LIFE CYCLE COSTING

What is Life Cycle Costing (LCC)?

   The life cycle cost of a building of structure incorporates the total costs linked with it from inception through the eventual demolition. Overall LCC is a method to affects the cost of the entire building’s life cycle. LCC often used in the early of a building’s development but some companies use it as a tool for the entire process of building. Based on  (Dhillion, 2010) the effects of the maintenance and running cost on the project are so evident that any attempt to overlook them would be at the detriment of the client and in fact, to the professional competence of the design and construction teams. (Akasah, 2012)  stated as such, LCC can serve as a valuable technique to predict and assess the cost performance of constructed assets, and thus aid in determining whether a project meets the client’s performance requirements. LCC assesses all costs that occur over the building’s lifetime operating cost, disposal cost, initial cost, service cost and preventive maintenance cost.  

         

                                                Figure 1.0: Show the cost in LCC

 1. Operating Cost

Operating cost is the cost for cleaning, caretaking, operating of plant and equipment and other associated activities.

2.  Disposal Cost

After demolition occurs, the recycling, reusability, and how disposable the resources should be determined. Factors such as cost, environmental impact, and the ending of the process are what concludes the entire process of a life cycle cost.

3.  Initial Cost

The capital and initial expenditure on an asset when first provided. Capital recovery will be a function of the interest rate and the facility’s expected life. To relate initial cost avoidance to service the program, the first step is to annualize capital costs to align them with how services are budgeted or included in five-year capital and modernization plans.

4. Service Cost

This cost includes the price of labour involves starting the project until the end of the building lifecycle. This service cost given base on their job scope and hour of working.The construction contract price includes the direct project cost including field supervision expenses plus the markup imposed by contractors for general overhead expenses and profit. The factors influencing a facility price will vary by type of facility and location as well. 

5. Preventative Maintenance Cost

Maintenance refers to any activity or a combination of actions that cover the technical aspects and management functions that are undertaken to maintain, preserve, or recover something to its original condition. Furthermore, it also refers to the work other than daily and routine cleaning necessary to maintain the performance of the building fabric and its services.

Objectives of Life Cycle Cost

•    LCC is the mathematical method used to form and support decision making.
•    Usually employed when deliberating on the selected options.
•   LCC is essential to effective decision making in four ways:

             i.   Identifies total cost commitment (Rather than initial cost)

                 ii.  Facilitates on effective choice of selecting between

              alternative and method of stated objectives.

                 iii.  A management tool that details the current operating costs of assets.

                 iv.  Identifies those an area in which operating costs might be reduced. 

What Importance of Life Cycle Costing?

1.   A whole or total cost approach undertaken in the acquisition of any capital cost project/asset, rather than concentrating on the initial capital alone. As a result of the loss of a holistic view of true costs of a building, the cost-inefficient solution might be selected. (Schneiderova, 2018) stated, life cycle costs (LCC) in general consist of an initial investment as usual construction costs and the follow-on costs ordinary payments, such as energy, utilities, cleaning and maintenance, irregular costs for renewal or replacement, while some life cycle costing methods also include the costs of demolition.

2.     Allows more effective choice, the method will take into account the capital, repairs, running, replacement cost, express these inconsistent and comparable terms. (Kovacic, 2016) life cycle costing is a method of assisting in estimating the total cost of ownership. The technique is able to help make decisions within building investment projects. Life cycle costing is particularly useful for estimating total costs in the early stage of a project

3.    Asset management tools allow the operating cost of premises to be evaluated at frequent intervals. Life cycle costing is often recommended as the method for finding cost-optimal solutions for product design. Life cycle costing is becoming the more frequent used tool in the design phase of building.

4.   Enable cost to be correlated with changes in working practices, such as hours of operation, the introduction of the new plant, machinery and use of maintenance analysis. The types of the material specified, the quality of the design and the contracting method has to be chosen directly upon operation and maintenance costs. By the way, the used procurement methods may have implications and a great influence on life cycle costs.

When Life Cycle Costing (LCC) approach can be adopted?

Figures 1.1: Shows Stages of LCC can be adopted

1.   Design Stages

-To evaluate various options in the design in order to access their economic impact throughout the project’s life.

-This way the economic and ecological goals are set will influence the efficiency and effectiveness of the building through an appropriate design.

-Also, it can target values during the whole design process and at the beginning of the design utilization phase.

2.   Procurement Stage

-Under contractual and procurement arrangement the manufactures and supplies are encouraged to supply goods, materials and components which ensure the lowest initial cost irrespective of their future cost in use.

3. Construction Stage

- To know the contractor’s method of construction.

- The contractor can benefit from adopting a life cycle costing approach to the purchase, lease or hire of the construction plant and equipment.

-Professional input to the scrutiny of the design by construction manager in the context of manufacture and construction and in the way that the project will assemble at site.

4.  During the project use and occupation

-Physical asset maintenance management.

-Cost attribute to maintenance can be reviewed at frequent interval.

Life Cycle Phases

                      

             Figures 1.2: Show phase of building life cycle

                       

Life-Cycle Phase	Description	Associated Costs
1. Specification	The formulation of the client’s requirements and translating these into an acceptable design	Initial the cost connected with land purchase, professional fees and construction
2. Design
3. Installation	The construction process up to completion and the handing over of the project to client	Recurring the cost necessary for occupational charges such as rate, insurance, repairs, improvements, fuel, cleaning and estate control
4. Commissioning
5. Maintenance	The use of the project for its intended purpose
6. Modification	Alterations necessary to keep the project in a good standard of repair or to improve the current-day standard	Recurring cost required for major changes to building in respect of refurbishment and redevelopment
7. Replacement	The evaluation of the project for a major refurbishment, or the site for redevelopment

Table 1.0: Show life cycle phase

Conclusion

Life cycle costing is a method of economic analysis directed at all costs related to constructing, operating, and maintaining a construction project over a defined period of time. Design decisions made at this project phase are determining the whole life effectiveness of the building. In the early phase of construction projects, the enormous benefit of life cycle costing could be gained. The commonly used construction cost minimization approach should be substituted for life cycle costs optimization. In order to gain the maximum value for money, all costs incurred over the whole life span must be estimated. The optimization of the life cycle costs of a project, construction, or equipment is essential for the complex decision-making process.

References

1.   Akasah, N. A. (2012, September). Implementing Life Cycle Costing in Malaysian. Journal of Civil Engineering and Architecture. Melaka, Malaysia. Retrieved from http://www.davidpublisher.org/Public/uploads/Contribute/555aa84b993b0.pdf

2.    Dhillion, B. (2010). Life Cycle Costing for Engineer. Amsterdam: Gordan and Breach Science Publisher.

3.    Kovacic, I. (2016). Building Life-Cycle Optimization Tools for Early Design Phases. 5-8.

4.  Schneiderova, R. (2018). IMPORTANCE OF LIFE CYCLE COSTING FOR CONSTRUCTION PROJECT. (pp. 1223-1225). Czech Republic: Engineering Rural Press.