lcc yusuf oz fatih bolukbas huseyin anil karabulut
TRANSCRIPT
LCC
YUSUF OZFATIH BOLUKBAS
HUSEYIN ANIL KARABULUT
IntroductionWhy use Life Cycle Costing?Growing pressure to achieve better outcomes from assets means that ongoing operating and maintenance costs must be considered as they consume more resources over the asset’s service life
What is life cycle costing? The Life Cycle Cost (LCC) of an asset is defined as: " the total cost throughout its life including
planning, design, acquisition and support costs and
any other costs directly attributable to owning or using the asset".
Life cycle costing modelLCC model is an accounting structure containing terms and factors which enable estimation of an asset's component costs
LCC: the Design Stage
Design Service Life Planning
Existing structures: It focuses on the rest of service life, maintenance and replacement costs.
New structures: It requires some mathematical assessments of components’ service lives.
LCC: the Design Stage
Effects to be considered:
Physical Economical Functional Technological
LCC: the Design Stage
Certainty of service life can’t be exactly determined unless all influencing factors are taken into consideration.
LCC: the Design StageDesign Environmental Life-cycle
Assessment
Resource depletion Waste Air Pollution Land Pollution
LCC: the Design Stage
Products are required to have:
Waste minimization Lower emission Sustainability
LCC: the Design Stage
Design step of LCC is very important with:
types of materials, the quality of the design, contracting and procurement method Operating maintenance and
rehabilitation costs
LCC: the Design StageFramework for LCC budget estimation covers these steps:Understanding client objectivesDefining cost breakdown structure (CBS) Developing LCC assumptionsBudgeting for LCC risksData collectionLCC budget estimate calculation
LCC: the Design StageRisk analysis and management
General risks: Political risks Economical risks Environmental risks Social risks
LCC: the Design StageDesign project specific risks:
project finance, design processes, costing and estimation processes preconstruction decision making construction and operation processes
LCC: the Design Stage
Design risk response measures:
risk avoidance: taking less risky decisions risk reduction: allocating additional
resources risk retention: insurances risk transfer: transfer obtained risky
situation for experts of it
DATA REQUIRED FOR LCC CALCULATION
Types of Life cycle
data
Physical Data• Superficial floor area• Window area• Types of heating systems• Functional areas• Walls and ceilings• Number of occupants
Performance Data• Maintenance cycles• Thermal conductivity• Cleaning cycles• Occupancy time and gas
Cost Data• Acquisition cost• Capital cost, taxes• Inflation, discount rate• Management, operating,
replacement, cleaning, maintenance cost etc.
Quality Data• Condition of sanitary
fittings• Pipe work furnishing• Fabric road surfacing
Occupancy Data• Occupancy profile• Functionality• Hours of use• Particular feature
EVALUATION OF LCC METHODS
Simple payback Discount payback method (DPP) Net present value (NPV) Equivalent annual cost (ECA) Internal rate of return (IRR) Net saving (NS)
SIMPLE PAYBACK
What does it calculateCalculate the time required to return the initial investment.The investment with the shortest pay-back time is the mostprofitable one Advantage Quick and easy calculation. Result easy to interpret DisadvantageDoes not take inflation, interest or cash flow into account
DISCOUNT PAYBACK METHOD
What does it calculateBasically the same as the simple payback method, it just takes
the time value into account
Advantage Takes the time value of money into account
Disadvantage Ignores all cash flow outside the payback period
NET PRESENT VALUE(NPV)
What does it calculateNPV is the result of the application of discount factors, based on
a required rate of return to each years projected cash flow, both in and out, so that the cash flows are discounted to present value.
Advantage Takes the time value of money into account. Generates the
return equal to the market rate of interest. It use all available data
Disadvantage Not usable when the comparing alternatives have different life
length. Not easy to interpret
EQUIVALENT ANNUAL COST(ECA)
What does it calculateThis method express the one time NPV of an alternative as a uniform equivalent annual cost
Advantage Different alternatives with different lifes length can be compared
Disadvantage Just gives an average number. It does not indicate the actual coast during each year of the LCC
INTERNAL RATE OF RETURN(IRR)
What does it calculateIt is possible to calculate the test discount rate that will
generate an NPV of zero. The alternative with the highest IRR is the best alternative
Advantage Result get presented in percent which gives an obvious
interpretation Disadvantage Calculations need a trail and error procedure. IRR can be just
calculated if the investments will generate an income
NET SAVING(NS)
What does it calculateThe NS is calculated as the difference between the present
worth of the income generated by an investment and the amount invested.
Advantage Easily understood investment appraisal technique
DisadvantageNS can be only use if the investment generates an income
NET PRESENT VALUE(NPV)
The most suitable approach for LCC in the construction industry is the net present value (NPV) method.
NPV = C + R – S + A + M + EC = investment costsR = replacement costsS = the resale value at the end of study periodA = annually recurring operating, maintenance and repair costs
(except energy costs)M = non-annually recurring operating, maintenance and repair
cost (except energy costs)E = energy costs
REFERENCES
Whole Life-cycle Costing, Abdelmalim Boussabaine and Richard Kirkham, 2004
http://www.treasury.nsw.gov.au/__data/assets/pdf_file/0005/5099/life_cycle_costings.pdf
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