Life Cycle Cost Analysis Model for Sustainable Buildings€¦ · • Life-cycle cost analysis...
Transcript of Life Cycle Cost Analysis Model for Sustainable Buildings€¦ · • Life-cycle cost analysis...
Life Cycle Cost Analysis Modelfor Sustainable Buildings
presented by
Prof Robert Tiong
Associate Professor
School of Civil & Environmental Engineering
Dr Meghdad Attarzadeh
Research Fellow
School of Civil & Environmental Engineering
Date of Presentation: 27 October 2015
Introduction
• Life-cycle cost analysis (LCCA) is a method for
assessing the total cost of asset over its operating
life, e.g. acquisition costs & running costs
• LCCA is essential to effective decision-making– Identifies total cost rather than concentrating on initial capital costs, Initial capital cost
may represent < 50% of total cost
– Facilitates’ effective choice between alternative methods of achieving stated objective,
e.g. choosing btw 2 systems
PlanningDesign and
Construction
Operation and
maintenance
DecommissioningCommissioning
Introduction
• Life Cycle Cost (LCC) is
– A management tool that details current operating costs of
assets.
– An Economic analysis procedure that uses engineering
inputs,
– Compares alternatives w/all significant costs,
– Expresses results in equivalent $s (present worth).
• LCC identifies opportunity of reducing operating
costs, by changing operating practice or relevant
system
Introduction
Rationale for a Whole Life perspective
• Managers/ developers may only see top part of
iceberg above sea (initial costs), in danger of hitting
bigger rocks under sea in larger long running costs
Original Asset Cost,
Capital cost
RehabilitationRepairs EquipmentSpares
EnergyChemicalCosts
MaintenanceCosts
DepreciationReplacementRenewal & DisposalCosts
AdministrationCosts
OperatingCosts
Source: Flanagan & Norman (1978)
TOTAL LIFE CYCLE COSTS
(The Professional View)
Single Focus
PAST PRACTICE
(An Inappropriate View)
Introduction
Types of costs considered in LCCA
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
Life Cycle
Cost Assessment
Disposal/
Rationalisation
Planning/
Auditing/
Review
Design/
Construction/
Acquisition
Operations/
Maintenance
Condition
Monitoring
Renewal/
Rehabilitation
Introduction
LCCA Calculations
LCC=I + Repl — Res + E + W + OM&R + O
LCC = Total LCC in present-value (PV)dollars
I = PV investment costs (if incurred atbase date, they need not be discounted)
Repl =PV capital replacement costs Res =PV residual value (resale value,
salvage value) less disposal costs E =PV of energy costs W =PV of water costs OM&R =PV of non-fuel operating,
maintenance and repair costs O =PV of other costs
Introduction
Parameters used in LCCA
Initial cost of construction Work costs for each
maintenance operation Defect occurrence cycle
requiring maintenance operationwith the expected life span of thesystem
Detail of how each operation willaffect the users of the system-socially and environmentally
Management cost necessary foreach maintenance operation, fore.g., in road maintenance
Appropriate discount rate toconvert the above costs topresent value (Inflation rate etc.)
Life Cycle Cost Elements
Life-Cycle Cost Analysis (LCCA) for
Buildings
• 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
worth (PW) dollars, today’s dollar.
Life Cycle Cost Components
Local school life cycle cost
Life-Cycle Cost Analysis (LCCA) for
Buildings
When to implement LCCA
Owner’s
Project
Definition
Preliminary
Engineering DesignDetailed
Engineering Design
Procurement
Of Spl.
Equip/Mats
Contract
Construction
Works
Low Low
HighHigh
Ability to influence project
quality, cost, and scheduleCost to implement changes in project quality, cost,
and schedule
Life-Cycle Cost Analysis (LCCA) for
Buildings
Uncertainty Assessment
Need for uncertainty assessment– There may be some uncertainty associated with the LCC results
– This is because LCCA is usually performed early in the design process
when only estimates of costs and savings are available, rather than
certain dollar amounts. Uncertainty in input values means that actual
outcomes may differ from estimated outcomes
Methods of uncertainty assessment– Deterministic techniques. E.g. Sensitivity analysis, Breakeven analysis
– Probabilistic techniques, Monte Carlo simulation
Long Term Renewal Planning for
Buildings
Facility owners need to know current
financial position, future commitments &
liabilities, e.g. cash flow to sustain levels of
service
• Plan for renewal: renewal programme
with details on nature & timing of works
• Long Term renewal program: asset
managers demonstrate cash flow
requirements over planning period to
allow for ‘peaks’ & ‘troughs’
• Renewal annuity plan- Org ameliorate
over ‘brick-wall’ periods w/intensive
renewal requirements by bldg up asset
restoration reserve during period of low
renewal requirements
• More than just Maintenance
Life-Cycle Cost Assessment (LCCA)
Application for Buildings
LCCA approach as an Effective Management Tool used by:
• Decision makers (developers, landlords) – evaluate development
option best ROI
• Designers - develop concepts & refine them into finished design
desired LCC
• Asset managers - plan/monitor O&M strategy, performance monitoring
for future
• Financiers - funding allocation maximizes benefits from depreciation
allowances, deductible expenses, etc.
Aim: To understand the comprehensive views of lifetime cost of the structure Need
for uncertainty assessment
To broaden the decision base for management Maintenance budget planning
Prioritizing the maintenance programs
Performance-based evaluation of structures
Life-Cycle Cost Assessment (LCCA)
Application
Example of Application
LCCA in Public Sector Comparator (PSC)
PSC is used by government to make decisions by testing whether a
private investment proposal offers value for money in comparison with
the most efficient form of public procurement
It is often used to ensure that value for money is achieved when a
public-private partnership (PPP) is undertaken
The PSC is– expressed in terms of net present value (NPV)
– based on the recent actual public sector method of providing that defined
output
– taking full account for risks which would be encountered by that style of
procurement
Life-Cycle Cost Assessment (LCCA)
Application
Example of Application (Cont’d)LCCA in Public Sector Comparator (PSC) – Cont’d
Structure and elements of PSC– The Overview
– Basic capital costs
– Basic operating costs
– Third party revenues
– Property values
– Risk matrix
– Discounted cash flow
– Sensitivity analysis
– Appendix
Functions of LCCA– Provide better insight into lifetime economics of structures– Help to plan effective O&M programs– Help to formulate proactive budget plan– An effective management tool to ensure value for money
Life-Cycle Cost Model
Life-Cycle Cost Model
Life-Cycle Cost Model
Sustainable Buildings
Definition
According to ASTM International, a sustainable building or green building is onethat: "provides the specified building performance requirements while minimisingdisturbance to and improving the functioning of local, regional and globalecosystems both during and after its construction and specified service life“
A sustainable or green building produces net zero or smaller carbon footprint orreduces the other harmful emissions. It is a building which does not have adverseeffects on the ecological balance. These structures don’t have a negative impact onthe environment as they generate their own energy from solar energy, wind energyetc.
Aims
A sustainable building aims to achieve efficient use of resources such as water andenergy, while providing a high quality indoor environment in terms of health, safetyand comfort
Conceptual Drawing of a green
building
Sustainable Buildings
Principles
CONVENTIONAL
BUILDINGS
GREEN
BUILDINGS
Sustainable Building Design
• Energy efficiency
GREEN LIGHTING
Sustainable Buildings
Initial Cost of Constructing Sustainable Buildings
In a report by Kats (2003)
“Green Building Costs and
Financial Benefits”, 33 green
buildings were studied and it
was found that the average
premium for these green
buildings is about 2% more than
the cost of conventional design
The majority of this cost is due
to the increased architectural
and engineering design time,
modeling costs and time
necessary to integrate
sustainable building practices
into projects
Sustainable Buildings
Economic Benefits
In a review of 33 California state green buildings, it was found that aminimal upfront investment of about two percent of construction coststypically yields life-cycle savings of over ten times the initial investment(The Costs and Financial Benefits of Green Buildings: A Report toCalifornia’s Sustainable Building Task Force (2003) by G. Kats, L.Alevantis, A. Berman, E. Mills, J. Perlman)
Sustainable design does not have to increase costs and yieldseconomic, social, and environmental benefits to building owners andsociety(The Business Case for Sustainable Design in Federal Facilities(2003) by U.S. Department of Energy, Federal Energy ManagementProgram (FEMP) )
Importance of LCCA in the
Sustainability context
Justification for the Green Premium (if any)
It is widely believed that constructing a sustainablebuilding costs more than constructing aconventional one. However, it is also claimed thatthe costs of running a sustainable building may belower in the long run.
LCCA which aims to capture all the costs that atthe various stages of a building life, including theinitial costs and running costs is therefore helpfulin deciding whether the running costs offset thehigher initial costs in the long-run.
Importance of LCCA in the
Sustainability context
A Tool for achieving Building Sustainability
LCCA can be used to assist towards achieving sustainability in
buildings in two ways.
– Firstly, LCCA is especially useful when project alternatives that fulfill the
same performance requirements, but differ with respect to initial costs
and operating costs, have to be compared in order to select the one that
maximizes net savings
– Secondly, LCCA can also be incorporated into cost planning and
analysis. This allows areas of poor performance or areas in which
additional savings can be made are identified
Therefore, LCCA can help to achieve building sustainability by
ensuring that resources are efficiently consumed at the lowest costs.
Application of LCCA towards
achieving Sustainability in Buildings
(I) Benchmarking of Life-CycleCost Parameters
Process of identifying industrybest practices
Important for establishingperformance indicators tomonitor cost effectivenessO&M program, renewal timingand performance improvement
Can be used as a proactivetool for management decisionmaking regarding O&Mactivities
Application of LCCA towards
achieving Sustainability in Buildings
(II) Development of Key Performance Indicators (KPIs) for Built Facilities
Performance-based maintenance management requires– LCC-based evaluation of performance of building components
– Establishing KPIs for setting priority for maintenance activities
– LCC-based performance monitoring procedure to ensure cost-
effectiveness of maintenance
Knowledge of LCC of different components of a building system is
very important
BCA Green Mark Scheme
Innovation in Building life cycle and
integrated design process
Certified Green Buildings and Sustainable Infrastructure by
deploying several innovations like:
Building Information Modeling (BIM) 5D Virtual Design and Construction
Pre-fabrication and Assembly
Integrated Project Delivery (IPD) Lifecycle Strategy
Cost, Risk, Performance Analysis
Engaging in Infrastructure Asset Management (IAM)
Build efficiencies by optimizing costs
BIM-Integrated Life Cycle Assessment
of Building
BIM-Integrated Life Cycle Assessment
of Building
The topics of Methodology development in BIM-Integrated LCA
BIM and Life Cycle Thinking
BIM-Integrated LCA tools
BIM-Integrated Carbon Footprint Analysis
BIM-Integrated Waste Management
BIM-Integrated Environmental Management
BIM-Integrated Supply Chain Management
International BIM-Integrated LCA Case Studies
Computer Simulation of Operation and End-of-life phases
Environmental Impacts Monitoring through BIM
Conclusion
Life cycle costs analysis (LCCA) takes into consideration all the costsincurred throughout the whole life of a building and hence can be atool for justifying the high initial costs of sustainable buildings. Inaddition, it can also be used towards achieving the long-term goal ofsustainability in buildings
However, it should be noted that buildings have both direct andindirect economic impacts that are inherent to the process of theiracquisition, construction, use, maintenance, and disposition
Direct economic impacts are those associated with the life-cyclecosts/benefits of materials, land, and labor directly attributable to thebuilding. On the other hand, indirect economic impacts are externalcosts/benefits that are indirectly impacted by the building
It should be noted that in order to advance sustainability, it isnecessary to quantify and optimize both direct and indirect economicimpacts to the greatest extent possible.
THANK YOU
Prof Robert Tiong
Dr Meghdad Attarzadeh