Life-Cycle Cost Analysis

Life-cycle cost analysis (LCCA) is a more complex analysis method that incorporates a variety of economic factors. LCCA looks at the costs of a building or building system over its entire life and can be used as a tool to compare multiple options. It incorporates all the costs of owning, operating, maintaining, and disposing of the building or system in question. LCCA can be used when making small decisions, such as choosing one type of air-conditioning unit over another, or large decisions, such as determining which building design will result in higher performance and greater energy efficiency. Building or system costs generally fall into the following categories:

LCCA can get very complex and require significant research, especially if you start delving into intangibles such as carbon emissions or depletion of natural resources. It is a valuable method of economic evaluation for building technologies, however, because it helps the building owner look beyond initial cost. Even if the dollar amounts attached to certain elements such as disposal costs are estimates, a basic LCCA enables you to view each type of cost as a percentage of the whole. Very often, the initial cost of a technology or whole building is a relatively small percentage of the total cost when compared with operation and maintenance costs. Products with greater durability will have a lower replacement frequency. In many cases, differences in replacement costs can outweigh differences in first cost when using LCCA.

Estimating costs associated with each phase can be helpful to gain a perspective of the total cost. Such an exercise can also be helpful in making the general decision of whether to take action. Costs associated with doing nothing may also be an option.