Understanding Life Cycle Costing and Whole Life Costing in Construction

In the world of construction, making informed decisions about costs is crucial. One key method to achieve this is through Life Cycle Costing (LCC) and Whole Life Costing (WLC) analysis. These approaches help in evaluating the economic aspects of a construction project over its entire lifespan, taking into account various costs and benefits. In this blog post, we’ll delve into the details of LCC and WLC, their differences, categories of costs involved, and the techniques used in their application.

Life Cycle Cost vs. Whole Life Cost: Unpacking the Definitions

Life Cycle Cost (LCC) is the total cost incurred throughout the lifespan of an asset while ensuring it meets its performance requirements. Essentially, LCC assesses all costs associated with constructing, operating, maintaining, and potentially disposing of a building or asset.

Whole Life Cost (WLC), on the other hand, expands the horizon of LCC. It not only encompasses life cycle costs but also includes non-construction costs like site expenses, financing costs, and even potential incomes, such as sales revenue or income losses. In essence, WLC looks at the overall development, while LCC focuses solely on the building itself.

Categories of Life Cycle Costs

To understand these costing methods better, let’s break down the different categories of life cycle costs:

1. Construction Cost

A. Construction Works Costs

This category covers the direct costs associated with constructing the building. It includes:

  • Building works and services.
  • External works.
  • Furniture, fittings, and equipment that the client will maintain.
  • Costs related to specialist contractors and artists.

B. Other Construction-Related Costs

These costs are incurred during the initial construction phase but don’t contribute to future life cycle costs. They include:

  • Site-enabling works (e.g., demolition and site clearance).
  • Consultancy fees for the design team (e.g., architects, structural engineers).
  • Planning and building regulation fees.
  • Roads that won’t require future maintenance by the client.
  • Furniture, fittings, and equipment maintained by the occupier or user.

2. Maintenance Costs

Maintenance costs involve any work undertaken to prolong the building’s life, including repairs, servicing, and replacements. These costs can encompass:

  • Repairs to building components (e.g., boilers).
  • Repairs to finishes (e.g., floor, wall, ceiling finishes).
  • Regular servicing (e.g., HVAC systems).

3. Operation Costs

Operation costs are associated with the day-to-day operation of the building and include:

  • Cleaning costs (internal and external).
  • Fuel costs.
  • Energy costs for heating, lighting, ventilation, and power.
  • Water and drainage charges.
  • Administrative costs for property management and building servicing.

4. Occupancy Costs

These costs vary depending on the building’s use and may include expenses such as internal moves, ICT services, catering, and more.

5. End-of-Life Costs

This category deals with costs and credits at the end of the analysis period. It encompasses inspections, potential demolition costs, landfill or recycling expenses, and the residual value of the building.

Life Cycle Costing Techniques

The application of life cycle costing involves several techniques:

1. Life Cycle Cost Analysis

This technique entails collecting and analyzing historic data regarding building costs. It may require additional data related to physical performance and condition. The analysis should be justified economically since data collection can be costly.

2. Life Cycle Cost Management

This involves planning and controlling occupancy costs throughout the building’s lifespan to maximize value for the client. It aims to ensure that the client gets value for money.

3. Life Cycle Cost Planning

This technique uses life cycle cost analysis to predict future costs and plan the timing of work and expenditure on the building. It also considers the impact of performance and qualitative alternatives.

Applications of Life Cycle Costing

Life cycle costing finds applications in various scenarios:

  • Comparing total costs of alternative design components over an agreed period.
  • Evaluating different building design options.
  • Deciding whether to refurbish, rebuild, extend, or adapt existing buildings.
  • Determining the most cost-effective maintenance and replacement program.
  • Creating cash flow predictions for individual building components or the entire building.
  • Assisting in financial planning for future maintenance costs.

In conclusion, Life Cycle Costing and Whole Life Costing are indispensable tools in the construction industry. They enable informed decision-making by considering the full spectrum of costs and benefits over the lifespan of a building, ultimately ensuring the best value for both clients and stakeholders.

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