Life-Cycle Cost Analysis (LCCA) of Buildings

Group 3c:Kalle SinisaloTuomo PehkonenJarmo RomoLaura TolvanenJere RaunamaKalle Vainikka

Life-Cycle of a Building

The lifespan of a property or a building from its design and development until its disposal:

1.Concept planning

2.Design

3.Construction

4.Operations

5.Replacement or Disposal

Life-Cycle Costs (LCC)

Initial costs - Purchase, Acquisition, Construction costs

Fuel Costs

Operation, Maintenance and Repair Costs

Replacement Costs

Residual Values - Resale or Salvage Values or Disposal Costs

Finance Charges - Loan Interest Payments

Non-Monetary Benefits or Costs

Life-Cycle Cost Analysis (LCCA)

“An economic evaluation method for determining the most cost-effective option out of competing alternative.”

OriginCame popular in the 1960’s.

US government agencies began implementing to improve cost effectiveness of buildings and equipment procurement.

Usage has spread around the business world for project evaluation and management accounting.

LCCA of BuildingsCompares execution options

Technically equally appropriate

Different costs

Takes into account the whole life-cycle of a building

Implemented early on, during concept planning and design

Radical changes possible

Main purpose is cost-efficiency, not environmental effects

Extent of study may vary

Tools

Calculation software

Reduce time and effort

Computation

Documentation

Process manuals, guidelines, principles

Depending on preferences and interests of companies and agents

Results are a collection of alternatives

Comparing options for most cost-effective result

Uncertainty of input values has an effect on the outcome values

MethodsMany quantitative techniques have been developed for analyzing life cycle costing of a building. These techniques can be used as a guide in choosing between alternative options in design

Optimal solutions are often something in between these two main categories

Pay-back

This is one of the most used and trusted method because of its simplicity in calculations and interpretation. Used measure in this method is simply time it takes for return of initial investment

Discounted pay-back

In discounted pay-back method we consider time-value of money. This means that value of given sum changes over time. For

example 100$ today is more valuable than 100$ in 5 years.

MethodsNet present value (NPV)

Method of net present value revolves around calculating NPV for every mutually exclusive investment choice

Processes

Steps

1.Identify Alternatives

Consider alternatives which bring value for each project participant and end user

2.Define Constant Parameters

Time period and discount rate

3.Identify Costs

Operating expenditures (OPEX) and Capital expenditures (CAPEX)

4.Generate LCCs for Each Alternative

Evaluate all project alternatives using the same time period and discount rate

5.Performe a LCCA Comparison

Compare the net present value (Sum of cash flow) of each alternative

Compare benefit-to-cost -ratio of best alternatives in order to select the most cost-effective options for the project budget

Example: Life-cycle costs of wooden windows

Building costs

Cost per unit (390€/m2)

Proportion for operating and joint costs (15%)

Reserve fo rise of the costs (2%)

Profit and builder's costs (10%)

Maintenance costs

Painting every 8 years (137 €/m2)

Reconditioning every 16 years (350 €/m2)

Renovating every 40 years

Current value with 40-year time period and 10% rate of interest:

Example: Life-cycle costs of wooden windows

Operation costs

Heat transfer through the windows (U-value 1,4 W/m2K):

Cost of heating energy (0,077€/kWh):

Current value with 40-year time period and 10% rate of interest:

Total costs

Life-cycle costs of wooden windows are:

Country specific variations

LCCA in different countriesLife cycle cost analysis programs are in principle the same in different countries

Results may differ a lot from each other (the price of energy, circumstances, politics)

The LCC-DATA (Intelligent Energy Europe)The LCC-DATA project aimed at easing and extending the use of Life Cycle Costs Analysis

Database for in-use costs (operation, maintenance, management, energy, etc)

The problem is still the lack of the use of LCC analysis. Companies also do not want to share their financial data