1. Life-Cycle Cost Analysis (LCCA) of Buildings
Group 3c:
Kalle Sinisalo
Tuomo Pehkonen
Jarmo Romo
Laura Tolvanen
Jere Raunama
Kalle Vainikka

2. Life-Cycle of a Building
The lifespan of a property or a building from its design and development until its disposal:
Concept planning
Design
Construction
Operations
Replacement or Disposal

3. Life-Cycle Costs (LCC)
Initial costs - Purchase, Acquisition, Construction costs
Fuel Costs
Operation, Maintenance and Repair Costs
Replacement Costs
Residual Values - Resale or Salvage Values or Disposal Costs
Finance Charges - Loan Interest Payments
Non-Monetary Benefits or Costs

4. Life-Cycle Cost Analysis (LCCA)
“An economic evaluation method for determining the most cost- effective option out of competing alternative.”

5. Origin Came popular in the 1960’s.
US government agencies began implementing to improve cost effectiveness of buildings and equipment procurement.
Usage has spread around the business world for project evaluation and management accounting.

6. LCCA of Buildings Compares execution options
Technically equally appropriate
Different costs
Takes into account the whole life-cycle of a building
Implemented early on, during concept planning and design
Radical changes possible
Main purpose is cost-efficiency, not environmental effects
Extent of study may vary

7. Tools Calculation software Process manuals, guidelines, principles
Reduce time and effort
Computation
Documentation
Process manuals, guidelines, principles
Depending on preferences and interests of companies and agents
Results are a collection of alternatives
Comparing options for most cost-effective result
Uncertainty of input values has an effect on the outcome values

8. Methods Pay-back Discounted pay-back
Many quantitative techniques have been developed for analyzing life cycle costing of a building. These techniques can be used as a guide in choosing between alternative options in design
Optimal solutions are often something in between these two main categories
Pay-back
This is one of the most used and trusted method because of its simplicity in calculations and interpretation. Used measure in this method is simply time it takes for return of initial investment
Discounted pay-back
In discounted pay-back method we consider time-value of money. This means that value of given sum changes over time. For example 100$ today is more valuable than 100$ in 5 years.

9. Methods Net present value (NPV)
Method of net present value revolves around calculating NPV for every mutually exclusive investment choice

10. Processes

11. Steps Identify Alternatives Define Constant Parameters Identify Costs
Consider alternatives which bring value for each project participant and end user
Define Constant Parameters
Time period and discount rate
Identify Costs
Operating expenditures (OPEX) and Capital expenditures (CAPEX)
Generate LCCs for Each Alternative
Evaluate all project alternatives using the same time period and discount rate
Performe a LCCA Comparison
Compare the net present value (Sum of cash flow) of each alternative
Compare benefit-to-cost -ratio of best alternatives in order to select the most cost- effective options for the project budget

12. Example: Life-cycle costs of wooden windows
Building costs
Cost per unit (390€/m2)
Proportion for operating and joint costs (15%)
Reserve fo rise of the costs (2%)
Profit and builder's costs (10%)
Maintenance costs
Painting every 8 years (137 €/m2)
Reconditioning every 16 years (350 €/m2)
Renovating every 40 years
Current value with 40-year time period and 10% rate of interest:

13. Example: Life-cycle costs of wooden windows
Operation costs
Heat transfer through the windows (U-value 1,4 W/m2K):
Cost of heating energy (0,077€/kWh):
Current value with 40-year time period and 10% rate of interest:
Total costs
Life-cycle costs of wooden windows are:

14. Country specific variations
LCCA in different countries
Life cycle cost analysis programs are in principle the same in different countries
Results may differ a lot from each other (the price of energy, circumstances, politics)
The LCC-DATA (Intelligent Energy Europe)
The LCC-DATA project aimed at easing and extending the use of Life Cycle Costs Analysis
Database for in-use costs (operation, maintenance, management, energy, etc)
The problem is still the lack of the use of LCC analysis. Companies also do not want to share their financial data