An Introduction into Life-cycle Cost Analysis

5 Sep 2017

An Introduction into Life-cycle Cost Analysis

A life-cycle cost analysis (LCCA) is typically carried out in order to calculate the total cost of ownership of a facility. This assessment takes into consideration all costs involved in buying, maintaining and disposing of a building system or individual building.


This method is particularly useful when comparing project options which may increase initial cost but result in dramatically reduced operating and maintenance costs over the lifecycle of a project. Along with accounting for the initial capital expenditure LCCA includes operating costs such as fuel, maintenance, an appropriate discount factor and inflation, replacements costs and the residual value of the equipment or other option.


Decisions about building-related investments can involve an element of uncertainty about their costs and potential savings. Performing an LCCA greatly increases the likelihood of choosing project options which save money in the long run, is far more appropriate then simple payback, and gives a better understanding of the economics of design choices by relating it to Net Present Value (NPV) and Return on Investment (ROI).


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