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    This Brieing Note is also available or download rom the WASHCost website at: www.washcost.ino/pubs

    Lie-Cycle Costs Approach

    Glossary and cost components

    Catarina Fonseca, Richard Franceys, Charles Batchelor, Peter McIntyre,

    Amah Klutse, Kristin Komives, Patrick Moriarty, Arjen Naas, Kwabena

    Nyarko, Christelle Pezon, Alana Potter, Ratna Reddy, Mekala Snehalatha

    IRC International Water and Sanitation Centre

    April 2010

    Brieng Note 1

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    Brieng Note 1

    Contact details author

    Catarina Fonseca, [email protected]

    Front page photo

    Catarina Fonseca

    Copyright 2010 IRC International Water and Sanitation Centre

    This work is licensed under a Creative Commons license.

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    WASHCost Lie-Cycle Costs Approach April 2010

    Table o contents

    Lie-cycle costs approach 3Dening lie-cycle costs (LCC) and lie-cycle costs approach (LCCA) 3

    Cost components 4

    Sources 5

    Annexes 6

    List o tables

    Table 1: Checklist lie-cycle cost components water 6

    Table 2: Checklist lie-cycle cost components sanitation & hygiene 10

    Abbreviations, acronyms, and terms

    CapEx Capital Expenditure

    CapManEx Capital Maintenance Expenditure

    CoC Cost o Capital

    DST Decision-Support Tools

    ExpDS Expenditure on Direct Support

    ExpIDS Expenditure on Indirect Support

    LCC Lie-Cycle Costs

    LCCA Lie-Cycle Costs Approach

    MIS Management Inormation Systems

    OpEx Operating and Minor Maintenance Expenditure

    WASH Water, sanitation, and hygiene

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    Brieng Note 1

    Lie-cycle costs approach

    Lie-cycle costs reer to the costs o ensuring adequate water, sanitation, and hygiene (WASH) services to a specicpopulation in a determined geographical area, not just or a ew years, but indenitely. They include not only the

    costs o constructing new systems but also what it costs to maintain them in the short and long term and at higher

    institutional levels. Costs or both district and national level administration and planning are taken into account, as

    well as the costs o replacing and extending inrastructure. This brieng note describes the costs denitions used in


    Dening lie-cycle costs (LCC) and lie-cycle costs approach (LCCA)

    Lie-cycle costs (LCC) represent the aggregate costs o ensuring delivery o adequate, equitable and sustainable WASH

    services to a population in a specied area. These costs include the construction and maintenance o systems in the

    short and longer term, taking into account the need or hardware and sotware, operation and maintenance, capital

    maintenance, the cost o capital, source protection, and the need or direct and indirect support, including training,

    planning and institutional pro-poor support. The delivery o sustainable services also requires that nancial systems

    are in place to ensure that inrastructure can be replaced at the end o its useul lie and to extend delivery systems in

    response to increases in demand. This is the lie-cycle at the heart o this approach - what is needed to sustain, repair

    and replace a water (or sanitation) system through the whole o its cycle o wear, repair and renewal.

    Collecting and understanding these costs is a primary aim o the WASHCost project. However, the lie-cycle costs

    approach (LCCA) goes beyond achieving the technical ability to quantiy and make costs readily available. It seeks to

    inuence sector understanding o why lie-cycle costs assessment is central to improved and sustained service deliv-

    ery and to inuence the behaviour o sector stakeholders, so that lie-cycle unit costs are mainstreamed into WASHgovernance processes at all institutional levels rom local to national to international. WASHCost aims to increase the

    ability and willingness o decision makers (both users and those involved in service planning, budgeting and delivery)

    to make inormed and relevant choices between diferent types and levels o WASH service.

    A signicant element o the LCCA is an understanding that costs can only be compared and properly assessed when

    they are related to particular levels o service. WASHCost specically aims to draw attention to the LCC o pro-poor

    WASH services delivery, including water or small-scale productive uses.

    WASHCost aims to help national and decentralised sector bodies to embed an understanding and use o lie-cycle

    costs so that this approach becomes institutionalised, owned and actively used within countries and internationally,

    and that national bodies develop and maintain their own LCC databases and incorporate them into management

    inormation systems (MIS) and decision-support tools (DST).

    Short defnitionsLife-cycle costs (LCC) represent the aggregate costs o ensuring delivery o adequate, equitable and sustainable

    WASH services to a population in a specied area.

    The life-cycle costs approach (LCCA) seeks to raise awareness o the importance o lie-cycle costs in achieving

    adequate, equitable and sustainable WASH services, to make reliable cost inormation readily available and tomainstream the use o LCC in WASH governance processes at every level.

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    WASHCost Lie-Cycle Costs Approach April 2010

    Cost components

    The main components o lie-cycle costs being proposed by WASHCost are the ollowing:

    Capital expenditure hardware and software (CapEx)

    The capital invested in constructing xed assets such as concrete structures, pumps and pipes. Investments in xed

    assets are occasional and lumpy and include the costs o initial construction and system extension, enhancement

    and augmentation.

    CapEx sotware includes one-of work with stakeholders prior to construction or implementation, extension, en-

    hancement and augmentation, (such as costs o one-of capacity building).

    Capital maintenance expenditure (CapManEx)

    Expenditure on asset renewal, replacement and rehabilitation costs, based upon serviceability and risk criteria. Cap-

    ManEx covers the work that goes beyond routine maintenance to repair and replace equipment, in order to keep

    systems running. Accounting rules may guide or govern what is included under capital maintenance and the extent

    to which broad equivalence is achieved between charges or depreciation and expenditure on capital maintenance.

    Capital maintenance expenditures and potential revenue streams to pay those costs are critical to avoid the ailures

    represented by haphazard system rehabilitation.

    Cost of capital (CoC)

    The cost o capital is the cost o nancing a programme or project, taking into account loan repayments and the cost

    o tying up capital. In the case o private sector investment the cost o capital will include an element distributed as


    Operating and minor maintenance expendure (OpEx)

    Expenditure on labour, uel, chemicals, materials, regular purchases o any bulk water. Most cost estimates assume

    OpEx runs at between 5% and 20% o capital investments. Minor maintenance is routine maintenance needed to

    keep systems running at peak perormance, but does not include major repairs.

    Expenditure on direct support (ExpDS)

    Includes expenditure on post-construction support activities direct to local-level stakeholders, users or user groups.

    In utility management, expenditure on direct support such as overheads is usually included in OpEx. However, these

    costs are rarely included in rural water and sanitation estimates. The costs o ensuring that local government staf

    have the capacities and resources to help communities when systems break down or to monitor private sector per-

    ormance are usually overlooked.

    Expenditure on indirect support (ExpIDS)

    This includes macro-level support, planning and policy making that contributes to the service environment but is

    not particular to any programme or project. Indirect support costs include government macro-level planning and

    policy-making, developing and maintaining rameworks and institutional arrangements, and capacity-building or

    proessionals and technicians.

    The detailed elements or each o the cost components are listed in the annexes.

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    Brieng Note 1


    Franceys, R. ; Perry, C. ; Fonseca, C. (2006). Guidelines for user fees and cost recovery for water, sanitation and irrigationprojects. IRC/Craneld report or the Arican Development Bank. Unpublished.

    Fonseca, C. (2007). Quantifying the costs of delivering safe water, sanitation and hygiene services: an overview of cost

    ranges and trends. IRC report or the Bill and Melinda Gates Foundation. Unpublished.

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    Brieng Note 1