Automatic Fire Suppression System installations - traditional building conversion to hotels: cost benefit analysis

7. Cost Benefit Results

7.1 Introduction

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 benefit to discounted costs. A BCR ratio greater than one indicates that the benefits are greater than costs.

7.2 Cost Benefit Results

7.2.1 Table 7.1 provides a summary of the present value of costs and benefits of installing AFSS into hotel buildings. The results are shown for hotels in traditional buildings and non-traditional buildings.

7.2.2 For hotels in traditional buildings, the costs are based on the traditional building costs for each example in Table 6.2 and the benefits are those for traditional hotels shown in Table 5.4. For hotels in non-traditional buildings, the costs are based on the non-traditional building costs in Table 6.2 and the benefits are those for non-traditional hotels in Table 5.4.

7.2.3 The Table shows that for traditional buildings, the benefits outweigh the costs if the AFSS is installed to BS 9251. When the system is installed to BS 12845, the costs significantly outweigh the benefits. As the BCR is below one for the systems designed to system BS 12845, it is expected that a water mist system would also return an adverse BCR.

7.2.4 Similar results emerge for non-traditional buildings, but the BCR is not so adverse for the projects where BS 12845 is adopted. This reflects the higher areas of property damage in non-traditional hotels (Table 3.9) which increases the property damage benefit.

7.3 Sensitivity Analysis

7.3.1 Given that the analysis is based on estimates of costs and benefits, it is important to test the sensitivity of results to some of the assumptions adopted. The key driver of the BCR is the cost estimate. Hence, the focus of the sensitivity tests are the assumptions relating to cost.

7.3.2 The following sensitivities have been considered:

1. Lower installation costs. The lowest cost estimate of installation per head (£250) is adopted and it is assumed that optimal use can be made of space. This yields an estimate of £10 to £21 per sqm for BS 9251 and BS 12845 respectively.

2. Mains water supply. The cost of a water pump and tank system is a major cost, particularly for BS 12845 systems. This sensitivity assumes that the water supply can be mains fed.

7.3.3 The results are shown in Table 7.2.

7.3.4 Table 7.2 shows that the overall results are not particularly sensitive to the lower installation costs per head. The results change considerably when the cost of a pump and tank is excluded from the calculation with a 20 room hotel returning a BCR of 1.3 and a 40 room hotel having a BCR close to one.