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
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