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1 Introduction to LIFE CYCLE COSTING (LCC) Based on ASTM Building Economics Standards May 24, 2006 Presented by:Robert Charette Hosted by:Harvard Green Campus Initiative
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2 Outline 1.The Notion of Life Cycle Costing 2.Data Requirements 3.Present Value Factors 4.Calculating Life Cycle Costs - Examples 5.Supplementary Evaluation Measures - Examples 6.Integrating LCC in the Design Process
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3 1. The Notion of Life Cycle Costing
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4 Life-Cycle Cost Analysis (LCCA) A method of economic analysis that sums up, over a given study period, all relevant costs of a building, building system, or building component, in present value (PV) dollars, today’s dollar.
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5 Source: Means Life Cycle Costing For Facilities Initial Cost – Office Building - $100 / SF % of Total Building Cost
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6 Source: Means Life Cycle Costing For Facilities Life Cycle Cost – Office Building - $200 / SF Life Cycle Cost – Present Value $ / ft 2 Initial CostOperational Cost
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7 ASTM Standards Present Value Factors (4) – E917 SPVSPV* UPVUPV* Evaluation Measures (4) NS – E1074AIRR – E1057 SIR – E964DPB – E1121
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8 2. Data Requirements for LCC
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9 Data Requirements for LCC A.Investment costs B.OM&R costs C.Cyclical renewal costs D.Financial criteria d – discount rate % e – escalation rate % n – study period years
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10 3.Present Value Factors
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11 Four Present Value Factors From Financial Tables 1. SPV - Single Present Value (w/o escalation) 2. UPV - Uniform Present Value (w/o escalation) 3.SPV* - Modified Single Present Value (with escalation) 4.UPV*- Modified Uniform Present Value Value (with escalation))
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12 4.Calculating Life Cycle Costs
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13 Example – LCC of Competing Heating / Cooling Systems System A: Electric baseboard and window air conditioner System B: Heat Pump Financial Criteria: Discount Rate d = 8% Energy Escalation e e = 6% Maintenance Escalation e m = 5% Study Period N = 15 years
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14 Investment Related Costs Initial Cost – I o $1,500 Replacement Cost Year 8 (Base Yr $)$400 Residual Value (Year 15 $) $150 Operation Related Costs Base Year Electric Energy Cost$1,200 Base Year OM&R Cost$50 System A: Electric Baseboard and Window Air Conditioner
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15 LCC System A PV Investment Costs PV Operational Costs + = $1,772 + $16,156 = $17,927
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16 LCC System B PV Investment Costs PV Operational Costs + =$3,384 + $12,798 = $16,182 LCC System B $1,745 less or 10% less
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17 5. Supplementary Evaluation Measures
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18 Four Supplementary Evaluation Measures From Financial Tables 1.Net Savings - (NS) E1074 2.Savings-to-Investment Ratio - (SIR) E964 3.Adjusted Internal Rate of Return - (AIRR) E1057 4.Discounted Payback - (DPB) E1121
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19 Example - NS, SIR, AIRR, DPB Attic Roof Insulation – R11 to R19 Additional Investment Cost – I $1500 Annual Energy Savings – A 0 $260 Financial Criteria: d = 8% e e = 6% N = 30 yrs
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20 Suplementary Evaluation Measures Additional Investment of $1,500 for Insulation 1.Net Savings (NS)$4,420 2.Savings-to-Investment Ratio (SIR)3.9 3.Adjusted Internal Rate of Return (AIRR)13% 4.Discounted Payback (DPB)6.2 years
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21 6. Integrating LCC in the Design Process
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22 Integrating LCC into the Design Process
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23 Part of the Solution An Integrated Design Process with all stakeholders that includes at the Schematic Phase: ---------------------------------------------------------------------------- A Baseline Preliminary Project Description (PPD) in accordance with CSI/CSC Practice FF/180 An Elemental Cost Estimate With Analytic Parametrs An Energy Analysis Simulation Model
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24 © The Construction Specifications Institute Manual of Practice FF/180 Chart 3.4 Preliminary Project Description (PPD)
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25 Table 4.3 UNIFORMAT II Elemental Cost Summary for Buildings
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26 kWh / SF vs targeted energy budget Identify energy drivers Identify alternatives to be evaluated Baseline Energy Simulation
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27 Summary 1.The Notion of Life Cycle Costing 2.Data Requirements 3.Present Value Factors 4.Calculating Life Cycle Costs - Examples 5.Supplementary Evaluation Measures - Examples 6.Integrating LCC in the Design Process
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28 End Robert Charette, PE, CVS robert_charette@sympatico.ca www.lifecyclecosting.org 514-739-3522 Harvard Green Campus Initiative www.greencampus.harvard.edu 617-496-1278
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