Description

Life Cycle Cost analysis (LCA) is a method of evaluating a system or component’s total cost by measuring its initial and future costs. It can be seen as the total discounted dollar cost of acquiring, operating, maintaining, repairing, disposing, and replacing a material or system over a fixed period of time. The analysis is a useful method for evaluating alternatives that serve similar purposes but differ in their initial and future costs.

At Urban Edge, this method can be applied to evaluate the savings potential in both renovations of existing buildings and new construction. For existing buildings, owners can use LCA to evaluate the cost effectiveness of upgrading current building components like energy efficient windows or water saving toilets. In new construction, developers can use LCA during the development and design process to determine if the benefits of incorporating high performance enhancements such as a wood flooring or green roofing systems are worth the extra initial costs.

LCA Components

• Costs
• Discount Rate 
• Inflation
• Cost Period

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Steps involved in LCA

According to Paladino Consulting, there are six steps involved in LCA:

1. Define Objectives
2.  Identify Alternatives
3. Define Assumptions
4.  Assess Costs or Benefits
5.  Calculate net present value (NPV)
6. Select an alternative

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Examples of LCA

Click here to see two examples of lifecycle cost assessment at Urban Edge.

Limitations of LCA

While LCA can provide a good estimate about total costs, data limitations are one of the factors that may influence the accuracy of the results. For instance, it’s not always possible to identify accurate information about the future performance of buildings or materials, maintenance costs, and operating and management costs because these can change over time. For example, a roof can last 10 to 20 years depending on maintenance, weather conditions, or other variables. As part of this green review process at Urban Edge we evaluated systems such as toilets or flooring for which we could develop our actual typical maintenance costs from our own historical maintenance data.

Simple Payback Analysis

One of the more simple cost-benefit analysis tools is called simple payback. Click here to learn more.

Resources

General

•  Life Cycle Cost Analysis Handbook, 1st Edition (pdf), State of Alaska-Department of Education & Early Development Education Support Services/Facilities, 1999. 
•  Life-Cycle Cost Analysis (LCCA), Whole Building Design Guide 
•  A Primer on Life Cycle Assessment for Sustainable Building Projects (pdf), Paladino Consulting, July 2000.
  

References