Correlation analysis of capital and life cycle costs in Private Financial Initiative projects

Although Private Financial Initiative (PFI) projects were proven to be more expensive to build, the UK Government believed it could achieve “spending more for less”, delivering better value for money to public projects. The underline philosophy is that high specification of new asset increases the construction cost but reduces future cost-in-use, such as the life cycle replacement (LCR) cost of the asset. However there is a lack of investigation on whether the higher initial capital cost indeed results in lower long-term LCR cost of the PFI projects in practice. In order to discover the relationships between the capital costs of PFI projects and their LCR costs over the concession period, a sample of 30 live PFI projects are randomly selected for correlation analysis. Contrary to the hypothesized negative relationship, a positive correlation is found between the two variables. In order to review the current cost estimate practice, the cost models for LCR cost are reviewed and interview surveys are carried out to further investigate the issues in cost estimate.

• Record URL:
  • https://doi.org/10.1061/(ASCE)ME.1943-5479.0000277
• Availability:
  • Find a library where document is available. Order URL: http://worldcat.org/issn/0742597X
• Supplemental Notes:
  • Copyright © 2013 American Society of Civil Engineers
• Authors:
  • Wang, Nannan
• Publication Date: 2013-11

Language

• English

Media Info

• Media Type: Digital/other
• Features: References;
• Serial:
  • Journal of Management in Engineering
  • Publisher: American Society of Civil Engineers
  • ISSN: 0742-597X
  • Serial URL: http://ascelibrary.org/loi/jmenea

Subject/Index Terms

• TRT Terms: Asset management; Capital costs; Construction projects; Correlation analysis; Life cycle costing; Public private partnerships
• Identifier Terms: Private Finance Initiative
• Geographic Terms: United Kingdom
• Subject Areas: Construction; Economics; Finance; I10: Economics and Administration; I50: Construction and Supervision of Construction;

Filing Info

• Accession Number: 01499903
• Record Type: Publication
• Files: TRIS, ASCE
• Created Date: Nov 25 2013 9:58AM