Purpose life cycle costing lcc is an important economic analysis used in the selection of alternatives that impact both pending and future costs. Lifecycle costing lcc and whole life costing wlc are commonly used terms today. Simply stated, its a method to identify a buildings true costs of ownership. When making funding decisions under constrained budgets, it is. Life cycle cost analysis lcc and social life cycle analysis slca are available methodologies for the economic and social assessment of a product or process along its life cycle. If, however, there is a potential for energy or water to be consumed by that product. Target costing and lifecycle costing can be regarded as relatively modern advances in management accounting, so it is worth first looking at the approach taken by conventional costing. Lcc cost is the entire process of project outlays, which extend beyond. Implementing the life cycle cost analysis process at stanford life cycle cost analysis will be implemented within the existing ninephase pdp. It can form the economic pillar in a full life cycle sustainability assessment, but often system delimitations differ depending on the goal and scope of the study. Life cycle costing assessmentbased approach for selection.
Life cycle costing life cycle costing lcc hereafter was first used in the united states by the department of defense us dod in the mid1960s epstein, 1996. Life cycle costing has been a part of the overall cost picture for some time now. Life cycle cost analysis handbook 2nd edition 1 table of contents. Life cycle cost analysis lcca is an economic evaluation technique that determines the total cost of owning and operating a facility over period of time. Typically the life cycle number is presented in a way that cannot be internalized by the owner. Asnzs 4536 defines the following objectives of lcc.
Life cycle costing lcc is an important economic analysis used in the selection of alternatives that impact both pending and future costs. What does life cycle costing in construction really mean. Life cycle cost analysis template microsoft excel templates. The process of identifying and documenting all the costs involved over the life of an asset is known as lifecycle costing lcc. The us dod applied lcc in the procurement of military equipment, as they found that acquisition costs only accounted for a. Lcm is performative and therefore will also propel lcc, in a twoway process. Lifecycle costing lcc, which has been used in this project, is not as standardized as lifecycle.
Through lcc one seeks to minimize the cost of obtaining a cer tain level of output. Pdf life cycle cost lcc analysis in oil and chemical. Section iii discusses in detail how to address lcca at each stage. Life cycle costing process asnzs 4536 life cycle costing an application guide shall be used for the development of the lcc process. Lifecycle costing of new processes, materials, and products fissac. Bridge, cost, life cycle cost analysis, procurement, investment, management. Lifecycle costing an overview sciencedirect topics.
Life cycle costing page 5 of 15 products in the case of the procurement of a product the only market cost that may be relevant is the purchase price. Issue 2 making a decision on the basis of lcc may make it more expensive upfront. Advantages, disadvantages and criticism of this procedure roberto niesing term paper business economics accounting and taxes publish your bachelors or masters thesis, dissertation, term paper or essay. Life cycle costing involves tracing cost and revenues on a product by product base over several calendar periods. Life cycle assessment of coalfired power production. Life cycle costing llc is a methodology to evaluate of the all costs over the lifecycle of works, supplies or services. Life cycle costing is particularly useful for the estimating total costs in the early stage of a project 5. The vice provost for land and buildings convened a team of staff from departments within land and buildings, along. Development of procurement process based on lifecycle. The general concept of a life cycle cost is not new.
Life cycle costs are all the costs associated with the product for its entire life cycle. It helps to identity most economical, cost effective and beneficial alternatives among the available range of options in order to asset ownership, maintain, run and develop various projects and. Buying an asset is a cost commitment that extends beyond its price tag. Life cycle costing of passenger cars general information quantity unit 90 4 number of years of usage years 5 4 discount rate % 4 4 product, fill in the intended product hybride car petrol car investments initial investment per unit eurunit 22 000 18 000 costs of acquisition per unit 22 000 18 000 costs for fuel. To perform an example, two product systems are created from doorinnerglasswood process and 1. Life cycle costing is a data intensive procedure by reason of the complexity of the building projects and the many components of a building. Traditionally it takes into account mainly investment, operation, maintenance and end of life disposal costs. Life cycle assessment lca is emerging as one of the most. The process being modeled, the life cost of a system, is usually a stochastic pro cess involving many parameters which may not be independent. Uses a life cycle costing case study to describe a. Life cycle costing lcc, by definition, refers to an analysis technique which encom passes all costs associated with a product from its inception to its disposal. Life cycle costing lcc is a method of economic analysis for all costs related to product and services throughout the entire life cycle.
It is not well documented and is presented as a single large number and. Fundamentals of asset management 5 concepts of cost particularly useful to am current replacement cost the full cost to replace an asset in its current operating environment life cycle cost the total cost of an item throughout its life, including the costs of planning, design, acquisition, operations, maintenance, and. For example, if the time frame of a study is 30 years and a component of a mechanical system e. Systematic process for evaluating the life cycle cost of a product or service by identifying environmental consequences and assigning measures of monetary value to those consequences 5,31. Life cycle costing is the process of compiling all costs that the owner or producer of an asset will incur over its lifespan. Lifecycle costs are all the costs associated with the product for its entire life cycle. Life cycle costing as an important contribution to. The future of building life cycle assessment in practice summary as the architectural and construction industries increasingly emphasize sustainability, more comprehensive methods are being developed to evaluate and reduce environmental impacts by buildings. This book is affectionately dedicated to my dear friend, dr.
The optimization of the life cycle costs of a project, construction or equipment, is essential for the complex decisionmaking process. Lifecycle cost analysis lcca is a method for assessing the total cost of. This course will provide you with an introduction to the principles of conducting a life cycle cost analysis and suggestions on how to use economic analysis to evaluate design alternatives and how to consider nonmonetary benefits as part of the lcca process. Lcca can be implemented at any level of the design process and. Simply stated, its a method to identify a buildings true costs. Life cycle costing lcc hereafter was first used in the united states by the department of defense. Life cycle cost analysis lcca is a form of economic evaluation that compares the costs and savings of alternative building designs and systems over the life cycle of a building. Life cycle costing, or wholelife costing, is the process of estimating how much money you will spend on an asset over the course of its useful life. The life cycle costing process can be as simple as a table of expected annual costs, or as complex as a computerized model that allows for the creation of scenarios based on assumptions about future cost drivers. Aia guide to building life cycle assessment in practice.
In the present work, the life cycle cost analysis lcca, also known as multicriteria decisionanalysis approach, has been used to subsequently develop a decision support tool. Nist handbook 5 1995 edition life cycle costing manual for the federal energy management program sieglinde k. Issue 3 a general appreciation for lcc is critical to change the procurement mindset from the best value for moneyto the best value across the asset life cycle. Kerr including contributions on process definition and data acquisition from. The fissac project addresses the resourceintensive. Lifecycle costing lcc is therefore an economic evaluation technique that determines the total cost of owning and operating a facility over a period of time and takes into consideration relevant costs of alternative building designs, systems, components, materials, or practices in addition to the multiple impacts on the environment both positive. Life cycle costing for design professionals, 2nd edition, is the rate of. Guidelines for life cycle cost analysis sustainable stanford. Life cycle costing of passenger cars general information quantity unit 90 4 number of years of usage years 5 4 discount rate % 4 4 product, fill in the intended product hybride car petrol car. Green building features generally have higher initial costs compared to conventional features but offer operational savings over time through decreased resource use. Life cycle costing lcc is a term commonly used to describe a general method of economic evaluation by which all relevant costs over the life of a project are accounted for when determing the economic efficiency of the project. Once all the cost flows are linked with the processes, a life cycle costing can be performed. Figure 321 simplified inservice phase life cycle costing process 342 figure 322 the interface and menu components of edcam 343 figure 323 simplified disengagement ph ase life cycle costing process 346 figure 324 translation from paps phases to iso 15288 stages 348 figure 41 example of typical distribution types 43.
A new impact assessment method needs to be created to calculate the costs over the life cycle. The process which fdot undergoes to select a particular type of pavement for a project. Life cycle assessment of coalfired power production pamela l. Life cycle costs are the costs required to maintain the asset past the point when the project has been completed. The lcca should be performed early in the design process while there is. Product life cycle costing traces costs and revenues of each product over several calendar periods throughout their entire life cycle. Life cycle costing lcc can form the economic pillar in a full life cycle sustainability assessment comprising the environmental, economic and social dimension see chap. Lifecycle costing of new processes, materials, and products. This overview provides an introduction to the life cycle costing process. Life cycle cost lcc analysis in oil and chemical process industries 5. Pdf life cycle cost lcc is an important technique for evaluating the total cost of. Kaufman 1970 8steps in formulation of life cycle costing model are as given. D o t is committed to ensuring that information is available in appropriate alternative formats to meet the requirements of persons who have a disability. Typically, conventional costing attempts to work out the cost of producing an item incorporating the costs of resources that are currently used or consumed.
A building owner will be interested in the costs of a built asset over its whole life, which could be. Guram, in thanks for his guidance, honesty, support, and friendship over the years. Sep, 2018 life cycle costing, or wholelife costing, is the process of estimating how much money you will spend on an asset over the course of its useful life. Society of chartered surveyors ireland scs guide to life cycle costing 5. Best practices for managing asset life cycle cost author. The guidealso includes a sample chart, examples of manual calculation. Factoring life cycle costs into the bid assessment process is allowable under. In capital budgeting, the total cost of ownership is compiled and then reduced to its present value in order to determi. However, practitioners are encouraged to adopt the practices in this guidance note earlier if appropriate. The cars price tag is only part of the cars overall life cycle cost. The principles and process for conducting a lifecycle cost. Governments and contracting authorities are becoming more aware of the fact that the far life cycle costs represent a better indicator of value for money than the initial ce prialone. Right click on lcia methods to create a new method for lcc 2. Unfortunately it has had little impact on the decision making process to date.
Life cycle cost tree acquisition costs sustaining costs life cycle costing process pareto principalpareto principalthe critical fewthe critical few y10 to 20% of the elements of a cost analysis will identify 60% to 80% of the total cost ythese high cost items are the vital few items of concern and need to be carefully considered. The costs are included in different stages of the product. Issue 1 life cycle costing is not yet considered to be a critical component of spp. In a clear, structured cost analysis you can easily see what cost sources influence your total cost of ownership the most. The difference between the two is often taken to be that lcc is a subset of wlc and represents the period of interest that the cost analysis is aimed at. Ken garrett explains target costing and lifecycle costing, and gives examples as to how and when you would use these costing techniques. The final result of life cycle costing is, therefore, determined by the availability and reliability of the input data 12. Life cycle costing for engineers author, editor, b. Life cycle cost analysis handbook alaska department of education. There is nothing intrinsically mystifying in the concept of life cycle costing. Training program for public procurement officers on procurement focused on life cycle cost analysis. Nist handbook 5 lifecycle costing manual for the federal. It assists efficiently in selection of the most suitable wastewater treatment technology for. Me development of procurement process based on life cycle costing 3 p a g e 5.
These costs can include repairs, maintenance, consumables, insurances and. Life cycle cost analysis is an essential design process for controlling the initial and the future cost of building ownership. The effective date of this guidance note is 1 july 2016. Standardized method of life cycle costing for construction procurement. The complete guideexpands upon life cycle costing and provides substantial technical guidance on designing new pumping systems as well as assessing improvements to existing systems. Lcc is a versatile technique capable of being applied for a range of purposes and at different stages in the project or asset life cycle to support decisionmaking. Life cycle cost analysis lcca is a datadriven tool that provides a detailed account of the total costs of a project over its expected life. Wholelife costing covers an assets costs from the time you purchase it to the time you get rid of it. John marano and massood ramezan,federal energy technology center life cycle assessment. The systematic analytical procedures and potential of lcca to deliver major savings highlighted. Code of practice for life cycle costing nato rto, 2009. The national institute of standards and technology nist has prepared the life cycle costing manual for the federal energy management program nist handbook 5, and annually issues real growth energy price indices and discount factors for life cycle cost analysis. The chapter gives an introduction to life cycle costing lcc and how it can be used to support decisionmaking.
It compares initial investment options and identifies the least cost alternatives for a twenty year period. Until recently, life cycle costing was a term used by large developers, real estate investors, and a handful of top commercial service sales people. Initial costs operating costs disposal costs life cycle costing 4. Lcca is a process of evaluating the economic performance of a building over its entire life. In the absence of actual data, estimates can be based on past experiences.
Lcc is relevant throughout the design and construction process but in particular during the planning and design of the project. Life cycle cost analysis can be performed on large and small buildings or on isolated building systems. An analyst, involved in life cycle costing, should be fully familiar with unique cost elements involved in the life cycle of asset, sources of cost data to be collected and financial principles to be applied. Nc life cycle cost analysis lcca nj green building manual. Draft of the amendments to the procurement process to incorporate life cycle costing 6. Life cycle costing is a system that tracks and accumulates the actual costs and revenues attributable to cost object from its invention to its abandonment. Many building owners apply the principles of life cycle cost analysis in decisions they. Management templates life cycle cost analysis template for the facilitation of management process, life cycle cost analysis is one amazing method. Life cycle costing, life cycle management, and other practices lcc is just one of the practices e. The life cycle costing process usually includes the following steps.
1035 1267 756 1396 1380 1650 71 421 954 548 396 1268 623 839 205 421 552 1259 1519 233 704 540 1131 217 1235 661 1388 752 216 813 1034 1125 1093 23