Sustainable Capital Projects: Leapfrogging the First Cost Barrier Dr. Annie R. Pearce Myers-Lawson School of Construction Virginia Tech

Same < > > < Life Cycle Cost First Cost “Unarguable” regions... The realist says... The pessimist says… The idealist says... Learning curve… Economies of scale… Resource scarcity… Stricter legislation… Expectations about Sustainable Projects

Traditionally considered quantifiable costs Qualitative costs Nontraditional quantifiable costs First Cost Life Cycle Cost Revised Whole Project Cost Model

Leapfrogging the First Cost Barrier What are the top strategies for leapfrogging the first cost barrier? How are others using these strategies effectively?

Systems Thinking: Question the question... OR

Systems Thinking: Question the question... Homestead Fire Station, Homestead, FL Anticipated budget cut in half - yikes! What’s the question? Performance benefits: - Infrastructure cost avoidance - Reduced construction costs - Proximity

Systems Thinking: Question the question... Phrase your problem and evaluation criteria in terms of performance requirements Think outside the box; look at the big picture! Don’t be satisfied with “it can’t be done” Sometimes a crisis can result in better outcomes!

Law of Diminishing Returns Conventional wisdom: –The more you throw at a problem, the less bang for the buck you get –There’s a point beyond which you are spending more than you will recover over your investment horizon Diminishing returns Cost-effectiveness limit STOP! Cumulative energy savings Cost of efficiency improvement (Hawken et al. 1999)

Integrated Design 0 Marginal Cost of Improvements Cumulative Savings Diminishing Returns Cost effectiveness limit Tunneling through the cost barrier... Lovins’ Discontinuity Effect (Hawken et al. 1999)

Integrated Design Cost effectiveness limit

Integrated Design Cost effectiveness limit Why does this principle work?

Exploiting Lovins’ Law Run the law in reverse to find cost discontinuities... Consider: –Construction costs and constructability –Equipment selection and labor requirements –Fundamental nature of different types of materials and equipment –Vendor practices

“Servicizing”/Leasing Puts product responsibility on manufacturer Encourages environmental responsibility, efficiency, and innovation Reduces liability and attention required from lessor Shifts cost to O&M Maintenance contracts

Multifunction Technologies Look for products that can play multiple roles: –Increased efficiency –Reduced material use –Reduced packaging –Reduced construction time –Reduced maintenance

Technology Equivalence ?=?= + +

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First Cost Premium = Myth? There’s fruit, and then there’s fruit –“Greener” does not necessarily mean “exotic, expensive, and unachievable” –Sometimes fruit has already fallen into your basket –Start with low hanging, ripe fruit first

Look for the “no-brainers” Lake Meredith National Rec. Area Wind-powered wind warning system: –Warns boaters when winds exceed 18 MPH –Flashing lights and siren –Powered exclusively by the wind

Rapid payback/ high SLOS strategies Choose strategies with rapid payback and high Sustainability Likelihood of Success (SLOS): –Risk –Reliability –Value –Difficulty

Sustainability Likelihood of Success Risk - how likely is it that implementing the intervention will have the desired effect? Reliability - how likely is it that the desired effect will continue over time independent of user behavior?

Sustainability Likelihood of Success Value - what are the chances that the intervention will achieve desired effects without additional negative effects? How much net positive impact per unit effort? Difficulty - given constraints & available resources, how implementable is the intervention? How much is required? What barriers stand in the way?

Thank you for your attention! Got questions? Want to take it to the next level? (540)