1:5:200

In the construction industry, the 1:5:200 rule (or 1:5:200 ratio) is a rule of thumb that states that:

If the initial construction costs of a building is 1, then its maintenance and operating costs over the years is 5, and the business operating costs (salary of people working in that building) is 200.

The rule originated in a Royal Academy of Engineering paper by Evans et al.

Sometimes the ratios are given as 1:10:200. The figures are averages and broad generalizations, since construction costs will vary with land costs, building type, and location, and staffing costs will vary with business sector and local economy. The RAE paper started a number of arguments about the basis for the figures: whether they were credible: whether they should be discounted; what is included in each category. These arguments overshadow the principal message of the paper that concentration on first capital cost is not optimising use value: support to the occupier and containment of operating-cost. Study by the Constructing Excellence Be Valuable Task Group, chaired by Richard Saxon, came to the view that there is merit in knowing more about key cost ratios as benchmarks and that we can expect wide variation between building types and even individual examples of the same type.

Hughes et al, of the University of Reading School of Construction Management and Engineering, observed that the "Evans ratio" is merely a passing remark in the paper's introduction (talking of "commercial office buildings" and stating that "similar ratios might well apply in other types of building") forming part of a pitch that the proportion of a company's expenditure on a building that is spent directly on the building itself (rather than upon staffing it) is around 3%, and that no data are given to support the ratio and no defence of it is given in the remainder of the paper. In attempting to determine this ratio afresh, from published data on real buildings, they found it impossible to reproduce the 1:5:200 ratio, in part because the data and methodology employed by Evans et al. were not published and in part because the definitions employed in the original paper could not be applied. The ratios that they determined were different by an order of magnitude from the 1:5:200 ratio, being approximately 1:0.4:12. They observed that "everyone else who deals with real numbers" pitches the percentage somewhere between 10% and 30%, and that their data support 12%.

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