Building Economics Life Cycle Cost Analysis

Building Economics
Life Cycle Cost Analysis
Submitted To – Ar.Daman
By-Pardeep Singh
1731683
What is Life Cycle Cost Analysis?
• Life cycle cost analysis (LCCA) is an approach used to assess the total cost
of owning a facility or running a project. LCCA considers all the costs
associated with obtaining, owning, and disposing of an investment .
• Life cycle cost analysis is especially useful where a project comes with
multiple alternatives and all of them meet performance necessities, but
they differ with regards to the initial, as well as the operating, cost.
• In this case, the alternatives are compared to find one that can maximize
savings.
• For example, LCCA helps to determine which of the two alternatives will
raise the initial cost but will reduce the operating cost. However, LCCA
should not be used for the purpose of budget allocation.
Understanding Life Cycle Cost Analysis
• Life cycle cost analysis is ideal for estimating the overall cost of a
project’s alternatives. It is also used to choose the right design to
ensure that the chosen alternative will offer a lower overall
ownership cost that is consistent with function and quality.
• LCCA needs to be performed during the initial stages of the design

process, as there is room to make changes and refinements that will
ensure that the life cycle cost is reduced.
Costs
• Various costs arise when procuring, operating, or disposing of a project.

Project-related costs can be classified into initial costs, fuel costs,
replacement costs, operation and maintenance costs, finance charges,
and residual values.
• Only relevant and significant costs in each of the categories above can
be used to make investment-related decisions. Costs are considered
significant when they are substantial enough to cause a dependable
impact on a project’s LCC.
• All the costs involved are treated as base year values equivalent to
present-day dollar amounts; LCCA transforms all dollar values into
future year occurrence equivalents and then discounts all the values to
their base dates. In such a way, it’s easy to find their present value
Life Cycle Cost Analysis for Infrastructure
• Life cycle cost analysis can be used to assess different

infrastructural sectors such as rail and urban transport, airports,
highways, and ITS, as well as ports and industrial infrastructure.
Such kinds of projects make use of capital expenditure, which is the
initial cost involved when constructing or delivering an
infrastructural asset. Simply put, it is the cost of construction for the
infrastructure of choice.
• The other thing that is important in infrastructural development is

operating expense, which consists of a number of costs, including
utility, manpower, insurance, equipment, health, and routine and
planned repairs.
• Replacement costs are incurred every cycle based on the predefined

age of replacement for different assets and the manufacturer’s
preference.
• Probably another important element of LCCA is disposal cost. When

the disposal cost is incorporated, it is possible to offset any
additional cost incurred during a particular year.
Advantages
Following are the benefits of the analysis:
•It will result in earlier actions for the generation of revenue.
•Lower costs than other methods or techniques.
•It shows an accurate and realistic assessment of costs and revenue within a specified
life cycle stage.
•It promotes long-term worthwhile.
•It gives an opportunity for total incremental costs over the whole span of time.
•It will provide management awareness of the resources required to be purchased and
the drive cost of it.
•This technique will not only focus on the cost but also other factors like the quality
of goods and the services that must be provided.
Disadvantages
•Time-Consuming: This analysis is way too long because of changes in the new

technology with future stability.
•Costly: The longer project means the long-time duration which makes it more costly
than other methods.
•Technologically Outdated: As technology changes day today so it provides the

possibility of outdated technology.
•Less Reliable: It is not a reliable method for facts and figures because some data are
assumed by the companies for the calculation of life cycle cost

Building Economics Life Cycle Cost Analysis

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Building Economics Life Cycle Cost Analysis

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Building Economics

Life Cycle Cost Analysis

Understanding Life Cycle Cost Analysis

• LCCA needs to be performed during the initial stages of the design

• Various costs arise when procuring, operating, or disposing of a project.

Life Cycle Cost Analysis for Infrastructure

• Life cycle cost analysis can be used to assess different

• The other thing that is important in infrastructural development is

• Replacement costs are incurred every cycle based on the predefined

• Probably another important element of LCCA is disposal cost. When

Following are the benefits of the analysis:

•It will result in earlier actions for the generation of revenue.

•Lower costs than other methods or techniques.

•It promotes long-term worthwhile.

•Time-Consuming: This analysis is way too long because of changes in the new

•Technologically Outdated: As technology changes day today so it provides the

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