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
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
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