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Life Cycle Costing Presented by: Renee L. Hoekstra, CVS RH & Associates, Inc.
Transcript of Life Cycle Costing - c.ymcdn.com · life cycle cost analysis on all state facilities Life-Cycle...
Life Cycle Costing
Presented by:
Renee L. Hoekstra, CVS
RH & Associates, Inc.
Definition
• Life-Cycle Costing (LCC) is the development of all significant costs of ownership of an item, system, facility or product over a specified length of time expressed in equivalent dollars
Life-Cycle Cost
Analysis (LCCA)
Why is LCC Important?
85% of a Facility’s Total Cost is in Operations and Maintenance
Basic Economic Concepts • Time Value of Money (Interest)
• The compounding effect
• $1000 @ 10% interest compounded annually grows to $10,840 in 25 years
• Equivalent Costs
• Equating all costs to a common baseline using an interest rate to adjust for variable expenditure years (i.e. discount rate)
Life-Cycle Cost Analysis (LCC)
LCC Methods
• Present Worth Method
• All future costs recalculated to present day values (discount rate adjusts for inflation and interest)
• Constant Dollar Approach
• Annualized Method
• All future costs estimated based on the year of its expenditure (future rates of inflation and interest must be predicted)
• Current Dollar Approach
Life-Cycle Cost Analysis (LCC)
Benefits of LCCA
Assists agencies/teams in assessing economic consequences of alternatives
An existing building vs. new
Systems or Components
Staffing Efficiencies
Improved Performance
Newer Technology vs. Existing Technology
Life-Cycle Cost Analysis (LCCA)
Government Seeing the Benefits
1977 Federal mandate to reduce energy consumption by 45%
1978, National Energy Conservation Policy mandates all new federal buildings be life cycle cost-effective
Various State legislations mandating life cycle cost analysis on all state facilities
Life-Cycle Cost Analysis (LCCA)
Owner Demands
Facilities with lowest possible initial costs
Minimized annual energy consumption
Minimized maintenance costs
Minimized replacement costs
Minimized staffing costs
Highest quality
Best appearance
Life-Cycle Cost Analysis (LCCA)
Reasons for Little or No LCCA
Lack of management and owner commitment
Lack of innovative ideas
Lack of life cycle cost information
Honest wrong beliefs
Habits and attitudes
No funding allocated
Life-Cycle Cost Analysis (LCCA)
LCC Data Sources
• Initial Project Costs
• Finance Costs
• Energy Costs
• Maintenance, Repair and Custodial Costs
• Replacement and Alteration Costs
• Insurance Costs
• Salvage Values
• Associated Costs
• Functional Use
• Down time
Life-Cycle Cost Analysis (LCC)
Using LCC ON Your Projects
• Identify Economic Criteria
• Criteria
• Sources of Information
• Evaluate Life Cycle Costs and Benefits for your approaches
• Select the Design Alternative that truly is the best
Life-Cycle Cost Analysis (LCC)
PROJECT EXAMPLE
Life-Cycle Cost Analysis (LCC)
Life-Cycle Cost
Analysis (LCC) - Example
Renee L. Hoekstra, CVS RH & Associates, Inc.
6677 W. Thunderbird Road, K183
Glendale, AZ 85306
(623) 266-3943 (800) 480-1401
www.rhpartnering.com
Life-Cycle Cost Analysis (LCC)
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