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

Towards a common European methodology for Life Cycle Costing (LCC) – Guidance Document
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Similarly, when identifying how many of the asset’s systems or components should be
included in the overall scope of the LCC exercise, it is sensible to apply the ’80-20’
principle, by selecting a manageable list of those systems/components that are likely to have
the greatest overall impact on the asset’s life cycle costs. The size of this list is likely to be
influenced by the project size and the resource/fees available for the LCC exercise.
5.4.6 Assemble data (Step 8)
Unlike the detailed LCC model for an entire asset discussed in Section 5.3 above, the cost,
design and specification data for this exercise will not be readily obtainable from the project
design and cost data. Instead, data will need to be assembled for each of the options under
consideration. Much of this data is typically provided by the existing project team.
Data on the service lives and maintenance requirements of specific systems and components
can be obtained from manufactures and suppliers, published reference sources, historic data
or from professional advisors’ own records.
Data on operating costs such as facilities management is generally obtained by creating a
build up of the likely facilities management resources and costs for each option, as little
historic benchmark data is likely to be available at the system/component level.
Further guidance on data sources and on the identification of relevant on-costs such as site
preliminaries and management costs is provided in Section 8 of the Methodology.
5.4.7 Carry out LCC analysis (Steps 11-13)
At this stage the project data identified above, along with the key parameters, is input into an
LCC calculation tool (typically a spreadsheet or database tool), and the analysis is carried out
according to the methods of economic evaluation selected during the earlier scoping stages.
At this stage, users will also undertake and risk/uncertainty assessments, including sensitivity
analysis of key variables.
Once an initial LCC model has been generated it is common for the user to refine and adapt
the model in consultation with the client. This process might typically include minor
changes to variables such as maintenance intervals or component service lives to reflect
client requirements, ‘smoothing’ of peaks in expenditure in order to reflect likely income
streams, or grouping of key life cycle works into defined remodelling/refurbishment
exercises. This refinement reflects the iterative nature of the LCC modelling process.
5.4.8 Reporting (Steps 14, 15)
The reporting for the LCC exercise typically includes;
Detailed LCC models for each of the options evaluated
A tabular and/or Graphical summary and analysis of the findings. The graphical analysis
would typically include a single graph comparing the annual LCC profiles over the
analysis period for each option (see example in Figure 20 of the Methodology).
A written report setting out the key analysis parameters, assumptions, data sources and
findings
A sensitivity analysis showing the effects on the outcomes of varying key analysis
variables.
Davis Langdon Management Consulting May 2007