed the app specifically because the calculation of the long-term cost benefits is a complicated process – influenced by several complex factors such as the cost of capital, net present value and discounted cash flows.

“While engineers do consider these costs, they are not accountants and it became clear that a tool was needed to simplify the process and allow for accurate material cost comparisons over the entire life-cycle of a project. We are delighted that our app is accessible and can be used by ‘non-engineers’, such as our winner Amrish Punwasi!”

The app is freely available from the Google Playstore and the Apple App Store and Tarboton highlights that it can be used to compare the life-cycle costs of a variety of construction materials, making it applicable across the consulting engineering and quantity surveying industries, as well as potentially in other sectors such as aluminum.

Due to the success of the app’s capabilities, sassda is considering running a life-cycle costing competition every two years, to continue proving the value of stainless steel over the long term and strengthen demand for the material in architectural and structural applications.

Here is the life cycle costing calculation for the Eiffel Tower that 60% of our entrants got right!

 

LIFE CYCLE COSTING OF THE EIFFEL TOWER

The above graph shows the total life cycle costs of the Eiffel Tower, if it were made today in mild steel, 3CR12 or LDX 2101. So the initial costs (material costs + fabrication costs + other installation costs are shown in 2017 present day value. The future maintenance costs (painting in the case mild steel and washing in the case of LDX 2101) is the calculated Net Present Value (NPV). The NPV is a Discounted Cash Flow (DCF) method used in forecasting the long run desirability of an investment (in this case the initial costs of the Eiffel Tower made from the three materials). Specifically, net present value discounts all expected future cash flows (maintenance costs of the Eiffel Tower) to the present by an expected or minimum rate of return. This expected rate of return is known as the Discount Rate, or Cost of Capital. In the case of net present value analysis, the DCF method takes each future cash flow and reduces the amount by how much of that cash flow represents interest earned if its principal portion were invested at the time investment originated. Thus the lowest total Life Cycle Cost is the calculated lowest cost over the life of the Eiffel Tower, taking into account the cost of capital.

 

TOTAL ACCUMULATED COSTS OF THE EIFFEL TOWER

 

The above graph shows over time how the total Life Cycle Costing evolves. Every seven years, the mild steel is painted, while every 20 years the LDX is washed, adding to the total LCC. As can be seen, these steps get smaller as time progresses, demonstrating the Discounted Cash Flow (DCF). What is of particular interest is that mild steel becomes more expensive than 3CR12 after 28 years and more expensive than LDX 2101 after 49 years. The dip seen at the 100-year mark represents the residual scrap value (calculated at NPV) of the material after dismantling costs are taken into account.