1

Introductionto

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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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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1. The Notion of Life Cycle

Costing

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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.

5Source: Means Life Cycle Costing For Facilities

Initial Cost – Office Building - $100 / SF

Uniformat Categories:

01 Foundation02 Substructure03 Superstructure04 Exterior Closure05 Roofing06 Interior Construc.07 Conveying System08 Mechanical: Plumbing HVAC Fire Protection09 Electrical11 Equipment12 Sitework 4%

16%3%

12%4%

1%15%

5%

5%

3%3%

17%12%

5% 10% 15% 20%

% of Total Building Cost

6Source: Means Life Cycle Costing For Facilities

Uniformat Categories:

01 Foundation02 Substructure03 Superstructure04 Exterior Closure05 Roofing06 Interior Construc.07 Conveying System08 Mechanical: Plumbing HVAC Fire Protection09 Electrical11 Equipment12 Sitework

$10$8$4$2 $12 $14 $16 $18 $20$6

Life Cycle Cost – Office Building - $200 / SF

Life Cycle Cost – Present Value $ / ft2

Initial Cost Operational Cost

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ASTM Standards

Present Value Factors (4) – E917

SPV SPV*UPV UPV*

Evaluation Measures (4)

NS – E1074 AIRR – E1057SIR – E964 DPB – E1121

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2. Data Requirements for LCC

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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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3.Present Value Factors

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Four Present Value FactorsFrom 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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4.Calculating Life Cycle Costs

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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 ee = 6%

Maintenance Escalation em = 5% Study Period N = 15 years

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Investment Related Costs

Initial Cost – Io $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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LCC System A

PVInvestment

Costs

PVOperational

Costs

+

= $1,772 + $16,156 = $17,927

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LCC System B

PVInvestment

Costs

PVOperational

Costs

+

=$3,384 + $12,798 = $16,182

LCC System B $1,745 less or 10% less

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5. Supplementary Evaluation Measures

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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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Example - NS, SIR, AIRR, DPB

Attic Roof Insulation – R11 to R19

Additional Investment Cost – I $1500

Annual Energy Savings – A0 $260

Financial Criteria: d = 8% ee = 6% N = 30 yrs

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Suplementary Evaluation MeasuresSuplementary Evaluation MeasuresAdditional Investment of $1,500 for InsulationAdditional 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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6. Integrating LCC in the Design Process

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Integrating LCC into the Design Process

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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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© The Construction Specifications Institute Manual of Practice FF/180

Chart 3.4 Preliminary Project Description (PPD)

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Table 4.3 UNIFORMAT II Elemental Cost Summary for Buildings

Project Example - 8 Story Office BuildingLEVEL 2 GROUP ELEMENTS . Level 3 Elements Quantity Unit Rate Cost

Cost per Unit GFA %

A10 FOUNDATION - - - 69,726.50 1.29 1.60%A1010 Standard Foundations 6,000.00 SF 7.67 46,025.50 0.85A1020 Special Foundations - - -A1030 Slab on Grade 6,000.00 SF 3.95 23,700.00 0.44A20 BASEMENT CONSTRCUTION - - 75,467.20 1.40 1.70%A2010 Basement Excavation 2,700.00 CY 5.91 15,960.00 0.30A2020 Basement Walls 3,840.00 SF 15.50 1.10B10 SUPERSTRUCTURE - - 688,569.96 12.75 15.80%B1010 Floor Construction 48,000.00 SF 13.37 641,632.56 11.88B1020 Roof Construction 6,000.00 SF 7.82 46,937.40 0.87B20 EXTERIOR ENCLOSURE - - 794,141.00 14.71 18.20%B2010 Exterior Walls 25,500.00 SF 18.43 469,900.00 8.70B2020 Exterior Windows 6,600.00 SF 47.58 314,041.00 5.82B2030 Exterior Doors 5.00 LVS 2,040.00 10,200.00 0.19. . . . . . . .. . . . . . . .. . . . . . . .

GFA = 54,000.00 SF

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• kWh / SF vs targeted energy budget

• Identify energy drivers

• Identify alternatives to be evaluated

Baseline Energy Simulation

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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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EndRobert Charette, PE, CVSrobert_charette@sympatico.cawww.lifecyclecosting.org

514-739-3522

Harvard Green Campus Initiative

www.greencampus.harvard.edu617-496-1278