Dynamic Cost Comparison Calculations for selecting least-cost ...

Dynamic Cost Comparison 

Calculations for selecting least-cost 

projects in Water Supply and 

Wastewater Disposal 

DCCC - Appraisal Manual for Project 

Designers 

December 2011 

Arbeitsanleitung zur Durchführung dynamischer Kostenvergleichsrechnungen 

für Projektplanungen in der Siedlungswasserwirtschaft

DCCC Appraisal Manual 

The German Association for Water, Wastewater and Waste (DWA) is strongly committed to the development of secure and 

sustainable water and waste management. As a politically and economically independent organisation it is professionally 

active in the field of water management, wastewater, waste and soil protection. 

In Europe DWA is the association with the largest number of members within this field. Therefore it takes on a unique position in 

connection with professional competence regarding standardisation, professional training and information. The approximately 

14,000 members represent specialists and executives from municipalities, universities, engineering offices, authorities and 

companies. 

Imprint 

Publisher and marketing: 

DWA German Association for 

Water, Wastewater and Waste 

Theodor-Heuss-Allee 17 

53773 Hennef, Germany 

Tel.: 

Fax: 

E-Mail: 

Internet: 

+49 2242 872-333 

+49 2242 872-100 

info@dwa.de 

www.dwa.de 

Translation: 

Helga Schlag, Bottrop 

Printing (English version): 

DWA 

ISBN: 

978-3-941897-05-2 

The translation was sponsored by the 

German Federal Environmental Foundation (DBU). 

Printed on 100 % recycled paper 

© DWA Deutsche Vereinigung für Wasserwirtschaft, Abwasser und Abfall e. V., Hennef 2011 

German Association for Water, Wastewater and Waste 

All rights, in particular those of translation into other languages, are reserved. No part of this publication may be reproduced in any form – 

by photocopy, digitalisation or any other process – or transferred into a language usable in machines, in particular data processing 

machines, without the written approval of the publisher. 

2 DWA 2011

Preface 


Ensuring value for money in public utility management, by following the principle of economic efficiency and cost consciousness, 

has always been a pivotal point for the water sector. This so in particular in the face of today's controversial 

situation as regards the need for development, extension, and rehabilitation of the country's water and waste water 

infrastructure. On the one hand, public resources available for the purpose are very limited, and, on the other hand, EU 

funding programmes pose a real challenge to the cost-consciousness and carefulness of decision makers working at local 

and regional level. Good results can only be achieved if the proposed measures are reviewed and compared critically on 

the basis of transparent, professionally-comprehensible and reliable planning approaches. This will help enhance the 

overall decision finding process. Today's modern planning tools make it possible to prepare, in a systematic and traceable 

way, all relevant documents needed by the decision makers in the water industry to explore the iron triangle timecost-quality 

and to select the best-suited, most cost-effective and sustainable solution. 

This manual is an adopted version based on German standards, as documented in the regularly updated 'Guidelines for 

the Application of Dynamic Cost Comparison Calculations' (DCCC-Guidelines). For no less than 30 years, the German 

Working Group on Water Issues of the Federal States and the Federal Government (LAWA) have supported the water 

sector by defining, revising and publishing such tools, starting with the manual’s first edition in 1986 and ending with 

the seventh edition in 2005. From that date on, DWA, the German Association for Water, Wastewater and Waste, as a 

licensee, has taken over responsibility for these activities. 

Within the framework of the cooperation between DWA and several national water associations from Southeast Europe the 

idea was born to transfer German specialised knowledge in project design and delivery by working out an internationalised 

English version of the DCCC-Guidelines and by furthering their implementation and application in customized versions that 

would be in line with national specifics. To this end, DWA has launched a practice-oriented project with the financial support 

of the German Federal Environmental Foundation, DBU (Deutsche Bundesstiftung Umwelt). Participating countries are 

Bulgaria, Croatia, Hungary, Romania, and Slovakia. The project consists of two parts or phases. In Part I, the basis of the 

User's Manual was set up during a one-week workshop at DWA’s headquarters in Hennef and another three-day workshop 

in Munich, then a draft was prepared, approved and released for translation into the different national languages. 

In Part II, DWA will then support the implementation and application processes, especially those required to obtain acceptance 

by both the EU and the national institutions involved. DWA will also help with capacity building. National 

workshops will be held by the local water associations to communicate information to all partners involved in the countries’ 

water supply and wastewater disposal industry in how to use the manual most effectively. 

Senior experts from the above mentioned countries have participated in the process of putting in place and publishing 

the DCCC-Guidelines for water infrastructure projects. All relevant issues have been incorporated in a clear and concise 

form which includes a number of real world examples. This makes it easier for project planners to apply the proposed 

methods and to choose between alternative solutions. The manual will not only serve as a practical guide for investors, 

beneficiaries, technical designers, and financial planners, controlling institutions, investment banks, local and regional 

authorities, but also as a core tool for those parties participating in EU tendering processes, because its application in 

feasibility studies provides all information on cost and efficiency data needed for proving that the selected project is the 

most suitable alternative between the decision-relevant options. 

The manual shall support the relevant institutions in Bulgaria, Croatia, Hungary, Romania, Slovakia and other countries 

with the realisation and introduction of suitable work instructions for infrastructure projects on the water supply and 

wastewater disposal sector. As normative targets have to be met in this field, application of the cost comparison method 

is a recommended approach in order to find the most cost-effective option and to achieve the required results in a verifiable 

and justifiable way. In addition, implementation of the User’s Manual will provide the data bases for application of 

EU-subsidies to conduct economic and financial analyses in good accordance with the general philosophy of the European 

Commission, CBA-Guidance (2008). 

I should like to thank all those who contributed to bringing the User’s Project Appraisal Manual to life. 

Planegg, September 2011 

Professor Dr.-Ing. Reinhard F. Schmidtke 

Chairperson of the Working Group 

DWA 2011 3


Participants of the International Working Group 

Chairperson 

SCHMIDTKE Prof. Dr.-Ing., 

Reinhard F. 

Co-Chairperson 

Bertha-von-Suttner-Weg 10, 82152 Planegg, Germany 

Consultant to DWA German Association for Water, Wastewater and Waste 

Formerly: Technical University Darmstadt and Bavarian Agency for Water Management 

KOVÁCS, Károly Higany u. 15, 1118 Budapest, Hungary 

Vice President of the Hungarian Wastewater Association (MASZESZ), 

Management Committee Member of the European Water Association (EWA) 

Members 

CVACI, Dr.-Ing., Darius COPLAN CAI SRL 

Str. Virgiliu 17-19, Sector 1, 010881, Romania 

CZEGLÉDI, Ildiko ÖKO Zrt. 

Attila út 16, 1013 Budapest, Hungary 

DASKALOV, Theodor Utilities Services Ltd. 

Angel Kanchev Str. 2, 1000 Sofia, Bulgaria 

FILIPOVIC, Branimir Croatian Water Pollution Control Society 

Ulica grada Vukovara 220, 10000 Zagreb, Croatia 

FÜSTÖS, András BDL Environmental Ltd. 

Tárogato Str. 14, 1021 Budapest, Hungary 

HORNAKOVA, Andrea Water Research Institute 

Nabrz. Arm. Gen. L Svobodu 5, 81249 Bratislava, Slovakia 

KALCHEVA, Kalina Aquapartner Ltd. 

58, Damjan Gruew Str., 1606 Sofia, Bulgaria 

KLEINERTOVA, Janka Larive Slovakio s.r.o. 

Heydukova 5, 81108 Bratislava, Slovakia 

PINTER, Marija Ministry of Regional Development, Forestry and Water Management 


RACELESCU, Radu Aquatim 

Gh. Lazar Nr. 11A, Timisoara, Romania 

SAMARJAY, Zoltan Radlinskeho 30, 81107 Bratislava, Slovakia 

VARGA, Balázs Ministry of Environment and Water Development Directorate 

Váci út 45, 1134 Budapest, Hungary 

VASILESCU, Ileana Ministry of Environment and Forests 

12, Libertatii Blvd, Sector 5, 040128 Bucharest, Romania 

VATRALOVA, Albena Department of Water Management and Usage (formerly IWP-BAS) 

National Institute of Meteorology and Hydrology (NIMH-BAS) 

66 Tzarigradsko Shosee Boul., 1784 Sofia, Bulgaria 

ZBASNIK, Snjezana Hrvatske vode 


Contact person to German Federal Environmental Foundation (DBU) 

DOMEL, Claudia Fraunhofer Center for Central and Eastern Europe 

Städtisches Kaufhaus Leipzig, Neumarkt 9-19, 04109 Leipzig, Germany 

Coordination 

MARTENS, Gabriele DWA German Association for Water, Wastewater and Waste 

Theodor-Heuss-Allee 17, 53773 Hennef, Germany 

4 DWA 2011

Contents 


Preface ................................................................................................................................................................ 3 

Participants of the International Working Group ................................................................................................... 4 

List of Figures ........................................................................................................................................................... 9 

List of Tables ............................................................................................................................................................ 10 

1 Objectives and instruments ................................................................................................................... 11 

1.1 Purpose and rationale .............................................................................................................................. 11 

1.2 Instrumental and methodical limits .......................................................................................................... 12 

2 Methodology ........................................................................................................................................... 15 

2.1 Preliminaries ............................................................................................................................................ 16 

2.2 Cost comparison in the strict sense of the term ........................................................................................ 16 

2.2.1 Cost finding ............................................................................................................................................. 16 

2.2.2 Conversion of cost items .......................................................................................................................... 17 

2.2.3 Comparison of cost present values and annual costs, respectively ............................................................ 17 

2.2.4 Sensitivity analyses and determination of break-even points .................................................................... 17 

2.2.5 Overall assessment and interpretation of results ...................................................................................... 17 

3 Cost finding ............................................................................................................................................ 18 

3.1 Cost types ................................................................................................................................................ 18 

3.1.1 Investment and running costs .................................................................................................................. 19 

3.1.2 Other terms and itemisation of costs ........................................................................................................ 19 

3.2 Compilation and calculation of costs ........................................................................................................ 20 

3.2.1 Methods of cost finding ............................................................................................................................ 20 

3.2.2 Requirements for cost comparisons .......................................................................................................... 21 

3.3 Consideration of price developments ....................................................................................................... 22 

3.3.1 Principle of evaluation in real terms ......................................................................................................... 22 

3.3.2 Updating of cost data ............................................................................................................................... 23 

3.3.3 Considering future real price changes ...................................................................................................... 25 

4 Cost conversions into equivalent terms ................................................................................................ 26 

4.1 Fundamentals .......................................................................................................................................... 26 

4.2 Period of analysis ..................................................................................................................................... 27 

4.3 Interest rate ............................................................................................................................................. 28 

4.4 Temporal weighting of costs .................................................................................................................... 29 

4.4.1 Conversion of individual costs into present values ................................................................................... 29 

4.4.2 Conversion of individual cost items into uniform cost series .................................................................... 31 

4.4.3 Conversion of uniform cost series into present values .............................................................................. 33 

4.4.4 Conversion of progressively increasing cost series into cost present values .............................................. 34 

5 Comparison of cost present values and annual costs .......................................................................... 36 

5.1 Overview .................................................................................................................................................. 36 

5.2 Simple comparison of project cost present values and annual costs ......................................................... 37 

5.3 Comparison of equivalent project cost present values .............................................................................. 39 

5.4 Comparison of the temporal development of project cost present values ................................................. 42 

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6 Sensitivity analyses and determination of critical values .................................................................... 45 

6.1 General .................................................................................................................................................... 45 

6.2 Explanatory examples .............................................................................................................................. 46 

6.3 Determination of dynamic prime costs ..................................................................................................... 49 

6.3.1 Methodology ............................................................................................................................................ 49 

6.3.2 Numerical example .................................................................................................................................. 50 

7 Overall assessment and result interpretation ....................................................................................... 54 

Appendix ................................................................................................................................................................ 55 

Summary of contents ................................................................................................................................................. 55 

Annex 1 Average service lifetimes of facilities in hydraulic engineering .......................................................... 56 

Preliminary remarks ................................................................................................................................................... 56 

Annex 2 Cost Conversion Factors ................................................................................................................. 66 

Annex 2.1-1 Accumulation factor for individual cost items AFACIC(i;n) ............................................................... 68 

Annex 2.1-2 Accumulation factor for individual cost items AFACIC(i;n) ............................................................... 69 

Annex 2.2-1 Discounting factor for individual cost items DFACIC(i;n) .................................................................. 70 

Annex 2.2-2 Discounting factor for individual cost items DFACIC(i;n) .................................................................. 71 

Annex 2.3-1 Capital recovery factor CRFAC(i;n) ................................................................................................... 72 

Annex 2.3-2 Capital recovery factor CRFAC(i;n) ................................................................................................... 73 

Annex 2.4-1 Accumulation factor for uniform cost series AFACS(i;n) ................................................................... 74 

Annex 2.4-2 Accumulation factor for uniform cost series AFACS(i;n) ................................................................... 75 

Annex 2.5-1 Discounting factor for uniform cost series DFACS(i;n) ...................................................................... 76 

Annex 2.5-2 Discounting factor for uniform cost series DFACS(i;n) ...................................................................... 77 

Annex 2.6.1-1 Discounting factor for series progression DFACSP(0,5;i;n) increase rate r = 0,5 % p. a. ......... 78 


Annex 2.6.2-1 Discounting factor for series progression DFACSP(1;i;n) increase rate r = 1 % p. a. ............ 80 




Annex 2.6.4-1 Discounting factor for series progression DFACSP(2;i;n) increase rate r = 2 % p. a ............ 84 










Annex 3 Project examples to explain the methodical approaches .............................................................. 94 

Preliminary note ........................................................................................................................................................ 94 

6 DWA 2011


Project example 1 ..................................................................................................................................................... 95 

Wastewater disposal by a gravity sewerage system or by a pressure sewerage system ............................................... 95 

1 Project definition .................................................................................................................................... 95 

2 Description of project alternatives ........................................................................................................ 95 

3 Applicability of the cost comparison method ....................................................................................... 95 


5 Calculation of cost present values and annual costs ............................................................................ 97 

5.1 Calculation parameters ............................................................................................................................ 97 

5.2 Cost conversion ........................................................................................................................................ 97 

6 Comparison of costs ............................................................................................................................... 99 

7 Sensitivity Analyses ................................................................................................................................ 100 

7.1 Interest rate ............................................................................................................................................. 100 

7.2 Energy price increases .............................................................................................................................. 100 

8 Overall assessment ................................................................................................................................. 101 


Wastewater treatment realised in a single central treatment plant or in several smaller decentralised plants ............ 102 








5.2.1 Computation of present values without consideration of real price increases for the running costs ......... 108 

5.2.2 Computation of present value with consideration of real price increases in the running costs ................. 109 

6 Comparison of costs ............................................................................................................................... 111 

7 Sensitivity analyses ................................................................................................................................ 111 



Full-scale or stepwise installation of a wastewater treatment plant ............................................................................ 113 





DWA 2011 7


5 Calculation of cost present values ......................................................................................................... 114 



6 Cost comparison ..................................................................................................................................... 117 

7 Sensitivity analyses ................................................................................................................................ 118 



Water supply by connection to a long-distance system or replacement of the local water abstraction and 

preparation facilities ................................................................................................................................ 119 








6 Cost comparison ..................................................................................................................................... 123 




Process water supply from a reservoir by means of various transport systems ............................................................ 125 





5 Calculation of cost present values ......................................................................................................... 127 



6 Comparison of Costs .............................................................................................................................. 128 



Annex 4 Abbreviations and Symbols ................................................................................................................... 132 

8 DWA 2011

List of Figures 


Figure 2-1: Flowchart for carrying out cost comparison calculations for selecting the most 

cost-efficient solution .................................................................................................................... 15 

Figure 4.1-1: Basic terms of a time-based weighting of cost items ...................................................................... 26 

Figure 4.4.2-1: Conversion of the investment cost series into the part ICAC of the annual costs ............................ 32 

Figure 4.4.4-1: Progressively ascending cost series as a function of real price increase .......................................... 35 

Figure 5.2-1: Project cost series of Alternatives 1 and 2 ...................................................................................... 37 

Figure 5.2-2: Temporal development of project cost present values for alternatives with 

unequal cost structures .................................................................................................................. 39 

Figure 5.3-1: Project cost series of Alternatives 1 and 2 ...................................................................................... 40 

Figure 5.3-2: Definitive project cost series for Alternative 2 ............................................................................... 40 

Figure 5.4-1: Equivalent investment cost series of Alternatives 1 and 2 .............................................................. 43 

Figure 5.4-2: Temporal development of the investment costs present values ...................................................... 44 

Figure 6.2-1: Sensitivity analysis relating to the interest rate ............................................................................. 46 

Figure 6.2-2: Sensitivity analysis illustrating the impact of real price increases on the running costs ................. 47 

Figure 6.2-3: Sensitivity analysis with regard to the design capacity .................................................................. 48 

Figure 6.3-1: Project cost series of the initial scenario ........................................................................................ 50 

Figure 6.3-2: Project cost series of the sensitivity scenario .................................................................................. 52 

Figure A.3.1-1: Project cost series for Alternatives A1 and A2 ................................................................................ 97 

Figure A.3.2-1: Site plans of Alternatives A1 and A2 ............................................................................................. 102 

Figure A.3.2-2: Project cost series of Alternatives A1 and A2 without consideration of real price increases 

in the running costs ....................................................................................................................... 108 

Figure A.3.2-3: Project cost series of Alternatives A1 and A2 with consideration of a real price increase 

of 1.5 % p. a. in the running costs ................................................................................................. 110 

Figure A.3.3-1: Project cost series of Alternatives A1, A2 and A3 ........................................................................... 115 

Figure A.3.4-1: Project cost series of Alternatives A1 and A2 ................................................................................. 121 

Figure A.3.5-1: Scheme of Alternatives A1 and A2 ................................................................................................. 125 

Figure A.3.5-2: Project cost series of Alternatives A1 and A2 ................................................................................. 127 

DWA 2011 9


List of Tables 

Table 1.2-1: Comparison of fundamental appraisal methods on the basis of a universal stepwise 

procedure in carrying out project evaluations within the planning process ................................... 14 

Table 3.3-1: Selected indices for the updating of investment and running costs ................................................ 23 

Table 4.2.1: Basic periods of analysis for different measures in water supply and wastewater disposal 

(without investment phase) .......................................................................................................... 27 

Table 6.3-1: Impact of potential under-utilisation of the wastewater disposal system on the dynamic 

prime costs .................................................................................................................................... 53 

Table A.2-1: Cost conversion factors most commonly used in project appraisals ............................................... 67 

Table A.3.1-1: Compilation of costs for Alternatives A1 and A2 ............................................................................ 96 

Table A.3.1-2: Calculation of project cost present values PCPV for Alternatives A1 and A2 at a real interest 

rate of 3 % p. a. ............................................................................................................................. 98 

Table A.3.1-3: Calculation of the annual costs AC for Alternatives A1 and A2 at a real interest rate 

of 3 % p. a. .................................................................................................................................... 99 

Table A.3.1-4: Calculation of the annual costs AC for Alternatives A1 and A2 at real interest rates of 2 % 

and 5 % p. a. ................................................................................................................................. 100 


of 3 % p. a. and a real rate of energy price increase of 2 % p. a. ................................................... 101 

Table A.3.2-1: Compilation of investment costs IC for Alternatives A1 and A2 ..................................................... 105 

Table A.3.2-2: Compilation of running costs RC for Alternatives A1 and A2 ......................................................... 106 

Table A.3.2-3: Calculation of project cost present values PCPV for Alternatives A1 and A2 at a real 

interest rate of 3 % p. a. without consideration of real price increases in the running costs .......... 109 

Table A.3.2-4: Calculation of the project cost present values and the annual costs for 

Alternatives A1 and A2 at a real interest rate of 3 % p. a. and an annual real price increase 

of 1.5 % p. a. in the running costs ................................................................................................. 110 

Table A.3.3-1: Compilation of costs for project Alternatives A1, A2 and A3 .......................................................... 114 

Table A.3.3-2: Calculation of the project cost present values PCPV of the three Alternatives at 

a real interest rate of 3 % p. a. and with consideration of a real price increase 

of 1 % p. a. for the investment in the extension measure ICE ........................................................ 116 

Table A.3.4-1: Summary of costs for Alternatives A1 and A2 ................................................................................ 120 

Table A.3.4-2: Calculation of project cost present values for Alternatives A1 and A2 at 

a real interest rate of 3 % p. a. ...................................................................................................... 122 


of 3 % p. a. .................................................................................................................................... 123 

Table: A.3.5-1: Compilation of costs for alternatives A1 and A2 ............................................................................ 126 

Table A.3.5-2: Calculation of project cost present values PCPV for Alternatives A1 and A2 at 

a real interest rate of 3 % p. a. ...................................................................................................... 128 

Table A.3.5-3: Calculation of the project cost present values PCPV for Alternatives A1 and A2 at 

various interest rates i ................................................................................................................... 129 

Table A.3.5-4: Calculation of project cost present values PCPV for Alternatives A1 and A2 at 

various real interest rates i under consideration of real power price increases .............................. 130 

10 DWA 2011

1 Objectives and instruments 

1.1 Purpose and rationale 


An international working group has been charged with the preparation of a User’s Project Appraisal Manual for selecting 

least cost solutions in water supply and wastewater disposal. To meet the goal of economic efficiency, which is focused 

on an optimised use of the available resources, there is a strong need for comprehensive guidance how to support the 

planning process by an adequate tool. In accordance with the development and successful implementation of such 

standards in Germany and the experience in practical application gained over more than 30 years, dynamic cost comparison 

has been chosen as the most suitable appraisal method. 

To identify and localise the individual needs for action and to create a made-to-measure guideline, the working group 

has not only focused on the specific requirements relating to the design of suitable help tools for economic efficiency 

calculation, but also on their practicability and performance. In particular when applying these instruments to support 

investment decisions in the field of water infrastructure, it becomes evident how important it is to eliminate uncertainties 

at an early stage. Logically, also the ‘Guidelines for dynamic cost comparison calculations (DCCC-Guidelines)‘, 

presented with this publication, are geared to the above described criteria. And the approach is well in tune with qualification 

campaigns launched by public authorities and associations to promote economic thinking and economic literacy 

and to contribute with that to efficiency, flexibility, and cost awareness. 

Required is a turning away from the simple reproduction of standard solutions that do not offer much space for creativity. 

Instead of sticking to technical rules and guidelines to the letter, case-specific scenarios should be created; and any 

resulting room for manoeuvring should be fully exploited so as to arrive at individual, customised solutions. A better 

planning performance is therefore primarily achieved by intensifying the integration of transparent, readily comprehensible 

estimates suited to enhance the decision quality. The dynamic cost comparison method lends itself for the 

purpose as a base process. 

First and foremost, appraisal procedures are to be understood as planning instruments. Besides, they serve as a basis for 

accompanying and final success control. Being integral parts of the overall planning process, such tools can be used 

throughout all planning phases. Over the course of time their application will shift from the question of how to select the 

most appropriate technical concept to that of how to optimise costs for the various plant components and operations. 

Needed is, apart from a clear and comprehensive picture of the range of applications, a wealth of expert knowledge in 

this domain. Frequently occurring quality failures often have their origin in a misjudgement of possible shortcomings 

emerging during the actual project work. To be mentioned in this context should be in particular: 

� incomplete consideration of all decision-relevant options and potential cost effects 

� insubstantial assumptions as to the applied calculation bases, like service lives of hydraulic-engineering structures 

and facilities, interest rates, price increases (estimates!) 

� application of unfit approximations drawn from general business and finance environments, in particular of those 

data not properly adjusted to the long-lived infrastructure projects in hydraulic engineering. 

The above outlined situation is essentially the result of a lack in appropriate guidance material. In response thereto, the 

“DCCC – Appraisal Manual” have been prepared. It is primarily directed to the following six individual goals: 

� By defining and delimiting the application of cost comparisons in contrast to other methods of project assessment, an 

individualised, need-based selection of the appropriate tool shall be put in place. 

� An exhaustive documentation, comprising all calculation techniques, process fundamentals, and parameters required 

for an accurate cost comparison, shall help avoid inappropriate and misleading simplifications and uncertainties in 

practical application. 

� Schematisation of the calculation procedure shall contribute to making the cost comparison calculations functional, 

uniform, and transparent in order to facilitate their application, revision and examination. 

� Compilation of the essential calculation bases shall help to bundle the required working material. 

� Numerical examples, inserted in the text passages, and in particular the five detailed project examples described in Annex 

3, shall demonstrate the different calculation procedures and their application in practice as well as ease the work 

during a breaking-in period. 

DWA 2011 11

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