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Luis Rodriguez, P.E.Federal Highway Administration
Life Cycle Cost AnalysisVirginia Concrete ConferenceMarch 6-7, 2014
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Life Cycle Cost Analysis Definition LCCA Five Steps Process Current Issues Resources / Reference
Presentation Outline
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A process for evaluating the total economic worth of a usable project segment by analyzing initial costs and discounted future costs, such as maintenance, user, reconstruction, rehabilitation, restoring, and resurfacing costs, over the life of the project segment.
Life-Cycle Cost Analysis Definition
Source: Transportation Equity Act for the 21st Century
Transportation Performance Management
An analytical tool to provide a cost comparison between two or more competing design alternatives producing equivalent benefits for the project being analyzed.
LCCA Overview
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Step 1: Establish alternatives Step 2: Determine timing of required activities Step 3: Estimate agency and user costs Step 4: Compute life-cycle costs Step 5: Analyze the results
The LCCA Process
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Activities to ensure performance Initial construction or rehabilitation activity Future rehabilitation and preservation activities
Step 1: Establish Alternatives
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Terminal Serviceability Index
Serv
icea
bilit
y
InitialActivity Activity One Activity Two
Time
When will the future preservation and countermeasure costs be incurred?
Service Life Analysis Period
Step 2: Determine Activity Timing
Long enough to capture differences between alternatives
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Include cost elements that are different between alternatives
Exclude cost elements that are the same between alternativesAgency overhead costsReal estate acquisitionsNormal operations user costs
Step 3: Estimate Agency and User Costs
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Approach fundamentalsCompare demand and capacity under
normal operations and work zone conditions
Determine how traffic is impactedConvert traffic impacts into costs
Step 3: Estimate Agency and User Costs
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Cash Flow Diagram
UserCosts
Rehab 1 Work Zone
Initial Activity Work Zone
PreservationWork Zones
Preservation Activities
Rehab 1Initial
Activity
AgencyCosts
$
$
Time
Time
Salvage or Remaining Value
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Step 4: Calculate NPV of Life-cycle Costs
Net Present Value = of Costs
N
k = 0Σ 1
(1 + d)nk(Costk) x
Costk = cost of activity N = length of analysis periodd = discount ratenk = year of expenditure
Present Value Factor
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How do agency costs compare? How do user costs compare? Can trade-offs be made?
Step 5: Analyze the Results
• MAP 21 and LCCA• GAO Report: LCCA – Pavement Selection• LCCA and Alternative Bidding
Current Issues
Transportation Performance Management
MAP-21 and LCCA
Transportation Performance Management
MAP-21 to asset management?
Each State is required to develop a risk-based asset management plan for the National Highway System (NHS) to improve or preserve the condition of the assets and the performance of the system. (23 U.S.C. 119(e)(1), MAP-21 § 1106)
Transportation Performance Management
Highway Asset Management Plan
Plan Contents– pavement and bridge inventory and conditions
on the NHS– objectives and measures– performance gap identification– lifecycle cost and risk management analysis– a financial plan– investment strategies
Transportation Performance Management
GAO and Next Steps
Transportation Performance Management
GAO and Next Steps
Define Program Characteristics Obtain Data Verify what was used was correct Document the Estimate Present Estimate for approval Update the Estimate
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What is the FHWA position on alternate bidding for pavement type selection? FHWA considers alternate pavement type bidding a suitable approach for determining pavement type when engineering and economic analysis does not indicate a clear choice between different pavement designs.
Alternate Bidding
FHWA Program Performance Management 19
Transportation Performance Management
Consideration of Challenges
FlexibilityCons
isten
cy
LCCA
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LCCA Resources
LCCA TechnicalBulletin
LCCA Case Study
LCCA Primer
http://www.fhwa.dot.gov/infrastructure/asstmgmt/lcca.htm
User Manual
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RealCost LCCA Software• Microsoft Excel based application –
existing user expertise and user customizable
• User interface – separates inputs from analysis methodology
• Offers both Deterministic and Probabilistic Analysis
• Available free of charge, regular enhancements and technical assistance from FHWA
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FHWA LCCA Internet Site:http://www.fhwa.dot.gov/infrastructure/asstmgmt/lcca.cfm GAO Report : LCCA-Pavement Selection http
://www.gao.gov/products/GAO-13-544 FHWA TA on Use of Alternative Bidding for
Pavement Type Selection:http://www.fhwa.dot.gov/pavement/t504039.cfm
Reference
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Thank You
Luis Rodriguez, P.E.Federal Highway [email protected]
http://www.fhwa.dot.gov/resourcecenter/