Life cycle costing (LCC) as a contribution to sustainable construction ...

Towards a common European methodology for Life Cycle Costing (LCC) – Guidance Document
17
Bidders are also likely to carry out LCC assessments of alternative design/specification
options at this stage.
During the tender stages the Public Sector client may also prepare its own LCC models
based on an exemplar design (often referred to as a Public Sector Comparator), as a
means of evaluating the LCC models submitted by the bidders.
Further refinement of life cycle costs may occur as part of the short-listing of bidders. A
due diligence exercise is also likely to be carried out by both the client and the bidder’s
funders.
Once a preferred bidder is selected the detailed LCC models setting out the expected
expenditure throughout the concession period are incorporated into project financial
models and contracts. For example, the provider may sub-contract defined maintenance
and replacement works to a third party, or the Public Sector client may specify
replacement periods for key elements in the contracts.
During construction and operation of the facility the detailed LCC models are updated to
reflect any changes or variations in the project, or in the specification of components and
materials within it.
The LCC models are regularly updated throughout the concession period and are used as
a tool for managing maintenance and replacement works and for ensuring the necessary
funding for such works is in place. The client may also used the models as a monitoring
tool to ensure the necessary works are being carried out.
4.4 How the Methodology supports Sustainability
Sustainability is now a critical consideration affecting the design, construction, operation and
disposal of constructed assets. The LCC Methodology is a key element in supporting
improvements in the sustainability of the built environment, by providing a common means
for all costs associated with constructed assets to be assessed and compared on a comparable
basis.
The environmental impact of constructing and maintaining the built environment is a
particularly important element of sustainability. In general, the materials and products used
in construction cause environmental impacts due to the interrelated processes of
manufacture, transport, assembly/disassembly, maintenance and disposal associated with
them. Additionally, constructed facilities generate a significant environmental impact in
their own right due to the operations carried out on and within them. Taken together, these
environmental impacts are highly significant and should be addressed at the design/project
planning stage of works projects.
The LCC Methodology allows for the assessment of the cost effects of these impacts, so that
balanced decisions can be made on the life cycle costs of mitigating/reducing environmental
impact. Additionally, the Methodology identifies ‘opportunity points’ for the assessment of
the cost impacts of the results of environmental analysis (such as Life Cycle Assessment –
LCA). Whilst it is not yet possible to integrate fully the results of LCC with environmental
assessment methodologies such as LCA – and this topic is covered further in Section 2.6 of
this Guide – it is important to ensure that the cost implications of environmental impact are
fully understood and taken account of in an LCC analysis. This will help ensure that best
value solutions in both economic and environmental terms are identified.
Davis Langdon Management Consulting May 2007