A. Life-Cycle Cost Analysis (LCCA) Method
The purpose of an LCCA is to estimate the overall costs of project alternatives and to select the design that ensures the facility will provide the lowest overall cost of ownership consistent with its quality and function. The LCCA should be performed early in the design process while there is still a chance to refine the design to ensure a reduction in life-cycle costs (LCC). The first and most challenging task of an LCCA, or any economic evaluation method, is to determine the economic effects of alternative designs of buildings and building systems and to quantify these effects and express them in dollar amounts.
Viewed over a 30 year period, initial building costs account for approximately just 2% of the total, while operations and maintenance costs equal 6%, and personnel costs equal 92%. Source: Sustainable Building Technical Manual
There are numerous costs associated with acquiring, operating, maintaining, and disposing of a building or building system. Building-related costs usually fall into the following categories: Initial CostsPurchase, Acquisition, Construction Costs
Operation, Maintenance, and Repair Costs
Residual ValuesResale or Salvage Values or Disposal Costs Finance ChargesLoan Interest Payments
Non-Monetary Benefits or Costs
Only those costs within each category that are relevant to the decision and significant in amount are needed to make a valid investment decision. Costs are relevant when they are different for one alternative compared with another; costs are significant when they are large enough to make a credible difference in the LCC of a project alternative. All costs are entered as base-year amounts in today's dollars; the LCCA method escalates all amounts to their future year of occurrence and discounts them back to the base date to convert them to present values. Initial costs
Initial costs may include capital investment costs for land acquisition, construction, or renovation and for the equipment needed to operate a facility. Land acquisition costs need to be included in the initial cost estimate if they differ among design alternatives. This would be the case, for example, when comparing the cost of renovating an existing facility with new construction on purchased land.
Construction costs: Detailed estimates of construction costs are not necessary for preliminary economic analyses of alternative...