Life Cycle Cost Analysis

Life Cycle Cost Analysis

What is Life Cycle Cost Analysis?

Life Cycle Cost Analysis (LCCA) is the cost of an asset, or its part throughout its cycle life while fulfilling the performance requirements. Source: BS/ ISO 15686-5 Buildings & Constructed Assets: Service Life Planning: Life Cycle Costing.

It is a system that calculates and amasses all costs and revenues attributable to cost the assets from their invention to their abandonment. LCCA is a process of evaluating the economic performance of a building over its entire life. (Stanford University Land and Buildings, 2005).

Cost components in LCCA:

A life cycle cost analysis comprises the investigation of the costs of a system or a component over its entire life span. The typical costs for a system include: (Energy System, Mechanical System, Electrical System, Building Envelope, Siting and Structural Systems)

1. Acquisition Costs- Acquisition costs or capital costs are the initial costs of a system combining designing and construction costs. These costs include Labour, Material, Equipment furnishings, and design and permit fees etc.
2. Maintenance and Operation Costs- Maintenance costs are the costs incurred for regular upkeep of the building systems so that they continue working properly. Operation costs include cost of repairs, cost of failures etc. and maintenance costs consist of preventive, reactive, planned and deferred maintenance costs. Generally, maintenance costs tend to accumulate over time and are a major contributor towards high life cycle costs. In the case of pre-installed services, maintenance issues may arise due to wear and tear of services, adding towards maintenance cost, leading towards higher life cycle costs. (Ashworth, 2010)

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Figure 1: Building Maintenance Services

1. Utility Costs- Utility costs is the amount of usage of energy systems which are the components of the facility that provide environmental conditions consistent with the intended use of the facility. E.g. heating and cooling systems, ventilation, etc.  (State of Illinois, 1991) Fuel and utilities expenses cover heat, electricity, gas, water and sewer charges. These costs consist of fuel for central heating of the building, electricity and cooking gas. (Karen M. Eisenstadt, 1972)
2. Service Costs- Service costs embrace items such as janitorial services, elevator maintenance and pest control. As these costs are related to the programmatic elements of building they are generally not included in LCCA.
3. Disposal Costs- Disposal costs include residual value (which is usually zero) and demolition costs (generally assigned to new projects) of the building components which cannot be repaired and need to be replaced as for most building services projects disposal costs exceed salvage costs. (State of Illinois, 1991)

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Figure 2: Life Cycle of an Asset

Life Cycle Cost Analysis Diagram:

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Figure 3: Life Cycle Cost Diagram

Objectives of Life Cycle Cost Analysis:

1. LCCA makes utility examine projected life cycle costs for comparing contending capital and O&M project solutions and consents for appropriate comparison of alternatives of various capital values and lengths of time.
2. Curtails the total cost of ownership of the Utility’s infrastructure to its customers providing a desired level of sustained performance
3. Supports management affecting decisions during any life-cycle phase
4. Helps in making more informed decisions
5. Ascertains the qualities of the asset which considerably affect the Life Cycle Cost drivers so that the assets can be efficiently managed
6. Identifies the cash flow requirements for projects

LCCA Calculations for the Primary Elements: