FCR: Fibre Concrete Roofing (SKAT, 1987, 185 p.) 6. Costs and economics (introduction...) 6.1 Conclusions 6.2 Evaluation of experiences 6.3 Comments

FCR: Fibre Concrete Roofing (SKAT, 1987, 185 p.)

6. Costs and economics

In chapter 6 Beat Schaffner is treating the aspects

- Cost factors
- Elements of costs
- Comparison with other roofing materials
- Advantages and drawbacks from

FCR-use

Please note:

Costs and economics of FCR products cannot be given as exact figures.
There are many factors which determine coatings and economics. It is not only the cost one has to study before implementing FCR but also its impact on the local building material market and its consequences regarding the raw-material situation.

Costs given here date to 1985; if reference is made to 1 m² of roofing, it means 1 m² of roof-surface (roof-skin).

6.1 Conclusions

Costs

- In most countries, FC-sheets or FC-tiles can be produced at a cost of 2 US $ to 4 US $ per square meter. This includes costs for raw-materials, labour, depreciation and interest for initial investment.

- A square meter of a FC-roof including cost for the roof structure varies between 4 US $ to 8 US $, depending on the local situation.

- Our analysis of field-experiences allows the following statement: Compared with other roofing-methods, a FC-roof including roof structure can be built at 2/3 to 3/4 of the cost of a similar roof covered with Asbestos-Cement- or Galvanised-Corrugated- Iron (GCI)-sheets. - The roof-structure will consume half of the investment, the FC-roofing-material the other half. There is no apparent difference in the costs of the roof structure whether FC-tiles or FC-sheets are used.

Economics

- The economics of FCR products depend largely on the life-span of the tiles or sheets and therefore on the quality of production.

- Both, the manufacturer of FCR products and the roof-builder by their actions fundamentally influence the lifespan of the products whether they be sheets or tiles.

- From the technical point of view the life-span of FCR products can be 10 years or more.

- From the economic point of view the life-span of FCR products should be at least 4 years, in order to justify the investment at all

- Economics of FCR are not only valued in costs but in other benefits to a local economy such as: Use of local resources, low initial investment, job creation for both men and women, less involvement of foreign currency than other roofing materials, low transport costs.

- The import component in a FCR product - if any - is in the cement and the plastic for moulds. It is typicially between 30 % and 50 % of the costs of the FCR product, e.g. 0.6 to 2 US $; comparable roofing materials such as GCI-sheets may have an import value of 3 to 6 US $/m²

6.2 Evaluation of experiences

Costs

The questionnaires which were returned by 17 projects had different paragraphs to evaluate the costs and economics of FCR products.

The answers should give a picture about the following aspects:

- Costs of production (fixed and variable costs)
- Costs of fixings and roof-structure
- Costs of transport
- Importance of costs and economics
- Comparison with other roofing materials

Even though most persons answering the questionnaire gave a high importance to the economic aspects, there seems to be a lack of information and awareness about costs and economics.

Almost everybody could give exact figures of the costs for raw-materials. Once the composite is known and practical experience is made, it is easy to calculate the costs of raw materials. The other cost factors which will incur from the investment such as interest on loans, depreciation (of capital, equipment and training costs) e.g. the fixed costs seem not to be taken into account by most of the project responsibles. This might origin mostly from the way FCR projects are supported.

Labour-costs, the other main cost factor, are also given very rarely. The reason may be the- fact, that FCR Is still In a phase of development and often the work Is done by free labour or self-help-groups. There seem to be very few cases, where FCR production is done on a commercial basis by entrepreneurs and contract labour.

As a general figure, 80 % of the people answering the questionnaire stated costs of production per one square meter of roofing elements at 2 US $ to 4 US $. No indication was given on transport costs.

The costs of fixings and roof-structure could be given by most of the participants. It varies between 2 US $ to 4 US $ per square meter of roof surface. There Is no apparent difference in costs of roof-structure whether FC-tiles or- sheets are used. The timber consumption Is almost the same for both a “truss and purlin” or a “rafter and purlin” structure.

The figures given by the field-workers have verified the statement made by the promoters of FCR technology:

In comparison with similar roofing materials such as GCI-sheets or asbestos-cement sheets, the costs of production for a FC-element can be 50 % to 60 % less.

Economics of FCR as a product ex-works

FCR products are, generally speaking, not a commercial product yet. In very few cases, FCR has entered the building material market as a profitable trade.

Advantages (+) or disadvantages (-) of FCR production is given in catchwords only:

+ Low initial investment
+ No direct import of raw-materials (foreign currency involved only indirectly for cement and plastic if at all )
+ Communities producing their own building materials
+ On site production (no transport)
+ Low energy input for production process
+ Low costs for maintenance of equipment

- Use of cement which might be scarce anyway
- Energy input for cement production
- Need of foreign currency to buy equipment
- Training courses overseas or expatriate trainers are expensive

Another problem to determine the economics of FCR is the lack of knowledge about the products life-span and a lack of marketing experience. A comparison with other roofing materials has to consider the different life spans as well as the fact, that prices of other materials known are retail prices which include profits of wholesalers and marketing costs . Estimates of life span of a FCR product vary from 4 to 30 years, depending on experiences of succes or failure so far made by the people answering the questionnaire. Empiric experiences date back to 1978. Reported failures are mostly caused by bad production or bad roof-structure and less by material properties.

Economics of FCR-products including roof-structure

There Is no evidence in the questionnaires, that FCR products require a more expensive roof-structure than other roofing-methods. No special comments are made on the system of roof-structure. It seems, that most projects are using a traditional local roof-structure technology, adapting it to the dimensions determined by their FCR product.

The scarce information given on structural problems of the roof asks for more clarification of how a FCR roof should be built.

6.3 Comments

Abstract of cost factors ( How to calculate a FCR project )

Diagram of calculate a FCR project

Table 1: Synoptic view of cost factors In a FCR project

Elements of costs

Elements of cost

a) Investment costs

(Estimates: 3’000 - 30’000 US $)

I 1: Site for workshop

These costs will depend on various circumstances, mainly wether it is in a rural or urban area 400 square meters is the minimum requirement for a production plot. (Estimates 0-5’000 US $)

I 2: Building, Infrastructure

Simple workshop. Water facilities (well, hand pump), curing devices (pool or drums), light, office furniture, typewriter, calculator, drawing equipment, etc. (Estimates 3’000 - 10’000 US $)

I 3: Equipment, tools

Costs vary whether you use

- imported kits
- locally made kits
- self made equipment

(Estimates 200 - 2000 US $)

Additional costs may be necessary for miscellaneous hardware plastic sheeting, shovels, stacking and transport devices, etc.

I 4: Knowhow-Transfer Costs vary wether knowhow-aquisition is done by

- manual
- training at regional center
- training abroad
- trainer from abroad

(Estimates 1 -15’000 US $)

Please note:

Initial investment in setting up a plant may well add up to 3 - 6 months production costs. This requires a substantial amount of working capital.

b) Production costs

The term < production costs > has meaning only when it is related to output. Output in FCR-production will be measured in square meters of roofing elements produced during a certain period. Production costs should be divided up In <fixed costs> and <variable costs>. The diagram below should help to make this clearer. The elements of fixed costs can be given as yearly costs; when divided by yearly production in square meters, the part of fixed costs in one square meter can be calculated. Fixed costs and variable costs added will give the total costs of production per one square meter of FC-roofing material.

Table 2: Diagram of production costs

Fixed costs are:

P+D, L, and E figure

P: Interest for Investment

Depending on the interest rate and the initial investment, interest costs can add up to some 300 to 3’000 US $ per year.

D: Annual depreciation

Building, infrastructure, equipment, tools and knowhow-transfer costs must be paid back within 5 to 10 years. Depreciation will therefore add some 500 to 5’000 US $ per year, depending on initial investment and life span of facilities.

Variable costs are:

L: Labour costs

FCR is a labour intensive production. As a rough estimate it can be said, that an experienced team of 4 workers can produce 2’000 to 4’000 m 2 a year.

E: Energy costs

Depending on the production process, energy may be used for vibrating devices. Nevertheless, the energy bill will be within some 50 to 100 US $ per year and therefore it can be almost disregarded

M: Raw material costs

M figure

Roughly estimated the costs of raw material may vary between 1 and 2,5 US$ for 1 m 2 of FC-roofing product.

M 1: Cement

According to proven standards cement requirements for 1 m 2 of roofing is either 5 kg or 14 kg depending on whether tiles or sheets are produced.

M 2: Sand

Sand is usually not an important cost factor in FCR-production. Nevertheless, where it has to be transported to the site, It will add 5 % to 20 % to the cement cost.

M 3: Natural fibres

The availability of natural fibres will determine its price. For a rough calculation, cost of fibre will be 10 to 20 % of the cement cost. FCR tiles require 0,2 kg of fibres per m2 of roofing, sheets 0.25 kg per m². Fibre cost will increase, if removal of contamination is necessary.

M 4: Water

Water is used not only for production but also for curing. In most cases it can however be disregarded as a cost factor except for cases, where it has to be transported to the site.

M 5: Plastic sheets

Plastic sheets have to be replaced frequently to maintain a good top surface.

Please note:

Raw material costs are not the only cost factor of FCR production. For proper calculation and comparison with other roofing materials, all cost factors have to be taken into account.

c) Cost for roof structure

S1: Cost for supporting structure

S1 figure

The costs do not vary that much whether tiles or sheets are used. Also the difference in the roof system -whether trusses and purlins or rafter and purlins - is not very significant.

The timber demand for the supporting structure per m² of roofing is between 0.005 to 0.015 m³. A rough calculation for a rafter and purlin construction can be done as follows:

Demand for rafters (in cubic meters):

L/D + 1 x y x (H x W)

number of	dimension
rafters:	of rafter
to be rounded
to full number

Demand for purlins:

y/B + 1 x L x (U x V) in cubic meters

number of purling: to be rounded to full number

S 2: Fixing costs

S2 figure

Includes labour for installation and material cost. As a general rule, this will be 8 % to 15 % of the cost for the supporting structure.

d) Transport costs

Figure

Transport of FCR-products is a crucial affair. If possible, it should be avoided. The simple equipment makes FCR production mobile . If there is a large demand for FCR products, it might be better to have it produced on site. For tiles, however, a permanent workshop looks like a better solution.

If transport is necessary, the following dimensions and weights have to be considered.

Dimension in meters	Units per sq. meter of roofing	Weight of sq. meter
Tiles
0.50x0.25	13	21kg
Sheets
1.00 x 0.78	1.5	30 kg

Example:

If you have to cover a roof surface of 60 square meters with sheets, you will have to transport 90 sheets with a total weight of 2,7 metric tons.

e) Royaltles, administrative and marketing costs, profit

Figure

A private entrepreneur will have to calculate an additional amount to the costs of production to cover royalties, administrative and marketing costs and to make his profit. The market situation in building materials will be a constraint to his calculation. A margin of 30 % seems to be possible In most cases.

Total costs

If FCR production is calculated with all the elements showed before, the total cost for one square meter of roofing including roof-structure, will be - in most cases- 4 US $ to 8 US $.

As a recapitulation a comprehensive coat-model might look as follows:

Compreshensive cost-model

As a simple rule it can be said that the roof-skin will be 50% of the costs, the roof-structure the other 50%.

The material costs of the roof skin -which are only part of the costs- will be 50% to 60% of the costs of production.

Comparison with other roofing-materials

The foregoing paragraph was about how FCR-products should be calculated if a comparison with other roofing-materials is made. Costs of other roofing materials are mostly given as retail-price in the market.

Table 3 shows, that FCR - as a product ex works - will be positioned between the traditional roofing materiels end the industrial products if it enters the market.

Table 3

This cost-comparison must be taken with caution. It compares roofing materials prices which are derived from production costs, with other prices which were determined by market forces. By itself it cannot be used to determine which is the most economical roofing material. No account has yet been taken of the life-span of the products and other economic criteria (see following pages).

Is the roof structure for a FCR roof more expensive than for other roofing materials?

It is obvious that the self-weight of roof cladding in FCR Is more than the weight of competing materials such as Asbestos Cement (AC) or Galvanised Corrugated Iron (GCI).

Nevertheless, the roof structure will in most cases have to be similar, as the critical dimensioning criteria is not the self-weight of the cladding but the ability to withstand imposed loads, such as people ( e.g. workmen ) or wind forces ( pressure or suction ).

A detailed cost comparison of different roof structures has already been made). In many countries one will find of course GCI end AC roofs using very timber saving methods. They are dimensioned according to the self-weight of the cladding and to critical loads during construction. Accordingly they will not be able to withstand strong wind uplift .

The following table compares the timber consumption of typically dimensioned roof-structures (wall plates are not included).

1 ) Ortiz, F: Experiencia en la investigacin de planchas de sisal-cemento en Cll-Viviendas Cetavip, Repblica Dominicana.

Table

Assumptions:

Wind speed = 90 mph
Rafters as shown
Timber: pine, spruce or wood with similar properties.
Deflection f = i /200 = 2 cm for rafter

Which economic criterias determine the use of FC-products?

a) Demand for a roofing alternative
FCR will be valued by its price as a roofing product on the market, respectively by the demand for this type of product.

Where roofing materials can be produced locally, e.g. in a clay-tile region or in an environment where thatched roofs are at a good standard, it will be difficult for FCR to become a competitive roofing solution against traditional roofing.

Where it competes with industrial products such as Asbestos Cement or Galvanized Iron-sheets, not only its price will be used as a deciding factor but also its social prestige. Competition is also difficult if a country subsidizes the industrial products.

b) Availability of cement

There might be circumstances, where FCR is not appropriate because of the national economics. If cement has to be imported, FCR should be promoted only if there is no other alternative.

c) Life span of FCR products A comparison between the manufacturing costs of FCR products and other products shows that FCR products are more economical In most cases. However, If the products have a different lifespan, the picture changes.

In general, if the cost of FCR products is half the cost of AC products, they should have at least half the lifespan to be more economical. If we assume that the cost of FCR products Is half the cost of AC products, and if the lifespan of AC products Is 25 years, then FCR products should at least have a life-span of 12,5 years.

But, the real considerations of a third-world customer are certainly different: even if he knows, that FCR products will last only half the time of AC products, he may prefer to buy the cheaper option, and he will not bother too much, if he has to replace the roofing sheets after 12,5 years, a time horizon, which he may consider as close to eternity. He may also simply not have the money to buy the more expensive products, even if the lifespan would be shorter and if he would end up with higher costs.

The choice between a cheaper product with a short life and a more expensive product with a longer lifespan depends basically upon the availability of capital. If capital is easily available, an investment in the long-lasting more expensive product becomes economical; if capital is very scarce - or not available at all - the short-term option is the only solution. The usual expression for the difficulty to have access to capital - or, in other words, the scarcity of capital - Is the prevalling interest rate in real terms of an economy. If inflation rate is higher than the nominal interest rate, interest in real terms becomes negative. This makes it attractive for the customer to invest his money in solid values which do not loose their value with inflation; he may buy a tile every week whenever he has some money left.

This interest rate can vary quite significantly from an official banking rate In a specific case; if the customer of FCR products has only access to credits from money lenders, his subjective interest rate can be on a short-term base, so that his effective interest rate would be absolutely prohibitive. The following table shows a comparison between AC- and FC-products in relation to the prevailing or individual interest rate. The basic assumptions are that FC-products cost US $ 4,00 per m², while AC-products cost US $ 8,00 per m² and have a life-span of 25 years. Flow long should FC-products last at least, If different Interest rates are taken Into consideration? In order to calculate the minimum life-span, both investments for AC- and FC-products were discounted with the method of the Net Present Value (NPV) at different interest rates. The results show the following relations:

Prevailing or Individual Interest Rate p.a.	Minimum (“breakeven”) Iife-span for FC-products
0 %	12.5 years
5 %	approx. 9.0 years
10 %	approx. 7.0 years
20 %	approx. 4.0 years

If interest rates are above 20% p.a., the minimum life-span drops down to 1 to 2 years, and decision-making will not any more depend on such considerations, but much more follow a subjective rationality; financing of the long-lasting option will get so troublesome (over a period of 25 years), that the customers preference will opt anyhow for the cheaper solution, providing that the life-span is acceptable. As a subjective impression, the life-span of FCR products should at least be 4 years, In order to Justify the Investment at all.

However, only the market can prove if the customer looks at FCR products this way. If money is scarce, to opt for the alternative with a lower initial investment seems logical. But It may also happen that the customer will prefer the alternative which he considers more long-lasting, and he will pay whatever costs if he is sure not to loose the money. Many poor people will spend the money very carefully; they may prefer not to have a solid roof for a long time and may slowly buy the tiles for a definitive roof which they consider as an investment for the “eternity”. In this case their perception of money fits with the zero-interest or the negative-interest option.

d) Producer organisation

FCR-production is a very tempting trade because it requires a low initial investment and first results are achieved with almost no capital input. Nevertheless this temptation is a risk if production at a low quality standard is started and maintained. The product will fail after some time and then it can become a loss maker.

FCR-production therefore needs to be backed by organisations which will take over the responsability for regular quality control.

Advantages from FC-use

FCR is not only a more economical roofing material but it can have also additional positive effects on a local economy. Except for the cement - which might be imported - FCR uses local resources such as sand, fibres, labour and reduces therefore the ecological stress on a region. The energy Input for the manufacturing process Is very low.

FCR is a labour intensive product and it creates Jobs not only for the people in the manufacturing unit but also for preparation-work such as fibre collection and preparation, sand collection or for installation on the roofs.

Except for the cement FCR does not require foreign currency for the raw-materials. The low initial investment allows to weak sections in society to start a production. It can be a real “If-help activity with a potential to become a regular Income source.

Drawbacks from FCR-use

If production Is not at a good standard, FCR can become a painful loss for the people involved.

Should the products turn out to crack after two years, a two years production can be lost and there is no way to recycle the material and the labour. However with the knowledge accumulated up to now, this can be avoided.

The failures reported so far in FCR projects do not dismiss the method as such. FCR is an alternative to the traditional roofing methods or the more industrial roofing material if the criteria described before are checked according to the local situation.