1:5:200
Encyclopedia
In the construction industry, the 1:5:200 rule (or 1:5:200 ratio) is a rule of thumb
that states that:
The rule originated in a Royal Academy of Engineering
paper by Evans et al.
Sometimes the ratios are given as 1:10:200. The figures are average
s and broad generalizations, since construction costs will vary with land costs, building type, and location, and staffing costs will vary with business sector and local economy. The RAE paper started a number of arguments about the basis for the figures: whether they were credible: whether they should be discounted; what is included in each category. These arguments overshadow the principal message of the paper that concentration on first capital cost is not optimising use value: support to the occupier and containment of operating-cost. Study by the Constructing Excellence
Be Valuable Task Group has come to the view that there is merit in knowing more about key cost ratios as benchmarks and that we can expect wide variation between building types and even individual examples of the same type.
Hughes et al, of the University of Reading
School of Construction Management and Engineering, observed that the "Evans ratio" is merely a passing remark in the paper's introduction (talking of "commercial office buildings" and stating that "similar ratios might well apply in other types of building") forming part of a pitch that the proportion of a company's expenditure on a building that is spent directly on the building itself (rather than upon staffing it) is around 3%, and that no data are given to support the ratio and no defence of it is given in the remainder of the paper. In attempting to determine this ratio afresh, from published data on real buildings, they found it impossible to reproduce the 1:5:200 ratio, in part because the data and methodology employed by Evans et al. were not published and in part because the definitions employed in the original paper could not be applied. The ratios that they determined were different by orders of magnitude
from the 1:5:200 ratio, being approximately 1:0.4:12. They observed that "everyone else who deals with real numbers" pitches the percentage somewhere between 10% and 30%, and that their data support 12%.
They note (as does Clements-Croome) that the three costs for every individual building are affected by a plethora of factors, yielding a wide variation in ratios. They suggest that "[p]erhaps the original 1:5:200 ratio was simply meant to be a statement to focus clients' attention" on the importance of considering the higher staffing costs of a building relative to its operating and construction costs, and to encourage people to not be too concerned with higher initial build costs to improve build quality and reduce later lifetime costs. They state that if this is so "then subsequent users of the ratio have misused it", and that the frequency of use of the ratio is not problematic, but that the authority and gravitas that are assigned to it is. They conclude that "perhaps the most worrying feature of this whole discussion is how this passing introductory remark in the paper by Evans et al has gained the status of a finding from research carried out by the Royal Academy of Engineering, which it most certainly is not!".
Rule of thumb
A rule of thumb is a principle with broad application that is not intended to be strictly accurate or reliable for every situation. It is an easily learned and easily applied procedure for approximately calculating or recalling some value, or for making some determination...
that states that:
- "If the initial construction costs of a building is 1, then its maintenance and operating costs over the years is 5, and the business operating costs (salary of people working in that building) is 200."
The rule originated in a Royal Academy of Engineering
Royal Academy of Engineering
-Overview: is the UK’s national academy of engineering. The Academy brings together the most successful and talented engineers from across the engineering sectors for a shared purpose: to advance and promote excellence in engineering....
paper by Evans et al.
Sometimes the ratios are given as 1:10:200. The figures are average
Mean
In statistics, mean has two related meanings:* the arithmetic mean .* the expected value of a random variable, which is also called the population mean....
s and broad generalizations, since construction costs will vary with land costs, building type, and location, and staffing costs will vary with business sector and local economy. The RAE paper started a number of arguments about the basis for the figures: whether they were credible: whether they should be discounted; what is included in each category. These arguments overshadow the principal message of the paper that concentration on first capital cost is not optimising use value: support to the occupier and containment of operating-cost. Study by the Constructing Excellence
Constructing Excellence
Constructing Excellence is a UK-based construction industry membership organisation. In the UK, it is unique insofar as its member organisations are drawn from across the industry supply chain, ranging from clients, through contractors and consultants, to suppliers and manufacturers of building...
Be Valuable Task Group has come to the view that there is merit in knowing more about key cost ratios as benchmarks and that we can expect wide variation between building types and even individual examples of the same type.
Hughes et al, of the University of Reading
University of Reading
The University of Reading is a university in the English town of Reading, Berkshire. The University was established in 1892 as University College, Reading and received its Royal Charter in 1926. It is based on several campuses in, and around, the town of Reading.The University has a long tradition...
School of Construction Management and Engineering, observed that the "Evans ratio" is merely a passing remark in the paper's introduction (talking of "commercial office buildings" and stating that "similar ratios might well apply in other types of building") forming part of a pitch that the proportion of a company's expenditure on a building that is spent directly on the building itself (rather than upon staffing it) is around 3%, and that no data are given to support the ratio and no defence of it is given in the remainder of the paper. In attempting to determine this ratio afresh, from published data on real buildings, they found it impossible to reproduce the 1:5:200 ratio, in part because the data and methodology employed by Evans et al. were not published and in part because the definitions employed in the original paper could not be applied. The ratios that they determined were different by orders of magnitude
Order of magnitude
An order of magnitude is the class of scale or magnitude of any amount, where each class contains values of a fixed ratio to the class preceding it. In its most common usage, the amount being scaled is 10 and the scale is the exponent being applied to this amount...
from the 1:5:200 ratio, being approximately 1:0.4:12. They observed that "everyone else who deals with real numbers" pitches the percentage somewhere between 10% and 30%, and that their data support 12%.
They note (as does Clements-Croome) that the three costs for every individual building are affected by a plethora of factors, yielding a wide variation in ratios. They suggest that "[p]erhaps the original 1:5:200 ratio was simply meant to be a statement to focus clients' attention" on the importance of considering the higher staffing costs of a building relative to its operating and construction costs, and to encourage people to not be too concerned with higher initial build costs to improve build quality and reduce later lifetime costs. They state that if this is so "then subsequent users of the ratio have misused it", and that the frequency of use of the ratio is not problematic, but that the authority and gravitas that are assigned to it is. They conclude that "perhaps the most worrying feature of this whole discussion is how this passing introductory remark in the paper by Evans et al has gained the status of a finding from research carried out by the Royal Academy of Engineering, which it most certainly is not!".