Understanding Life Cycle Costs by air20214


									                                                             investment costs, allows for various alternatives to be
Understanding Life Cycle                                     compared to each other based on their full life cycle
                                                             costs. By approaching a project in this way, the owner,
         Costs                                               architect, and contractor can make quantifiable
                                                             determinations as to which alternative is truly the best
 By Michael Funck, Wohlsen Construction Company;             value.
     Member of the Green Building Committee
                                                             This is one of the main focuses of LEED®, and
Traditionally, as designers and contractors, our focus       sustainable buildings in general.    Balancing the
has been to develop buildings which are aesthetically        environmental impact of a project through better
pleasing, functional to the user, and soundly built, while   efficiency, and reducing energy costs, particularly
being economically efficient. What we have not               considering impeding increase in energy costs -
focused on enough is the cost of the building over its       particularly electric and petroleum - this type of
lifetime which is essentially Life Cycle Costs.              analysis will prove to provide greater dividends to
                                                             owners in their ongoing operating costs moving
Life Cycle Costs are the total discounted dollar cost of     forward.
owning, operating, maintaining and disposing of a
building or a building system. Instead of only looking       In summary, doing this kind of analysis on a building or
at the first cost of a building, we must investigate the     system can be the greatest value that we as designers
economics of the building’s operations over the life of      and contractors provide to owners. Ultimately the
the building. This is done by comparing various              owner will live with, and pay for, the buildings we
building or building system alternatives to each other       create long after we have completed the design and
based on their total life cycle costs.                       construction.

Understanding life cycle costs requires us to understand
various pieces of information concerning a building, or
a building system, over a period of time (typically 20
years). To effectively perform an accurate analysis we
must consider:
      Initial Investment Costs – these are costs that
      are incurred to construct a building or system
      prior to occupancy or operation. (Example: cost
      to construct a building).
      Operations Costs – these are annual costs for
      utilities or custodial services. (Example: ongoing
      energy costs).
      Maintenance & Repair Costs – these are
      scheduled and unanticipated costs to keep-up
      and/or prolong the life of the facility or system.
      (Example: preventive maintenance costs).
      Replacement Costs – these are major
      expenditures to replace a system or component at
      the end of the life of that system or component,
      but not the end of the life of the entire building.
      (Example: cost to replace a boiler).
      Residual Value – this is the value of the building
      or system at end of the life cycle costs analysis.
      (Example: the value of a building at completion
      of study period).

The information as described above, whether analyzing
an entire building, or a component within a building,
makes it possible to evaluate the long term costs rather
than simply the initial construction costs. Each piece
must be evaluated and summarized based on their
current (present) value. These items added to the initial

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