Life Cycle Costing in Construction

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Life Cycle Costing in Construction: Reduce your building’s lifetime costs

Focus. You are presented with a choice. Which path would you take?

To the left — routine, all too familiar way to calculate your building project’s costs largely based on upfront costs, Return on Investment, and Simple Payback Period metrics.

To the right — life cycle costing analysis that enables efficient decision-making that is mutually beneficial for both builders and investors, and makes your savings to investment ratio positively overperform.

Would you like to hear more about option B? Last week I sat down and talked with Anni Oviir, our very own Life Cycle Costing specialist. We discussed the advantages and disadvantages of life cycle costing methodology, and I am now happy to share what I have learnt about LCC for the construction industry.

Starting with the basics, what is the purpose of life cycle costing?

Life cycle costing analysis (LCCA or LCC for short) is the most accurate way to increase your building’s project savings by comparing different design alternatives. As opposed to more commonly used ROI-based calculations, LCC is conducted based on long-term costs and savings, keeping in mind the fact that they are interconnected. The “life cycle” part means that LCC assesses all costs that occur over the building’s lifetime including construction costs, maintaining, operating, and end-of-life related costsTo be more specific, the lifespan of a building consists of five main stages: concept planning, design, construction, operations, and replacement or disposal.

While LCC is not yet used to its full potential, it is starting to become more and more popular. Increasing interest in the construction industry and the understanding of LCC benefits have led to a growing number of companies adopting the methodology and taking advantage of the benefits it offers. And as LCC is more and more widely adopted, the guidelines are being refined. The standards the LCC methodology refers to are ISO 15686–5, EN 16627, and, for UK, “Standardized method of life cycle costing for construction procurement” PD 156865:2008.

What does life cycle costing in construction really mean?

LCC is a process that consists of three key steps:

  1. In a clear, structured cost analysis you can easily see what cost sources influence your total cost of ownership the most.
  2. When the major expenditure sources are clear, you can quickly identify hotspots for improvement in your baseline design and test different solutions for the existing objectives.
  3. Knowing your alternatives, you can compare their benefits and accordingly relocate the costs to gain maximum value out of your project.

Therefore, LCC is an objective, down-to-earth approach. Obviously, the earlier is performed the better the result, since it is easier to make changes in the design stage. And the more options and freedom you have, the more value you can get from your LCC analysis.

The understanding of life cycle costs can lead to a drastic reduction of the total cost of building ownership. LCC allows you to find the most optimal costing solution for your building project, to compare between design alternative, and to choose the one that will boost your project’s value.

Credit: Defense Acquisition University website

What are the advantages and disadvantages of life cycle costing?

Are there any disadvantages to using LCC in construction?

There is, perhaps, not a disadvantage, but an issue that some people see in the LCC approach.

It has been noted that LCC focuses exclusively on cost reduction and has no regard for the environmental impact of a building. This was my own concern too when I first heard about LCC analysis, taking into account that eco-friendly materials can sometimes be more expensive. However, as technology keeps evolving, new, more ecological materials can prove to be cost-efficient solutions when adopting life cycle perspective. What is more cost-efficient: installing the conventional HVAC system and consuming a lot on energy over the course of decades or purchasing a contemporary HVAC system that enables net zero building design, producing as much or more energy to cover all expenditure?

Modern, eco-friendly materials and techniques are created to appeal to architects and investors alike especially when looking at a building’s whole life cycle.

What are the main benefits of performing life cycle costing analysis?

  • Best long-term value

Your project costs might drop or remain the same, but you will know that your building project has the highest possible value. You can fix flaws and imperfections of the original design, while positively influencing your bottom line. And that means better durability, higher quality, less maintenance, less risks, and lower operational spending with the same amount of investment.

In some cases, carefully conducted LCC can even result in an increased building lifespan. Better quality materials reduce maintenance costs, and are more resilient, so this potential outcome comes as no surprise.

  • Easy Green Building certification credits

LCC credits are included in many Green Building certification schemes, and in some LCC is a mandatory credit. For example, DGNB has mandatory LCA and LCC credits, while BREEAM includes LCC credits split between sub-credits. In the case of DGNB the LCC credit is called ECO 1.1. LIFE CYCLE COST, 9,6 % (Gebäudebezogene Kosten im Lebenszyklus).

Achieving credits is getting more and more complicated with each certification version released, and LCC can be an easy way to get a few extra points.

  • Reliable planning

LCC helps your team to control the project throughout all its stages. It is an excellent planning tool that covers long spans of time. With properly conducted LCC you can effectively avoid surprises, dodge financial risks, and relax while patiently waiting for the next renovation works knowing how much they will cost you beforehand.

Credit: WERF, Water Research Foundation

How to get maximum value from your life cycle costing analysis?

As it has been mentioned before, LCC should be implemented as early in the project as possible before any major decision has been made. The whole team should be involved in creating alternatives to capture the full potential of your project.

LCC should be regarded as an ongoing process and calculations should be repeated several times as the transition through construction stages takes place. Keep it up to date to ensure accuracy and high analysis quality, and it will be your easiest way to succeed.

The data you need for LCC is readily available in your project designs. The generic LCC data also exists, but there is no common database for LCC and no data is available on maintenance costs. It is time-consuming to go through all the data sources in a big-scale project, so one good option would be hiring a Quantity Surveyor or a Costing Specialist and employing robust software to perform the calculations.

One Click LCA is a cloud-based software has a Life cycle costing module designed specifically for fast and efficient life cycle costs calculation, safely storing your data and helping you achieve Green Building LCC credits.

We are soon releasing a major update to the LCC module that is guaranteed to make your project’s analysis even more precise and effortless with complete automation. Until then, you can sign up for a free webinar to see the software live.

While you are conducting the LCC for your Green Building certification scheme, it is perfect time to use the opportunity to achieve easy life cycle assessment credits. One Click LCA is the best LCA tool that enables you to calculate your project design’s CO2 impact fast and anywhere in the world. Moreover, One Click LCA contains the largest global and local material database available.

Ready to reduce your building’s carbon footprint? Request your free LCA trial now!

Want to learn more about One Click LCA?

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