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Asset Management Manual
A guide for practitioners!
Rates used for the calculation of GRC should be the rates used for new construction and should the organization’s own rates. They should reflect actual rates at the time; proposed improvements in procurement or other factors that might lower rates in future years should not be anticipated.
In some cases, organizations may not have sufficiently recent rates of their own. This is most likely to arise with certain infrequent maintenance or replacement activities, for example when maintaining or replacing structures. For anything else, organizations should take appropriate steps to obtain a realistic estimate, for example by seeking rates from similar or neighbouring organizations.
Replacement costs should be the net of any residual (disposal) value of the asset or component. In most cases, disposal will be part of the replacement works and will therefore already be reflected in the unit cost rates. For example, in a street lighting replacement contract, the contractor will normally be responsible for removing and disposing of the old assets as well as installing the replacements, and the rates will take account of any scrap value. However, when that is not the case, any residual value will need to be netted off from the replacement costs.