Life cycle costing in construction

When budgeting for a construction project, there are two ways to go about making decisions. You can stick to the principle of calculating the project’s cost entirely based on metrics like upfront costs, Return On Investment and Simple Payback Period. Alternatively, you can undertake life cycle costing analysis to make more efficient decisions to the benefit of both builders and investors. The second option will make your savings to investment ratio extremely positive, and it is crucial that you take it into consideration.

Why life cycle costing?

Life cycle costing analysis, often known as LCCA or LCC, is the most accurate method of increasing a construction project’s savings by considering alternative designs. In contrast to more simplistic ROI-based costing, LCC is aimed at forecasting costs and savings in the long term, keeping in mind that the two are inextricably linked. The term ‘life cycle’ is used because LCC assesses the full range of costs that will be incurred over a building’s lifetime. This includes construction, maintenance, operations and end-of-life costs. The lifespan of a building is made up of the following 5 stages:

The full potential of LCC has not yet been fully realised, but it is becoming an increasingly popular concept. The construction industry is waking up to the advantages, and an ever-increasing number of companies are adopting the techniques and reaping the benefits. The LCC methodology refers to standards ISO 15686-5, EN 16627 and, in the UK, PD 15865:2008.

So what are the disadvantages?

Though it’s genuinely difficult to identify a disadvantage of using LCC in the construction industry, there is one issue that some put forward. As LCC is entirely focused on minimising costs, could it not overlook the environmental impact of a building? This has been a valid concern for some, since many of the more eco-friendly materials can be quite expensive. However, as technology continues to progress and evolve, a growing number of ecological materials are proving to be cost-effective when incorporated into a life cycle perspective.

Think about it: would it be more cost-efficient to install a conventional HVAC system, which will consume a huge amount of energy over decades of operation? Or would a contemporary HVAC system that is designed to facilitate net-zero emissions, generating as much energy as it consumes?

Modern, eco-friendly construction solutions and techniques are designed to be appealing to investors and architects alike. And this appeal only increases when you take a life cycle perspective of the proposed building.

The primary benefits of life cycle costing

1. Optimal long-term value

The upfront costs of your project might remain the same, but you can rest assured your construction project offers maximum value for money. Flaws and imperfections of your original design can be fixed to positively influence your bottom line. This means enhanced durability, increased quality, less maintenance, fewer risks and reduced operational costs for roughly the same upfront investment

2. The fast-track to green building certification

LCC credits are incorporated into many Green Building certification schemes – for some, it is even a requirement. With each certification version release, achieving credits can get more and more complicated. LCC can make it easy to get a few extra points and help improve your green credentials.

3. Reliable planning

LCC helps give your team control of the project at every stage. It is a detailed and comprehensive planning tool that covers extensive timespans. When it is conducted properly, LCC can help you avoid unexpected surprises, dodge financial risk factors and relax as you patiently await the next renovation works, having already planned for their costs.

What does it mean in practice?

There are 3 key steps to the LCC process:

1. A rigorous, structured analysis that shows the cost sources that will have the greatest impact on your total cost of ownership.

2. Having identified the major sources of expenditure, areas for improvement are identified in the baseline design, enabling the testing of different solutions for the existing aims.

3. Having learned about the possible alternatives, you can then undertake comparisons and relocate costs accordingly. Thus, you get maximum value for your project.

LCC is an objective, methodical approach. It needs to be performed as early as possible in the project to get the best results, as it is easier to implement changes during the design phase. By giving yourself more options and greater freedom, you get the maximum value from your LCC process.

When you have an understanding of life cycle costs, the total cost of building ownership can be drastically reduced. By implementing LCC, you can identify the most appropriate costing solution for a construction project. It also empowers you to make comparisons between existing designs and alternatives, so that you can choose the one that gives you the most value from your project.

Getting maximum value from life cycle costing

As you now know, LCC should be implemented at the earliest possible stage in a construction project. This means it should be done before any major decisions are made. The whole team should play a role in discovering alternatives to achieve the project’s full potential. LCC is an ongoing process, and you should repeat the calculations a number of times as you move from one construction stage to the next. Make sure you have the most up-to-date calculations in place to ensure the accuracy and quality of your analysis.

The necessary data for LCC is there in your project designs. Generic LCC data is also available, though there is currently no common database or maintenance cost data. It can be time-consuming to sift through the full range of data sources on a large-scale project, and one good solution is to hire a Costing Specialist or Quantity Surveyor to help.

alsecco facade systems are designed with LCC in mind. Whilst not the cheapest facade systems on the market in terms of upfront costs, the extended design life and life cycle cost make it highly competitive. There are many areas you will need to consider if you are taking the LCC approach, and for building facades, you should keep alsecco in mind. Interested in discussing a project with us? Contact us today on 01785 818998.