7. Cost Benefit Results
7.1.1 This section presents the results of the cost benefit analysis using the individual benefits and costs set out in Sections 5 and 6 respectively. The analysis shows the costs and benefits in present value terms which is the current value of a future stream of cash flows. The discounted costs and benefits take account of the fact that £1 today is worth more than £1 in future years. The benefit cost ratio (BCR) is also calculated which is the ratio of discounted benefits to discounted costs. A BCR ratio greater than one indicates that the benefits are greater than costs. The analysis has been undertaken over a 60 year period and is consistent with the Treasury Green Book.
7.2 Cost Benefit Analysis
7.2.1 The cost benefit calculations are undertaken for the following building scenarios:
1. Costs for two flats or attic space being converted to a maisonette and benefits for flats/maisonettes.
2. Costs for maisonette being converted to two flats and benefits for flats/maisonettes.
3. Costs for conversion of commercial building to 20 flats and benefits for social housing.
4. Costs for conversion of commercial building to 50 flats and benefits for social housing.
5. Costs for maisonette being converted to two flats and benefits for HMOs.
6. Costs for small care home extension and benefits for care homes.
7. Costs for large care home extension and benefits for care homes.
8. Costs for conversion of commercial buildings to 20 flats and benefits for sheltered housing.
9. Costs for conversion of commercial buildings to 50 flats and benefits for sheltered housing.
7.2.2 Table 7.1 provides a summary of the present value of costs and benefits for each of the scenarios in paragraph 7.2.1 and the BCR for each project.
7.2.3 The Table shows that for scenarios 1 to 5, the costs of installing a fire suppression system substantially outweigh the benefits for flats/maisonettes, social housing and HMOs. A number of points emerge from the analysis:
- The low value of benefits in the scenarios reflect the relatively low prevalence of fires, deaths and injuries in buildings containing flats, social housing or HMOs (Table 5.5).
- The present value of costs includes the installation, water supply and annual maintenance costs. At £200 per annum for all systems for 60 years, the present value of the annual maintenance fee alone is over £5 million. The present value of this component of cost alone is higher than the present value of benefits for buildings containing flats/maisonettes, social housing and HMOs.
7.2.4 The Table shows that for scenarios 6 to 9, the benefits of installing a fire suppression system outweigh the costs for care homes and sheltered housing projects. The analysis shows:
- The high value of benefits in care homes reflects the relatively high prevalence of fires in care homes and the value of damage associated with the fires (Table 5.5).
- The present value of benefits associated with the sheltered housing scenarios outweigh the costs with the BCRs in the range 1.7 to 2.0, depending on the water supply costs.
7.3 Broad Suggestions for Relaxations
7.3.1 From the analysis in this report, the following broad conclusions can be drawn:
- The prevalence of fires, deaths and casualties in care homes and sheltered housing is much higher than in the other building types forming part of Standard 2.15. This leads to relatively high values of annual benefit from avoiding a fire, death or casualty. When compared to the costs of installing automatic fire suppression systems, the benefits outweigh the costs in both water supply scenarios (mains and pump and tank systems). Both care homes and sheltered housing have been covered by the Standard since 1 May 2005 and during this time there have been no applications for a relaxation of the Standard. This suggests that a potential exemption may not be required for these two categories of buildings.
- It has not been possible to obtain costs for the installation of an automatic fire suppression system into an extension/conversion/alteration of a commercial (retail) property. However, given the need for the system to meet the commercial standard, it is anticipated that the costs could be substantial. The present value of benefits for avoiding a fire, death and casualties in retail properties is estimated to be £8.8 million. Should the present value of the cost of the system in an extension/conversion/alteration project exceed this, the cost could be prohibitive. As with care homes and sheltered housing, retail has been covered by the Standard since 1 May 2005 and there have been no applications for a relaxation of the Standard during this time. This suggests that a general exemption may not be required and that any applications should be reviewed on a case by case basis.
- The analysis shows that the example projects relating to flats/maisonettes, social housing and HMOs have BCRs which are well below one, suggesting that the costs outweigh the benefits. These results derive from relatively low prevalence of fires, deaths and casualties and relatively high installation costs associated with conversion/extension projects, particularly where a small (e.g. one or two) number of homes are involved. Given that all the applications, to date, for a relaxation of the Standard apply to buildings which are flats/maisonettes, consideration should be given to a potential exemption for conversions/extensions/alterations in this building category. The exemption should relate to an automatic fire suppression system meeting meeting BS 9251:2021.
7.3.2 A number of caveats could be applied to the exemption including:
- The height of the building if more than 18 metres.
- The use of a mist suppression system.
|Scenario||Description||Mains Water||Pump and Tank Water System|
|PV Costs||PV Benefits||BCR||PV Costs||PV Benefits||BCR|
|1||Flats to maisonette||16.1||1.9||0.12||27.2||1.9||0.07|
|2||Maisonette to flats||12.6||1.9||0.15||18.1||1.9||0.10|
|3||Commercial to flats (small)||7.2||2.5||0.34||8.0||2.5||0.31|
|4||Commercial to flats (large)||6.9||2.5||0.35||7.3||2.5||0.34|
|5||Maisonette for HMO||12.6||0.9||0.07||18.1||0.9||0.05|
|6||Care home extension (small)||17.3||43.4||2.49||36.0||43.4||1.2|
|7||Care home extension (large)||22.8||43.4||1.90||41.4||43.4||1.05|
|8||Commercial to sheltered housing (small)||7.2||13.8||1.92||8.0||13.8||1.73|
|9||Commercial to sheltered housing (large)||6.9||13.8||1.98||7.3||13.8||1.88|
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