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

Towards a common European methodology for Life Cycle Costing (LCC) – Guidance Document
5
LCC may also be applied in the context of existing constructed assets, for example as a
means of assessing future operational budgets or for evaluating refurbishment and renewal
options.
The period of analysis adopted for an LCC exercise may similarly vary. LCC may be
employed to inform decisions throughout the complete life cycle of a constructed asset (from
its creation to final disposal/demolition) or for a selected limited period within it.
The purposes for which LCC may be employed can also be divided into two broad
categories:
As an absolute analysis, when used to support the processes of planning, budgeting and
contracting for investment in constructed assets
As a comparative analysis, when used to undertake robust financial option appraisals, for
example in relation to potential acquisition of assets, design approaches or alternative
technologies.
Fundamentally, LCC is a tool to support decision making, where the decision requires
assessment of current and future costs (and revenues). The common range of applications of
LCC in supporting decisions includes:
In assessing the total cost commitment of investing in and owning an asset, either over its
complete life cycle (“cradle to grave”) or over a selected intermediate period
By improving understanding of the total cost of an asset, particularly by construction
clients, and improving the transparency of the composition of these costs
By facilitating effective choices between different means of achieving desired objectives,
for example reducing energy use or lengthening a maintenance cycle
By helping to achieve an appropriate balance between initial capital costs and future
revenue costs
In helping to identify opportunities for greater cost-effectiveness, for example selection of
components with a longer service life or reduced maintenance requirements
As a tool for the financial assessment of alternative options identified during a
sustainability analysis, for example components with less environmental impact or
HVAC systems with greater energy efficiency
Overall, by instilling greater confidence in decision-making in a project.
LCC can be employed throughout or at different stages of the life cycle of an asset or a
project to invest in construction; this is considered further in Section 5 below.
Table 2 below illustrates how LCC can be applied in a variety of circumstances, with
examples drawn from a building development. The same principles apply in an
infrastructure or engineering context. More detailed examples are provided in the case
studies in Annex A of this document.
Davis Langdon Management Consulting May 2007