WHOLE LIFE COSTING

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WHOLE LIFE COSTING
FIFE COUNCIL FINANCE AND PROCUREMENT SERVICE

• PRESENTATION TO
• SCOTTISH CARBON COUNTING GROUP
• 5TH NOVEMBER 2009

PRESENTED BY- KEITH GRIEVE TEAM LEADER
(PROCUREMENT AND SUPPLY CHAIN MANAGEMENT) FIFE
COUNCIL
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WHY DID FIFE COUNCIL OPT FOR WHOLE LIFE COSTING?

• Fife Council is a major consumer in Scotland
  spending in excess of 75 million on goods,
  materials and services each year.
• Many of the products we purchase have a
  significant impact on the environment and we
  wanted to take steps to reduce our carbon
  footprint.
• For Example Vehicles and Plant
• Gas Boilers
• Electrical Appliances
• PCs
• Stairlifts
• Woodworking Machinery

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WHY DID FIFE COUNCIL OPT FOR WHOLE LIFE COSTING?

• Procurement was tasked with finding a way to
  green the supply chain and specifically to reduce
  CO2 emissions to contribute to the councils CRC
  target of 3 per annum till 2050.
• Whole life costing was identified as having some
  potential to deliver the councils expectations as
  it offered a way to introduce carbon accounting
  into the procurement process

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DEVELOPMENT

• Although the council had a few basic whole life
  costing models they were far from being adaptable
  to incorporate CO2 emissions.
• It was decided therefore that we would create a
  new model with assistance from our climate change
  consultants Forum for the Future.
• With their knowledge of carbon reduction and our
  practical skills and after much trial and error
  we eventually arrived at a final whole life
  costing tool which meets our requirements.

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TESTING

• Two main trials of the whole life costing tool
  have been conducted since the final version has
  been approved.
• One was a dummy procurement involving the
  purchase of fixed plant which could be powered by
  either a diesel or electric engine.
• The costing was based on a ten year product life
  and all relevant costs were input to the
  evaluation including a cost for carbon of 12 per
  tonne being the adopted rate for carbon trading.
  

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TESTING

• This rate is not fixed however and may be
  adjusted to give a greater or lesser impact on
  the whole life costing outcome.
• From this trial it was found that the electric
  powered unit produced less CO2 emissions than
  its diesel equivalent and when the 12 per tonne
  was applied the financial saving was significant.

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TESTING

• The Invisible cost of carbon was thereby
  identified and used to determine the outcome of
  the procurement exercise.
• The impact of the carbon cost can be increased or
  decreased by either -
• Increasing or decreasing the 12 per tonne CO2
  value
• or
• Increasing or decreasing the weighting given to
  the price element of the Price/Quality Matrix
  Evaluation Method which would typically be a 70
  quality 30 price split. By adjusting the split
  to 60/40 then by default more emphasis is placed
  on the Whole Life Costing outcome.

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TESTING

• The second trial involved the purchase of mobile
  plant and this time the procurement was live
  therefore certain precautionary steps had to be
  taken prior to issuing the tenders.
• The first step involved discussing the use of the
  whole life costing tool with the client service
  whose co-operation was crucial in terms of
  agreeing the costing period/estimated life of the
  product at the outset.
• Their willingness to accept the outcome of the
  evaluation was also crucial as the impact on
  their budget may have been greater than they
  anticipated as the recommendation may have been
  to purchase a unit which was initially more
  expensive but with savings being achieved in the
  subsequent years.

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TESTING

• The second step was to clearly state in the
  tender document the means by which the tenders
  were to be evaluated to ensure that the
  tenderers were absolutely clear about our
  intentions and the need for additional
  information to enable us to populate the various
  fields in the whole life costing tool.
• Having done this the tenders were issued and
  offers were received but only two suppliers
  submitted tenders and both were offering exactly
  the same unit. In this trial therefore the CO2
  element had no bearing on the final outcome and
  the tipping factor was actually residual values.
• Had the units been powered by different engine
  types however there may have been another outcome
  to consider.

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NEXT STEPS

• Fife council is committed to reducing its carbon
  footprint and is determined that its procurement
  policy reflects this stance.
• The decision to adopt whole life costing as a
  means to reduce carbon emissions is forward
  thinking and shows that the council is putting
  the environment first in an effort to halt
  climate change.
• Whole life costing will be rolled out to cover as
  many relevant areas of spend as possible to
  ensure that it has maximum impact on our carbon
  footprint.
• The success of our efforts will be for future
  generations to judge but I believe we are on the
  right track and hopefully others will take up the
  challenge.

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QUESTIONS AND ANSWERS
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FINISH
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• CONTACT DETAILS-
• Keith Grieve, Team Leader,
• Procurement and Supply Chain Management,
• Finance and Procurement Service,
• Fife Council,
• Fife House,
• North Street,
• Glenrothes,
• Fife, KY7 5QW
• Tel [phone] ext 445920
• E-mail keith.grieve_at_fife.gov.uk