Life-Cycle Cost Analysis (LCCA)

of Buildings
Group 3c:
Kalle Sinisalo
Tuomo Pehkonen
Jarmo Romo
Laura Tolvanen
Jere Raunama
Kalle 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.”
Origin
Came 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 Buildings
Compares 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

Methods
Many 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.
Methods
Net 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
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)

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 countries
Life 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