construction and refurbishment of earthen irrigation channel banks

The costs used in these methods should be derived from the best available data,including all the direct and indirect costs (supervision, administration andoverheads), from either:• actual current costs• actual past costs updated to present time using appropriate inflation indices• costs determined from past or comparative experiences, test work or field trials• direct estimates prepared from first principles experience• budget estimates from contractors and suppliers• unit rates from industry publications and handbooks modified to suit specificconditions and adjusted by scaling factors and escalation indicesThe accuracy required will vary according to the project significance, dataavailability and the cost of getting data. In all cases the effort made to obtainaccurate costs should be consistent with both the ability to predict the costs and thepotential for the cost element to influence the decision being taken.For comparative studies of alternative courses of action, costs that will not varybetween alternatives may be eliminated, as they affect all options similarly. In thesesituations only the differences in costs between the alternatives need be assessedand compared. If the cost estimates are to be used as an input to NPV or BCRanalysis, the true PVC of all costs will need to be calculated.One approach, used to identify costs, involves the development of a cost breakdownstructure that identifies all relevant costs of an asset over its complete life cycle.With this approach, all phases of a channel’s life which attract costs are brokendown into consistent cost elements over time. These cost elements are individuallyidentified such that they can be distinctly defined and estimated.This involves:1. Describe the life cycle phases2. Identify the relevant cost elements in each phase - the more detailed andaccurate this list is, the more accurate will be the life-cycle-costing3. List the cost elements in the year in which they will occur4. Select the method for estimating costs5. Obtain the data required to develop these estimates6. Estimate the appropriate costs attributed to each cost element - variable,fixed, direct, indirect, recurring, non-recurring7. Document the assumptions and level of uncertainty in the estimation of costsThis kind of approach has the advantage of being systematic and orderly thus givinga level of confidence that all relevant costs have been included. The identificationof the elements and their scope should be based on the purpose and requiredaccuracy of the life cycle cost analysis.Checklists of typical cost elements that may occur in each phase of a channel’s lifeare given in Figure 13-7. This list is intended as a guide only. It is not exhaustive,and not every element is relevant in all circumstances.Construction and Refurbishment of Earthen Channel Banks August 2002 - Edition 1.0 13-14