Life-Cycle Cost Analysis

Life-cycle cost analysis (LCCA) is a method for assessing the total cost of facility ownership. It takes into account all costs of acquiring, owning, and disposing of a building or building system. LCCA is especially useful when project alternatives that fulfill the same performance requirements, but differ with respect to initial costs and operating costs, have to be compared in order to select the one that maximizes net savings. For example, LCCA will help determine whether the incorporation of a high-performance HVAC or glazing system, which may increase initial cost but result in dramatically reduced operating and maintenance costs, is cost-effective or not. LCCA is not useful for budget allocation.

Lowest life-cycle cost (LCC) is the most straightforward and easy-to-interpret measure of economic evaluation. Some other commonly used measures are Net Savings (or Net Benefits), Savings-to-Investment Ratio (or Savings Benefit-to-Cost Ratio), Internal Rate of Return, and Payback Period. They are consistent with the Lowest LCC measure of evaluation if they use the same parameters and length of study period. Building economists, certified value specialists, cost engineers, architects, quantity surveyors, operations researchers, and others might use any or several of these techniques to evaluate a project. The approach to making cost-effective choices for building-related projects can be quite similar whether it is called cost estimating, value engineering, or economic analysis.

DESCRIPTION

A. Life-Cycle Cost Analysis (LCCA) Method

The purpose of an LCCA is to estimate the overall costs of project alternatives