Life cycle cost analysis (LCC) in the United States green building industry. Dave Nornes

Impact of the built environment 40% of the world’s energy 25% of the timber harvested 16% of the fresh water used 50% ozone depleting CFC’s 30% of raw materials used 35% of CO2 emissions 40% of landfill waste

Green Building “An integrated framework of design, construction, operations, and demolition practices that encompass the environmental, economic, and social impacts of buildings.” “Building practices recognizing the interdependence of the natural and built environment and seek to minimize the use of energy, water, and other natural resources while providing a healthy and productive indoor environment.”

Green Building Sustainable Durable/Adaptable Building beyond the codes Build for the occupant Whole systems approach

Barriers to Green Codes Education Cost Products not available Breaking tradition

Reasons to Build Green Mandated Market demands Occupant comfort and health Save $ Environmental responsibility

Reasons to build green “Building to code means that if a building were designed any worse it would be against the law.” Randy Croxton, Architect

Life Cycle Costing Economic assessment of alternatives that considers all of the significant costs of ownership over the useful life expressed in equivalent dollars. initial costs financing costs operational costs

History of LCC 1933-- Comptroller of the U.S. Government 1940-- WW II factored maintenance costs in bids for tractor acquisition 1940-- WW II Shortage of materials and labor. Lawrence D. Miles (General Electric Inc.) created value engineering model for substitute materials and procedures.

LCC applied to buildings 1970’s--U.S. General Accounting Office applied LCC to hospital facilities. Operation and Maintenance costs equal initial investment costs in 1-3 years. Focused primarily on energy costs.(Arab oil embargo)

Standardized LCC methods American Society for Testing and Materials (ASTM) 1980--Set a series of standards for building economics. LCC analysis Benefit to Cost Ratio Internal Rate of Return (IRR) Net Benefits Payback Period

LCC characteristics LCC treats design decisions as investments in buildings and building components. LCC compares the estimated costs of different options taking into account both initial capital costs as well as costs that may be incurred over the life cycle.

LCC objectives To provide an analytical tool that can establish the interaction between planning and design decisions and long term costs. To promote interdisciplinary communication and look at the building as a whole and not merely its component parts.

Recent LCC trends Infrastructure Federal/State Buildings durability/ longevity Federal/State Buildings efficiency/ obsolescence Green Buildings LCC/ LCA studies

LCC Uncertainties Input data Parameters estimating assumptions discount rate useful life/ study period future prices

Literature LCC importance to promote green features. Little evidence exists about if, who, how, and where LCC is applied.

Statement of the Problem Green building initiatives are predicated on the fact that benefits accrue over the life of the building. Use of LCC is needed to increase adoption of green building practices.

Research Questions What are the goals of LCC? Who are the drivers of the studies? To which types of projects is LCC applied? Which building components are analyzed? What constraints are faced with LCC?

Methodology Survey Research Human Characteristics thoughts behaviors

Instrument Web-based questionnaire 18 scaled, nominal, and ordinal questions Part 1- set framework for parameters of study Part 2- specific use and application 3 open ended response questions Part 3- LCC and Green building (opinions and perceptions)

Sample Sample Population LEED registered project contacts 1000 cover letters with hyperlink to questionnaire

Response rate 104 total responses (10.4 %) 45% Architects 84 questionnaires completed 45% Architects 17% Engineers 9% Consultants

Findings Current use of life cycle cost analysis Projects utilizing LCC 10 20 30 40 50 60 70 0-25% 25-50% 50-75% 75-100% Percentage of projects Responses LEED projects All projects

Findings Types of projects utilizing LCC Project types using LCC 5 10 5 10 15 20 25 30 35 40 45 50 Public Private Commercial Renovations Residential Institutional Highway/Infrastructure Responses

Findings Team member(s) initiating the interest of conducting LCC Individual responsible for the analysis LCC Driver and Analyst 10 20 30 40 50 60 Architect Engineer Owner Facility manager Consultant Government Project manager Vendor Group Decision Other Responses Analyst Driver

Goals of the project’s LCC Findings Goals of the LCC Goals of the project’s LCC   Goal Very important Somewhat important Not important Response Avg. Reduce operation/ maintenance costs 55 8 1.13 Extend useful life/durability 47 12 4 1.32 Increase occupant productivity/comfort 31 24 1.63 Conserve natural resources 27 29 7 1.68 Future facility alteration 17 37 9 1.87 Lower construction costs 16 36 1.89 Meet government mandates 15 25 21 2.1

Findings LCC application to building components LCC application in predictive analysis   Building component Always Sometimes Seldom Never Weighted avg. Positive pay-off HVAC system 41 23 1 1.38 94% Lighting/day-lighting 27 30 7 1.69 75% Operations and maintenance 26 8 2 1.76 59% Windows 29 9 1.84 50% Insulation 21 31 10 1.86 45% Water conservation 19 16 2.02 Exterior finishes/Roofing 22 15 4 34% Size of building 11 14 20 2.67 22% Interior finishes 17 2.61 17% Renewable energy 25 2.1 13% Disposal/deconstruction 5 2.84 11% Foundation/structural elements 13 2.92 3%

Better than or equal to projected Findings Accuracy of LCC projections Accuracy of LCC projections   Building component Better than or equal to projected Less than projected No post construction follow-up Weighted avg. Lighting/day-lighting 26 7 20 19 HVAC system 29 12 13 17 Water conservation 21 8 23 Operations and maintenance Windows 4 33 9 Exterior finishes/Roofing 2 38 Size of building 35 5 Insulation Interior finishes 3 34 Foundation/structural elements 37 -1 Disposal/deconstruction 6 -2 Renewable energy 14 24 -7

Findings Constraints encountered in the LCC Constraints encountered in LCC 5 10 15 20 25 30 35 40 45 Forecasting uncertainties/ complex tools Added cost involved Inaccurate input data Added time involved Lack of savings justified Responses

Conclusions Why do you suspect you are not using or under utilizing LCC on the LEED project you are associated with? Shift costs/ budget Lack of expertise/user friendly tools Lack of time

Conclusions Where are improvements needed in the LCC process? User friendly tools Better input data Owner education benefits

Conclusions Do you think LCC is an effective tool to increase sustainable building practices?

Future Research How can the cost to perform an LCC be justified? How can the time to perform an LCC be reduced? What improvements are needed in LCC software? How can the industry have better trained LCC practitioners?