RTTC cost calculation: including capital costs?

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  • Ulrike
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RTTC cost calculation: including capital costs?

Dear Rosalyn

We are in RTTC round 1, phase 1 and have a basic but important question regarding the RTTC goal ”maximum costs of $0.05 per person and day”:

According to the initial call and related documents from webinars and e.g. the RTTC-Factsheet of February 2011, this goal refers to total costs, including capital and operating costs.

This is however in contrast to the information which is currently avialable on the BMGF homepage: the actual RTTC factsheet of October 2011 says that the toilet should have “an operational cost of $0.05 per user, per day”.

Please specify, as it makes quite a difference if capital costs are included or not.

Thanks and kind regards

Ulrike
Ulrike Messmer
Project Officer "Reinvent the Toilet Challenge"
Eawag- Swiss Federal Institute of Aquatic Science & Technology
Sandec - Department of Water & Sanitation in Developing Countries
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Re: RTTC cost calculation: including capital costs?

Hi Ulrike,

I discussed your question with our Science and Tech team and we wanted to confirm that the affordability spec of $0.05/person/day refers to capital and operating costs.

I will be sure to communicate the error in the factsheet to our Communications team to resolve.

Thank you,
Rosalyn

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Note by moderators: This post was made by a former user with the login name rosalyn who is no longer a member of this discussion forum.
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  • HAPitot
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Re: Gates Foundation launches 2nd round of reinvent the toilet challenge

(note by moderator (EvM): I moved the post into this thread on 27 Aug. 2013 because it fits very well here)

Dear all,

To be honest, I've been somewhat amazed about how the discussion about the „reinvent the toilet challenge" of the Gates Foundation has gone. If I have read the requirements of the foundation correctly, they have an aim of 5 US cents per user per day for the costs of the envisaged toilet. That's at least 25 cents, if not 30 or 40 cents per day for a family out of an income of possibly 2 US dollars per day (or less) - two dollars per day would actually be very decent, that's what my security people are earning. Under these circumstances, 25 cents would be more than 10% of daily family income!! Do you seriously think that anybody among the poor would spend that kind of money for a toilet?

In another post on Susana: forum.susana.org/forum/categories/34-uri...charge-on-water-bill ,
I have mentioned a toilet that is costing less than 2 US cents per person per day - a UDDT that we have improved upon (and still do) here in Adjumani, Uganda. The locals that are having such toilets - admittedly usually more durable and expensive ones - built in Adjumani are among the more wealthy people. From my observations, the ONLY reason for the poor to shy away from these toilets are perceived costs. The Gates Foundation should aim at a toilet that costs ONE cent (US) per person per day, AND is hygienic, AND doesn't require water for flushing, AND doesn't require electricity, AND recovers the nutrient value of faeces (at least potentially). That would be the proper goals to reach the poor at least in Northern Uganda!

Kind regards to everybody,

Hanns-Andre
Hanns-Andre Pitot
M.Eng. Environmental Pollution Control
presently in Seesen, Germany
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  • Elisabeth
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Re: question about the costs

(Note this post was originally in this thread: forum.susana.org/forum/categories/105-pr...-and-bangladesh#4587
but was moved here to have a thread dedicated to costs)


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Dear Steve,

Thanks a lot for sharing your progress here.

I would like to pick up on one point. When you were asked about the costs, your answer was simply:

As with the other grantees our target is to go below 5 cents per user per day.


Isn't that a bit "the easy way out"? What are the costs really, split up in capital and O&M costs and how close can you get to this target? Have you done any calculations?
If so, how have you converted the capital costs into an annualised cost?

For the benefit of those who don't know this cost condition in the Reinvent the Toilet Challenge Grants so well: It is stipulated here in the grant conditions:
www.susana.org/docs_ccbk/susana_download...y-2013-version-2.pdf

It says:

You shall create a toilet that (amongst other things)...

...costs less than 5 cents per user per day: the anticipated capital and operational cost for the final products (commercial units) is expected to be less than $0.05/user/day, both for the family and neighborhood solutions.


The Foundation left it a bit vague how they want to see the capital costs converted to an annual (or daily) cost.
This was also briefly discussed here on the forum last year by Ulrike and Rosalyn
(see above).

It is a matter of confusion for some grantees, one of them wrote to me:
"I have no idea how much the BMGF expects the systems themselves to cost; The BMGF specifies operating costs only."
(which is wrong)

Anyhow, so I know you are not the only one grappling with this, but I start with you because you are a smart and business-minded guy.

Thus: how have you estimated the capital and O&M costs so far? What are the biggest cost items? How do you hope to bring them down once mass produced? Over how many years do you have to do the financial anlysis for? 10, 20 or 30 years? Which discount factor?

I look forward to hearing your thoughts on this.


Regards,
Elisabeth
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  • christoph
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Re: how to transform investment costs into "cost per use"

Dear all,

concerning the costs I think it would be good to use clear criteria. If not it is possible to proof anything or nothing. The criteria should be, that each calculation capitalizes investment cost in order to get to a “cost per use” has to show:
a) Investment adopted
b) Lifetime (life cycle) adopted
c) Real interest (interest – inflation) adopted
d) Users estimated or uses per toilet estimated

Just an example: a latrine

a) 500 U$
b) 5 years
c) 2% (7 % interest p.a. – 5 % inflation p.a.)
d) 5 users
e) 1 uses per day per user

Result: 500*2%*(1,02^5)/(1,02^5-1)/5/365 = 0,058 U$ or 5,8 Cent per use CAPEX!!

The same latrine

a) 400 U$
b) 10 years
c) 2% (7 % interest p.a. – 5 % inflation p.a.)
d) 10 users
e) 2 uses per day per user

Result: 1,16 Cent per use

So the criteria are VERY important!

You have to add to this the operational costs. If you do a pit cleaning each 5 years the way of calculation would be the same as described.

Do you agree or does anybody have better approaches?

Yours Christoph
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  • gustavo
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Re: how to transform investment costs into "cost per use"

Yes Cristoph - I totally agree. This is the way different options should be compared... also when talking about sewage systems, wastewater treatment plants and water distribution system. You have to convert everything to USD/m3.

+++++++++++++++++
(moderator's comment (EvM): Gustavo: please introduce yourself and fill in your SuSanA profile information. Thanks)
Gustavo Heredia
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  • jonpar
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Re: how to transform investment costs into "cost per use"

I was not aware until reading this discussion about the BMGF criteria.

On a positive note, it is good to see a donor is encouraging recipients of grants to consider operational costs as well as capital costs. It is the first time I have seen this articulated as a requirement for receipt of funding. I hope other funding agencies start to take this on board. So, I think we should congratulate BMGF for a step in the right direction.

BUT, evidently it immediately raises a whole host of questions about how to calculate the equivalent annual cost. It is not so difficult as Christoph's email demonstrates. But clearly some guidelines on this for grantees would be valuable.

I expect that the SuSanA Working Group on Finance and Economics could put together a 1 pager on this for BMGF if they would like us to. They can give is a grant to do so if they like!

At the same time we could send a communique to other donors to lobby them to take this on board.

Who's with me on this one ?

best regards,

Jonathan Parkinson

Programme Manager – Urban Sanitation Initiative
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Re: how to transform investment costs into "cost per use"

p.s. I wasn't serious about the bit about the grant !
Dr. Jonathan Parkinson
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  • steve4real
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Re: RTTC cost calculation: including capital costs?

I think the 1 pager is an excellent idea - that way everyone can be on the same page!
Stephen Sauder, M.Sc., M.A., B.A
Project Manager | Reinvent the Toilet
Centre for Global Engineering, University of Toronto
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  • chrisully
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Re: RTTC cost calculation: including capital costs?

Excellent initiative.

I think that a simple reference document that steps out a consistent approach to costing is definitely required. Financial/economic costing information are being provided more and more in presentations and papers but the process and assumptions behind the calculations are often not presented.

Chris Sullivan
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  • gustavo
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Re: RTTC cost calculation: including capital costs?

Yes this is a very interesting topic!
we have some interesting data about small scale ( <10,000 people) DEWATS we have built in Bolivia www.aguatuya.org
Gustavo Heredia
Director
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  • Elisabeth
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Re: RTTC cost calculation: including capital costs?

Dear Gustavo,

Are you able givs us some figures for your systems, expressed in the same way as outlined above? I.e. cost per user per day (capital and O&M costs taken together?).

Regards,
Elisabeth
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