Design Phase—Cost/Benefit Analysis and Optimization

Building owners, managers, and decision makers can use a number of different methods to perform an economic analysis that range from very simple to very complex. The type of analysis performed varies relative to the desired measure, product or system, and end use. For example, when debating between two types of air conditioning units, a building owner could perform a simple cost-benefit analysis, such as payback period, and get a relatively useful comparison for making a decision. By contrast, if a building is in its initial design phase or undergoing an extensive retrofit, a more complex economic analysis, such as a life-cycle cost analysis or value engineering (VE) approach, would provide a more relevant measure of comparison for project alternatives. In the case of some innovations without clear paybacks, first cost, or value, may also be the main driver for decision making.

Depending on the complexity necessary to perform an economic analysis, you may want to consider hiring an outside consultant to assist with this analysis. An energy analysis regarding annual energy consumption may require the use of specialized software to gain a reasonably accurate picture of the costs and savings associated with different technologies. After the building characteristics are entered, it is then fairly simple to enter different levels of insulation or equipment efficiencies and optimize first costs versus long-term savings. As demonstrated in the graphic that follows, the rigor of the economic analysis may be driven by factors such as the size of the project or the lifetime of a project. For example, an innovation that provides both high-performance insulation and structural durability might be better analyzed using a lifecycle cost. Such an innovation is likely a large project, and the innovation lifetime likely matches the life of the building. Conversely, replacing toilets with low-flow fixtures may be an easier decision. Simple payback based on reduced water use might give a less comprehensive answer than lifecycle analysis, but may be more appropriate for a low-cost project.