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Life-cycle Cost Analysis (LCCA) / Life Cycle Costing (LCC)


To improve the cost-effectiveness of its building and renovation programs, companies must invest in designs and systems with improved long-term performance. The Guidelines for Life Cycle Cost Analysis (LCCA) instruct Project Teams to consider not only the “first costs” of a building (design and construction expenses) but also long-term costs, including utilities, operations, and maintenance.

 What is life cycle cost analysis?

LCCA is a process of evaluating the economic performance of a building over its entire life. Sometimes known as “whole cost accounting” or “total cost of ownership,” LCCA balances initial monetary investment with the long-term expense of owning and operating the building. LCCA is based upon the assumptions that multiple building design options can meet programmatic needs and achieve acceptable performance, and that these options have differing initial costs, operating costs, maintenance costs, and possibly different life cycles. For a given design, LCCA estimates the total cost of the resulting building, from initial construction through operation and maintenance, for some portion of the life of the building (generally referred to as the LCCA “study life”). By comparing the life cycle costs of various design configurations, LCCA can explore trade-offs between low initial costs and long-term cost savings, identify the most cost-effective system for a given use, and determine how long it will take for a specific system to “pay back” its incremental cost. Because creating an exhaustive life cycle cost estimate for every potential design element of a building would not be practical, the Guidelines for LCCA focus on features and systems most likely to impact long-term costs.

Why LCCA is important?

As the chart below illustrates, over 30 years of a building’s life, the present value of maintenance, operations, and utility costs is nearly as great as the initial project costs.


Funds secured or set aside to construct new  buildings rarely extend to ongoing operational costs. Increasingly, buildings are experiencing shortfalls in their annual budgets for building operations. These lead to deferred maintenance and eventually to declining building utility and performance. Designing new and renovated buildings with maintenance and operating costs in mind can result in significant savings. The Guidelines for LCCA help Project Teams calculate these costs and use them to inform planning, design, and construction decisions. Company’s decision to implement LCCA as part of the PDP is a direct effort to reduce the total cost of building ownership. 

 Implementing the life cycle cost analisys process

Life Cycle Cost Analysis will be implemented within the existing nine-phase Project Delivery Process(PDP). Section III discusses in detail how to address LCCA at each stage. LCCA adds two major activities to the PDP: O&M Cost Benchmarking and Comparative Analysis. Each of these activities occurs at specific phases in the PDP, in conjunction with other Project Team tasks during those phases.

Operations & Maintenance cost benchmarking

During the Feasibility and Programming phases of the PDP, the Project Manager develops a “Benchmark Budget” with design and construction cost estimates based upon data from past projects. At this time, the Project Team will also develop an O&M Benchmark using historical operations and maintenance data from existing buildings for those LCCA components that apply to the project.

Comparative analysis

During the Schematic Design (SD) and Design Development (DD) phases of the PDP, the Project Team makes increasingly detailed decisions about the final design for the building, including mechanical, electrical, structural, telecommunications, and plumbing systems. During this period, the Project Manager will direct the team to conduct a series of analyses comparing the total costs of various building system options.

Study categories

The Project Team will assess the value to the project of up to 14 possible life cycle cost (LCC) comparisons in six general categories: Energy Systems, Mechanical Systems, Electrical Systems, Building Envelope, Siting/Massing, and Structural Systems. Within each category, the specific comparisons involve options for addressing the same need. The 14 comparison areas follow, with examples of options that might be considered in each. These examples are only for clarification; specific systems or options considered will vary with the type, scale, and intended use of the building.

Energy Systems 1. Central plant-connected vs. stand-alone systems (steam and chilled water) 2. Alternative energy systems (e.g., solar photovoltaics, solar thermal, fuel cells) 3. Equipment options for stand-alone systems (e.g., air-cooled chillers vs. refrigerant-based direct-expansion units) Mechanical Systems 4. Air distribution systems (e.g., variable volume vs. constant volume, overhead vs. underfloor) 5. Water distribution systems (e.g., various piping systems and pumping options) Electrical Systems 6. Indoor lighting sources and controls 7. Outdoor lighting sources and controls 8. Distribution (e.g., transformers, buss ducts, cable trays) Building Envelope 9. Skin and insulation options 10. Roofing systems (various materials and insulation methods) 11. Glazing, daylighting, and shading options Siting/Massing 12. Orientation, floor-to-floor height, and overall building height 13. Landscape, irrigation, and hardscape options Structural Systems 14. Systems/materials selection (e.g., wood vs. steel vs. concrete, cast-in-place vs. pre-cast)

Study selection

The Project Team will determine which of the six categories of studies and the 14 comparative analyses have the highest potential LCC benefit for the project. An LCCA Decision Matrix can assist in this determination. The team should create a customized matrix, using the example on page 6. The vertical axis represents the potential cost impact to the project. The horizontal axis reflects the complexity of the analysis required.


When the six categories and/or 14 analyses are compared on such a matrix, they become easier to prioritize. Those in Quadrant I (simple analysis with high potential cost impact) should have the highest priority. Studies that require complex analysis but have a high potential impact should be prioritized next (Quadrant II). Simple analyses with low potential impact would be next (Quadrant III), followed by complex analyses with low potential impact (Quadrant IV). By taking the time to prioritize LCC analyses, the Project Team can focus on those studies most appropriate for the project.

Conducting comparative analyses

Each comparative analysis is developed on a project specific basis. The Project Manager, Technical and Consultant Groups will decide together how to determine the details of each analysis. A “base case” will be established. The Project Team will then draw upon its collective experience to identify alternatives to the base case. For example, in analyzing mechanical distribution systems, the team might decide to consider a base case of overhead air distribution and an alternative underfloor approach. Section IV discusses the format used to record the results of the comparative analyses. While this format is intention ally generic (to accommodate various types of studies), all Project Managers must use the same format so that the data collected and analyzed are documented consistently. The results of each team’s studies will be incorporated into the Department of Project Management’s LCCA library for future reference. In this way, Company will create a database of building studies as both a reference for future projects and a tool for understanding similarities and differences between building systems.

Selecting cost-efective alternatives

The Guidelines for LCCA give Project Teams the direction and tools to use LCCA to inform project decisions. The team should use LCCA incremental cost and payback findings in concert with other factors such as sustainability and user preferences to determine which elements to include in the final project design. Alternatives that result in a payback of 5 years or less are required to be incorporated into the project. Alternatives that result in a payback of 6 to 10 years are strongly encouraged and require the approval of the Vice Provost for Land and Buildings to be exempted. Alternatives resulting in paybacks over 10 years are discretionary. Documentation and appropriate explanations should be included to support the inclusion or exclusion of alternatives considered. See Section III for further details.

Process phases

The project delivery process

Nine distinct phases of PDP – Scoping, Feasibility, Programming, Schematic Design, Design Development, Construction Documents, Permitting, Construction, and Closeout.

Each PDP phase requires the Project Team to complete set tasks and produce specific deliverables to obtain approval to move forward. A graphic representation of the phases, activities, deliverables, and approvals – the “Heartbeat” – follows. The following discussion identifies the primary goal for each phase of the PDP and the related LCCA goals. It also describes the new Ownership phase. The Heartbeat illustrates the relationship of each phase to the overall process.

LCCA Process Phase Summary


Scoping, feasilibity, and programming


The goal of project Scoping is to translate academic or departmental initiatives into potential facility needs to determine if a capital construction project is necessary. The LCCA goal during this phase will be to assign an O&M Benchmark for the long-term costs of the building.

LCCA Tasks:

  • As part of the Capital Planning process, O&M costs will be estimated


The overall goal during the Feasibility phase is to further develop the options outlined through Scoping and approve one option for further consideration. The LCCA goal will be to reconfirm the O&M Benchmark. (See Operations & Maintenance Cost Benchmarking in Section II above.)

LCCA Tasks:

  • Department of Project Management (DPM) and Project Team will verify the O&M Benchmark LCCA Deliverables
  • Documentation of assumptions for the O&M Benchmark (e.g., if based on historical performance of similar buildings, list of buildings and their O&M costs)


During the Programming phase, the option approved by the Dean and Provost is further developed. As part of this process, the Project Manager should update the O&M Benchmark and arrange an LCCA work session to review the Guidelines for LCCA.

LCCA Tasks:

  • DPM and Project Team will create a project specific LCCA Decision Matrix (see Section II) to determine which LCCA studies might render the greatest cost benefit to the project
  • DPM will document cost and scheduling implications of LCCA studies

LCCA Deliverables:

  • Completed project-specific Decision Matrix
  • Completed project schedule and budget, with breakdown of LCCA elements.

Schematic design and design development

Schematic Design Schematic Design (SD) is a critical phase of the PDP during which the general scope, initial design, scale, and relationships among the components of the project are determined, and the greatest level of LCCA effort will take place. The Project Team will select the comparative analyses to be performed, assess the results, and determine which design elements would generate long-term cost savings. The results of the LCCA studies will be reported as a part of the SD submittal, which will clearly state LCCA elements that have (or have not) been incorporated into the project design. The LCCA results will document incremental University investments in building design elements with potential long-term benefits for the institution. LCCA results will also note elements that have not been incorporated into the project due to budget constraints, but that would benefit the University. These results will allow the University to reassess the project budget and scope, based on the potential to realize greater return on initial investment over the life of the building. The Project Manager will need to consider schedule and budget impacts of the LCCA options studied.

LCCA Tasks Project Team will:

  • Review the LCCA Decision Matrix and determine which studies should be completed
  • Perform LCCA studies in conformance with the technical guidelines in Section IV
  • Assess study results and select appropriate LCCA elements to be incorporated into the project
  • Fully document LCCA results, along with budget and schedule implications

LCCA Deliverables:

  • Final LCCA Decision Matrix with selected studies highlighted
  • Completed LCCA comparative studies
  • Meeting minutes from workshop(s) to discuss LCCA results
  • Documentation of LCCA elements incorporated or not incorporated into the project, with brief rationale for inclusion or exclusion
  • Updated schedule and budget, with LCCA elements/impacts clearly highlighted (if applicable) Design Development During the Design Development (DD) phase, the approved schematic design begins to include a level of detail necessary to work out a clear, coordinated description of all aspects of the project. The Project Team will review the LCCA elements incorporated into the project to ensure that design conditions have not changed and that the LCCA return-on-investment calculations are still accurate. LCCA Tasks
  • Project Team will review DD documents to ensure that design and specifications conform to LCCA study assumptions LCCA Deliverables
  • Documented review of LCCA elements, including design changes or LCCA modifications made during DD phase.

Construction documents/permitting, construction, closeout, and ownership

Construction Documents/Permitting

During the Construction Documents (CD) phase, the Project Team prepares a comprehensive, fully coordinated set of construction documents and specifications to obtain the necessary permits and construct the project.

LCCA Tasks:

  • At 50% CD, the Project Manager will ensure that the contract documents (plans, details, and specifications) are consistent with the designs evaluated in the original LCCA studies
  • During Bidding, the Project Manager will ensure that any Value Engineering (VE) options address the impact on the LCCA elements in the project LCCA Deliverables
  • Documentation of changes made to LCCA elements as a result of VE process


The objective of the Construction phase is to safely build the project as represented in the contract documents within the parameters approved by senior management and/or the Board of Trustees. There are no specific LCCA tasks or deliverables during this phase.


Closeout of facilities, occupancy and the turnover of the finished and fully commissioned project to the user group and facilities operations representative. It is important for building occupants and maintenance personnel to understand how their facility is designed to function, particularly as this relates to specific user behavior.

LCCA Tasks Project Team will:

  • Ensure that the Building Manager and the facilities operations representative understand specific user requirements associated with the LCCA features in the building (e.g., requirements that users turn off lights manually at certain times of the day because of special daylighting control systems, or that they close windows when the air conditioning is on)
  • Confirm that O&M manuals are complete and include any specific information related to LCCA elements in the building
  • Ensure that commissioning and training on systems highlight LCCA expectations for system performance, so that any significant variances from these expectations can be identified and investigated
  • During “lessons learned” session, evaluate implementation of the Guidelines for LCCA and procedures

LCCA Deliverables:

  • Appropriate documents and training for building users and facilities operations representative related to the LCCA features in their building
  • Documentation of LCCA “lessons learned” to be included in the eleventh-month evaluation


The Ownership phase begins once the initial project construction is complete and the building is handed over to facilities operations. During this period, key assumptions and anticipated outcomes established through LCCA studies need to be validated. As LCCA continues to evolve, the process for this evaluation will become more established and consistent.

LCCA Tasks:

  • The facilities operations representative will monitor utility consumption and O&M costs. These data are critical to evaluate the effectiveness of the Guidelines for LCCA and facilitate future LCCA work
  • DPM and the facilities operations representative will conduct eleventh-month evaluations to assess performance of LCCA elements LCCA Deliverables
  • Meeting minutes, survey results, etc. from eleventh-month evaluations conducted regarding LCCA elements


* Article based in the Standard LCCA procedure.