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

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Towards a common European methodology for Life Cycle Costing (LCC) – Guidance Document 6 Table 2: Typical applications of LCC Context and need During investment planning, clients will need to understand the full cost implications of operating as well as building the scheme, to establish its essential viability. During the early stages of scheme design, decisions will be required on the fundamental elements – structure, envelope, services, finishes By detail design stage, the essential cost parameters of the scheme will be determined but decisions will still be required on details and whether, finally, to commit to construction. Detailed design also requires final selection of materials, components and systems. Potentially, similar decisions will subsequently be required in the event of their replacement during operation and maintenance During the operation of the completed asset refurbishment and renewal of some elements might be required, driven by (for example): • High operational costs • High energy consumption • Obsolescence (for example: physical, technical, economic, social) • Change in use of the asset • Components or systems reaching the end of their service life Typical application of LCC The analysis will be based on approximate data, typically historical information from similar projects, but sufficient for budgeting and option ranking to allow a decision on whether to go ahead, to reduce the scheme or stop. The analysis can draw on feasibility studies and pre-project professional advice, as well historical information, to support decisions on the key features of the scheme – its size, scope, method of construction and operation. Information can now be fed into the analysis based on a clear view of all primary elements of the scheme and access to related cost, service life and maintenance data from manufacturers’ specifications, as well as similar projects and national price books. This allows a detailed LCC breakdown confirming the viability of the scheme and appraisal of detailed design options. Sensitivity and risk analyses may also be carried out. LCC analysis can be focused on the specific component or system with the benefit of related cost, service life and maintenance data from manufacturers’ specifications, as well as from similar projects and national price books. The main focus will be on option evaluation, ranking and selection. LCC can be applied in supporting selection of the most appropriate refurbishment or renewal option, at either an asset or component level. The analysis can be based on historic or benchmark data, or on detailed data derived from manufacturers’ specifications and comparable cost-in-use data. It is essential that the analysis takes into account the impact on interdependent systems and the overall asset. 2.4 The core LCC process Regardless of whether LCC is used to inform decisions throughout the life cycle of a constructed asset or only for a selected limited period within it, the core processes involve the same series of key steps in all circumstances. These steps are summarised below. Davis Langdon Management Consulting May 2007
Towards a common European methodology for Life Cycle Costing (LCC) – Guidance Document 7 Figure 1: Core process of LCC Defining the objective of the proposed LCC analysis Preliminary identification of parameters and analysis requirements Confirmation of project and facility requirements Assembly of cost and performance data Carry out analysis, iterating as required Interpreting and reporting results These key steps are explained in greater detail in the Methodology and are illustrated further in subsequent sections of this guide. 2.5 Interrelationship between LCC and sustainability analysis Whilst LCC and LCA are two distinct and different processes that have developed and are practised as separate disciplines in the construction industry, there are many parallels and interrelationships between the two. For example, both: Are concerned with assessing the long term impacts of decisions Require analysis of an often diverse range of inputs Use similar data on inputs of materials and energy Take into account operation and maintenance Consider opportunities for recycling vs. disposal Provide a basis for rational decision making, particularly in appraising options. However, the two disciplines differ in the basis of the resulting decisions: LCC combines all relevant costs associated with an asset into outputs expressed in financial terms as a basis for making investment decisions LCA enables decisions to be made on the basis of potential environmental impacts by scoring and rating on environmental criteria. Whilst costs can be firmly attributed to some environmental factors there is currently no widely agreed methodology for others and some cannot be quantified at all in cost terms. As a result LCC and LCA do not necessarily produce a common output. Nevertheless environmental impact assessment has a key place in overall long term decision-making and consideration should be given to how to integrate it with the LCC process at the earliest stages. Davis Langdon Management Consulting May 2007
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Life cycle costing (LCC) as a contribution to sustainable construction ...

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