Life Cycle Costing (LCC)

...evaluate economic performance of investments in building and building systems.

Methodology to evaluate economic performance of investments in building and building systems. Also known as “total cost of ownership over the life of the asset.”  LCC can be applied to a single system or used as an integrated design approach.

Costs Associated with Construction Include:

  • Land acquisition/improvement

  • Construction, including materials, equipment and labor

  • Field supervisor of construction

  • Construction financing

  • Insurance and taxes

  • Permitting fees

  • Inspection and testing

  • A/E and other design fees

  • Contractor OH&P

  • Equipment and furnishings not included in construction

  • Site access or other owner operational constraints

  • Owner’s other expenses

Design Estimates typically run parallel with the planning and design of a project, providing more detailed costs as the design develops at each phase. Bid Estimates, provided by the contractor, consist of direct construction costs including field supervision plus a markup to cover general overhead and profit.

Factors Used in Estimates

Economy of Scale:
Many of the construction cost references report pricing based on past projects of $1,000,000 or more and on a national average.  Pricing needs to be adjusted for the locale and scale of the project.

Contingencies:
Typically budgeted as an allowance for design changes, differing conditions, third party requirements imposed during construction, substantial changes in material pricing (usually based on historical experience and difficulty of a particular type of project).   Budgeted contingent amounts not expended can be released near the end of construction to the owner or to add additional project elements.

Escalation:
Pricing adjustments are usually made to the mid-point of construction based on inflation and trends. This is especially true of projects that may be under construction for more than a year.

Access or Difficulty Factors:
Some projects may require multiple set ups for staging, restricted site conditions, double handling of material, or access restrictions based on security, (i.e. detention facilities, airports etc.)

Historical Cost References

  • R.S. Means Company Inc.

  • Design Cost Data

  • Engineering News Record

  • Turner Construction Company Building Cost Index

- Dennis C. Spina, AIA, RRC, REWC, REWO