Lifecycle funding is incorporated into the unitary charge for a project with provisions typically included within the Project Agreement or associated agreements such as the FM agreement and the credit agreement for the allocation of funds to a maintenance reserve account(s).
Project Co will develop a lifecycle expenditure profile in the early stages of a project, typically based on manufacturers' recommendations or industry guidance, to establish a notional replacement schedule that is incorporated into the financial model.
These expenditure profiles will have been utilised to derive the funding profile for the maintenance reserve account(s) contained within the base financial model. Where, as should normally be the case, Authorities have copies of the financial model, this can provide an insight into the funding for lifecycle within the project.
Under the Project Agreement, Project Co takes the risk on funding and delivery of lifecycle, whereby if a component has a reduced economic life compared to the one modelled, then the additional cost of more frequent or early replacement is borne by Project Co. Conversely, if through good component choice or good maintenance, the economic life of a component is extended resulting in fewer replacements over the operational period, Project Co takes the benefit. It is noted that this risk is typically passed down to the FM service provider as it is responsible for the management and delivery of maintenance within a facility, though this is not always the case.