Life cycle cost is a crucial asset management tool that takes into account all the life-side effects of planning, acquisition, operation, operation, and maintenance of assets.
One of the most important considerations for investors regarding the energy saving project or green building is to know when and when the investment will take place. To attract investors, there must be a guarantee that their investments are profitable. Investors, owners and project managers use various tools to assess financial feasibility. One of the most effective ways to estimate total costs is the LCCA.
LCCA is an assessment method that takes into account the financial aspects of acquiring, owning and disposing of construction projects. It can also be used by project managers to examine alternative opportunities and focus on achieving project objectives. When comparing alternatives to two or more projects, you can use the ECCA method. ELCCA is a computer model that accurately measures different design options.
The central concept of the life cycle cost analysis equation is the concept of time value of money. The task of identifying the best financial option for a lifetime is to achieve a situation where the various options that have been relatively studied can be evaluated. When looking at different offers, you will have to compare the capital and operating costs that are disbursed at different times. In assessing the financial impact of the various alternatives, all costs of each option being considered are expressed in “dollar value today.”
Andromeda Systems Incorporated made an enterprise asset management software called OptiAM which can help conduct an effective life-cycle cost analysis.
LCCA uses regular assessments and comparisons of building design options available to determine the best overall cost-effectiveness options, including ownership, operation, and maintenance of a particular building. It adheres to some methodologies and procedures to determine the cost of the life cycle following the Federal Regulations Act (CFR), part of the Federal Energy Management and Planning Program. The LCCA regulations comply with the requirements of energy conservation legislation, including those defined by NECPA and Directive 13423, also known as the Federal Environmental Protection, Energy and Transport Act.
Mission of LCCA
In green building projects, different costs can be identified that ultimately determine the total cost of ownership of the project. These include initial costs of purchase, acquisition, and construction; operating, maintenance and repair costs; replacement cost disposal costs energy costs financial or interest payments; and other non-cash expenses incurred by the project.
In short, LCCA is used as a tool to determine the total cost of each alternative project to determine which option will provide the lowest TCA (Total Cost of Ownership) without sacrificing quality or functionality. When implemented in the earlier stages of the project, especially during the design process, project managers can choose the alternative that will lead to a lower cost of the life cycle.
Benefits of LCCA
LCCA applies not only to green building project initiatives but also to investment decisions. This is very useful for identifying alternatives that will provide the most cost-effective project building in the long term. This places LCCA as the best tool for determining the total cost of ownership compared to other methods that focus on the first or short-term costs associated with operations only.
To illustrate the benefits of using LCCA, we can determine whether the use of an HVAC system or a glass system is more cost-effective in the long term. An essential part of this process is taking into account both short- and long-term costs, as they relate to return on investment. It is often assumed that high initial costs may outweigh the long-term benefits. This is not always true and can be demonstrated using LCCA methodology. It is also useful to note that LCCA can be applied to different levels of complexity in the project life cycle, from launch to disposal.
LCCA and Green Building
When considering the use of energy in refrigeration, heating, cooking, lighting, and other processes, ELCCA can be a useful analysis tool and decision to choose the most cost-effective systems. The report, created using ELCCA models, identifies and recommends the best and most cost-effective design options for green buildings in terms of energy efficiency, convenience, productivity, and residents’ health.
ELCCA works as an unsteady process and is continuously improved and adjusted whenever new alternatives are identified and approved. The final design can be a combination of many decisions that depend on the selection and selection process identified by ELCCA. These comparisons and conclusions are documented correctly with the corresponding results in the final report ELCCA.
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