In Search of Better Investment and Engineering Decisions

Prepared by: Siti Zubaidah Bt Hashim Lecturer Department of Building Surveying

What is Life Cycle Cost?

An economic analysis procedure that uses engineering inputs
Compares competing alternatives considering all significant

costs
Expresses results in equivalent dollars (present worth)

Cost Considerations
Present Worth Salvage Costs Initial Cost

Costs

Rehabilitation Cost

Maintenance and Inspection Cost

Years
Salvage Value

Present Worth Analysis

Discounts all future costs and benefits to the present:
PW = FC + pwf [MC+IC+FRC+UC] + pwf [S]
t=0 t=n

FC t MC IC FRC UC S pwf

= First (Initial) Cost = Time Period of Analysis = Maintenance Costs = Inspection Costs = Future Rehabilitation Costs = Users Costs = Salvage Values or Costs = Present Worth Factor

First (Initial) Cost

Initial cost of structure
Incentive/disincentive payments should not be included

since they would reflect user benefits or costs prior to structure going into service

Time Period of Analysis

Normally equal for all alternatives
Should include at least one major rehabilitation
Needed to capture the true economic benefit of each alternative

Bridge design today is based on a probabilistic model of

100 years

Maintenance Costs
Annual cost associated with the upkeep of the structure
Information is difficult to obtain for a given project Cost varies on the basis of size of the structure (sqft) Best Guess Values
Frequency - Annual Concrete

0.05 % of Initial Cost Structural Steel 0.05 % of Initial Cost

Inspection Costs
Requirements set forth in the National Bridge Inspection

Standards (23 CFR 650.3) Occurs for all alternatives every two years Cost varies on the basis of size of the structure (sqft) and by construction material Best Guess Values
Frequency - Biannual Concrete

0.15 % of Initial Cost Structural Steel 0.20 % of Initial Cost

Future Painting Costs

Only applies to structural steel structures but excludes

weathering steel Should occur every 20 years Cost varies on the basis of size of the structure (sqft) Best Guess Values
Frequency every 20 years Concrete

0.0 % of Initial Cost Structural Steel 7.0 % of Initial Cost

Future Rehabilitation Costs

The frequency is not only a function of time but also the

growing traffic volume and the structural beam system Cost varies on the basis of size of the structure (sqft) and structural beam system Best Guess Values
Frequency

First occurrence Concrete 40 years First occurrence Structural Steel 35 years Annual traffic growth rate .75 % (shortens rehab cycles) Concrete 20.0 % of Initial Cost Structural Steel 22.0 % of Initial Cost

Salvage Value/Costs
Occurs once at end of life of structure
Difference between
Removal cost Salvage value

Best Guess Values

Removal cost 10 % of Initial Cost
Salvage Value Concrete - 0 % of Initial Cost Salvage Value Structural Steel - 2 % of Initial Cost

Users Costs
For early construction completion, maintenance and

rehabilitations only
Delay-of-use

Time delay Fuel consumption Driver discomfort

Vehicle operating costs Accidents

Users Costs
Pros
Users pay for transportation system Drives the results

Cons
Owner can not recoup costs
Not in my budget Drives the results

Users Costs
Driver Delay Costs:

DDC = (L/Sa-L/Sn) x ADT x N x w

L Sa Sn ADT N w = Length of affected road way = Traffic speed during maintenance activity = Normal traffic speed = Average daily traffic (vehicles per day) = number of days of maintenance activity = Hourly time value of drivers

Users Costs
Vehicle Operating Costs:

VOC = (L/Sa-L/Sn) x ADT x N x r

L Sa Sn ADT N r = Length of affected road way = Traffic speed during maintenance activity = Normal traffic speed = Average daily traffic (vehicles per day) = number of days of maintenance activity = weighted-average vehicle cost

Users Costs
Accident Costs:

AC = L x ADT x N x (Aa-An) x ca
L ADT N Aa An ca = Length of affected road way = Average daily traffic (vehicles per day) = number of days of maintenance activity = Accident rate during maintenance activity = Normal accident rate = Cost per accident

Present Worth Factor

1
pwf = (1 + i)n

pwf
i n

= Present Worth Factor for discount rate i and year n = Discount rate = Number of years when cost (benefit) will occur

Discount Rate
Interest - Inflation
i= 1 + Inflation
Interest The return of an investment that raises the future value of an invested dollar
Inflation The erosion of a dollars value that raises any future expenses Use of a discount rate allows for the use of constant dollars in the analysis

Process And Approach Limits

Government does not invest money to gain cash benefits

(interest)
Government money is generally invested only in

depreciating assets
Anything not bought this year costs more next year

(inflation)

User Costs Input

User Co sts In p u ts
Len gth of affected road way * ADT * Norm al traffic sp eed Con stru ction traffic sp eed Norm al accid en t rate Con stru ction accid en t rate Nu m ber of con stru ction d ays Early Construction Com pletion Maintenance Inspection Painting Rehabilitation Hou rly tim e valu e of d rivers W eigh ted average veh icle cost Cost p er accid en t

Alt erna t ive 1 Prest ressed Concret e 2.00 5,000 45 20 1.9 2.2 90 10 5 0 120 6.25 8.00 100,000

Alt erna t ive 2 St ruct ura l St eel 2.00 m iles 5,000 veh icles p er d ay 45 m p h 20 m p h 1.9 /m illion veh icle m iles 2.2 /m illion veh icle m iles 0 d ays 10 d ays/occu rren ce 8 d ays/occu rren ce 90 d ays/occu rren ce 120 d ays/occu rren ce 6.25 $/h ou r 8.00 $/h ou r 100,000 $/occu rren ce

Note*: Total traffic affected by Main ten an ce, In sp ection , Pain tin g, an d Reh abilitation activity over an d u n d er stru ctu re

Discount Rate Inputs

Present Worth Factors Discount Rate Inflation Rate For All Alternatives 0.00% 2.00%

Structure ctu re Costs Input In itial Cost of Stru

7,000,000

An alysis Period

100 Alt erna t ive 1 - Prest ressed Concret e Frequency ( Yea rs) Cost Per Occurrence Fa ct or Cost

Main ten an ce Costs In sp ection Costs Pain tin g Costs Reh abilitation Costs First Rehabilitation An n u al Traffic Growth Rate * Salvage Costs/Valu e Dem olition Costs Salvage V alue Net Salvage Costs

1 2 0 40 0.75% 100 100

0.05% 0.15% 0.00% 20.00%

3,500 10,500 0 1,400,000

10.00% 0.00%

700,000 0 700,000

Structure Costs Input

In itial Cost of Stru ctu re An alysis Period
7,000,000 100 Alt erna t ive 2 - St ruct ura l St eel Frequency ( Yea rs) Main ten an ce Costs In sp ection Costs Pain tin g Costs Reh abilitation Costs First Rehabilitation An n u al Traffic Growth Rate * Salvage Costs/Valu e Dem olition Costs Salvage V alue Net Salvage Costs Cost Per Occurrence Fa ct or Cost

1 2 20 35 0.75% 100 100

0.05% 0.20% 7.00% 22.00%

3,500 14,000 490,000 1,540,000

10.00% 2.00%

700,000 140,000 560,000

Life Cycle Costs Results

Alternative 1 - Prestressed Concrete Cost s User Cost s Construction Maintenance Inspection Painting Rehabilitation Salvage Total Constant Dollars Present W orth
7,000,000 346,500 514,500 0 4,200,000 700,000 12,761,000 30,235,675 6,408,792 21,746,666 (383,250) 4,215,750 1,043,292 0 1,533,000

Tot a l
6,616,750 4,562,250 1,557,792 0 5,733,000 700,000 19,169,792 51,982,341

Life Cycle Costs Results

Alternative 2 - Structural Steel Cost s User Cost s Construction Maintenance Inspection Painting Rehabilitation Salvage Total Constant Dollars Present W orth
7,000,000 346,500 686,000 1,960,000 6,160,000 560,000 16,712,500 48,910,066 9,462,017 31,365,348 0 4,215,750 1,669,267 1,533,000 2,044,000

Tot a l
7,000,000 4,562,250 2,355,267 3,493,000 8,204,000 560,000 26,174,517 80,275,414

Life Cycle Costs Comparisons

Prest ressed Concret e Sa vings Cost s
Co n stan t Do llars Presen t Wo rth 31% 62%

User Cost s
48% 44%

Tot a l
37% 54%

Thank you for your Attention!