Life cycle costing is performed over an agreed period of analysis, clearly identifying whether the analysis is for only part of or for the entire life cycle of the constructed asset. Pdf the application of whole life costing in the uk. As defined in the a dictionary of business 1996, p. Life cycle costing, also known as the whole life costing, is a costing technique to establish the total cost of ownership. Life cycle costing lcc is a method of economic analysis for all costs related to product and services throughout the entire life cycle. The australian and new zealand standard life cycle costing an application guide asnzs 4536. The environmental impact of a product over its whole life cycle.
Pdf the last few years have seen significant improvements in the concepts, methods and the general approaches to calculating costs. Life cycle costing is methodology for systematic economic evaluation of the life cycle costs over a period of analysis, as defined in the agreed scoping. What is life cycle costing life cycle costing lcc is a methodology that enables you to incorporate costs and benefits that occur over the entire life cycle of a product into your procurement decisions rather than considering the initial capital cost of a product only costs and benefits. Whole life costing is a key component in the economic appraisal associated with evaluating asset acquisition proposals. The terms are often used interchangeably but in general whole life costing incorporates all of the costs over the life of a building including capital cost of construction, cost of maintenance and cleaning, energy costs, and lifecycle replacement. Why decisions on life cycle costing lcc are needed. Whole of life cycle cost analysis in bridge rehabilitation v executive summary the report presents a methodology for whole of life cycle cost analysis of alternative treatment options for bridge structures, which require rehabilitation. Target costing and lifecycle costing can be regarded as relatively modern advances in management accounting, so it is worth first looking at the approach taken by conventional costing. Life cycle costing lcc is a technique to estimate the total cost of ownership ogc, 2003. The history of the application of lifecycle costing lcc began in the. Definition, objectives and benefits of life cycle costing lcc 2.
Life cycle cost analysis lcca is a method for assessing the total cost of facility ownership. Initial costs operating costs disposal costs life cycle costing. Life cycle costing, especially within pfi procurement, often just refers to. Wlcc in buildings whole life cycle costing is a relatively new concept in construction, although this concept is based on analytical methods that have existed for several years. Implementation of whole life cycle costing and how it can be measured in construction phase of a construction project. Traditionally it takes into account mainly investment, operation, maintenance and end of life disposal costs. It can be used to provide input to decisions regarding asset design, manufacture, installation, operation, maintenance support, renewalrefurbishment and disposal. Life cycle costing analysis can be carried out during any phase of an assets life cycle.
The costs and values included in a life cycle costing exercise 5. Pdf the last few years have seen significant improvements in the concepts, methods and general approach to calculating costs. Life cycle cost assessment lcca systematic process for evaluating the life cycle cost of a product or service by identifying environmental consequences and assigning measures of monetary value to those consequences 5,31. Life cycle costing is applied initially at a broad brush level. It considers also how much solid, liquid and gaseous waste and emissions are generated in each stage of the products life. Life cycle costing is a subset of whole life costing and it is a method of systematically doing economic evaluation. Defining the cost profile of alternatives may be sophisticated, combining. It used to be the case that once a project was built that was all that mattered. This fact sheet introduces the principles of whole life costing for organisations that are new to the subject or in the early stages of working with whole life costing. Note 2 life cycle costing typically includes a comparison between alternatives or an estimate of future costs at portfolio, project or component level. Wholelife costing is covered by a british and international standard. The standard defines it as the process of assessing the cost of a product over its life cycle or portion thereof.
Lifecycle costs are all the costs associated with the product for its entire life cycle. Life cycle costing summarizes all costs associated within the life cycle of a product that are directly covered by one, or more, of the actors in the product life cycle e. At the same time, the empirical researchers also focus their studies towards building conditions. An economic appraisal is generally a broader based assessment, considering benefits and indirect or intangible costs as well as direct costs. Pdf life cycle cost lcc is an important technique for evaluating the total cost of ownership between mutually exclusive alternatives. In capital budgeting, the total cost of ownership is compiled and then reduced to its present value in order to determi. Part i deals with the fundamentals, providing the general background to appreciate wlcc concepts and whole life risk management techniques at the key decisionmaking milestones through a projects life.
A life cycle costing approach din en 6030033 the six phase model of a product life in the following, the six phases model of a general product life cycle, which is the basis of the lcc measurement approach in the din norm, will be explained. Whole life costing wlc or life cycle costing lcc is the methodology for systematic economic consideration of all costs. According to 5, life cycle costing lcc is a technique to estimate the total cost of ownership. Through lcc one seeks to minimize the cost of obtaining a cer tain level of output. Bs iso 15686 service life planning of buildings and constructed assets. Wholelife costs for buildings wlc designing buildings wiki. Suppliers sales strategies can merge specific equipment grades with general.
It is also known as a life cycle cost, which includes. The factors affecting the investment life of a project 3. Costs are the monetary value of goods and services that producers and consumers purchase real money flows. As opposed to more commonly used roibased calculations, lcc is conducted based on longterm costs and savings, keeping in mind the fact that they are interconnected. Whole life costing is defined in the draft international standard, iso15686 part v see.
May 30, 2018 whole life cost is the total expense of owning an asset over its entire life, from purchase to disposal, as determined by financial analysis. Costs will later be refined in the course of making a firm acquisition decision. Wholelife cost is the total expense of owning an asset over its entire life, from purchase to disposal, as determined by financial analysis. Typically, conventional costing attempts to work out the cost of producing an item incorporating the costs of resources that are currently used or consumed. Product life cycle costing traces costs and revenues of each product over several calendar periods throughout their entire life cycle. The general concept of a life cycle cost is not new. The costs are included in different stages of the product life cycle. Risk analysis in the theory of whole lifecycle costing. Life cycle costing analysis lcca or lcc for short is the most accurate way to increase your buildings project savings by comparing different design alternatives. The principles and process for conducting a lifecycle cost. It will save you guesswork in budgeting and will save tax dollars. Life cycle costing lcc, by definition, refers to an analysis technique which encom passes all costs associated with a product from its inception to its disposal. A guide to whole life costing wlc 1 introduction 1.
Whole life costing who should read this fact sheet. Issue 2 making a decision on the basis of lcc may make it more expensive upfront. The process of implementing a life cycle costing exercise 6. Issue 1 life cycle costing is not yet considered to be a critical component of spp. Despite the existence of many life cycle costing lcc. In the modern world clients need to understand how sustainable their investment is likely to be from a cost, as well as from an environmental, perspective. Assessing costs arising from an asset over its projected life cycle. Life cycle costing is the process of compiling all costs that the owner or producer of an asset will incur over its lifespan. Utilising life cycle costing and life cycle assessment. Purpose life cycle costing lcc is a means of comparing design options on the basis of their whole life cost with the objective of providing value for money for the life of the asset. The aim of life cycle costing at the acquisition stage is to ensure that all relevant costs are identified, and that through life costs are adequately considered. Lcca is especially useful when project alternatives that fulfill the same performance requirements, but differ with respect to initial costs and. Whole life costing techniques look at the big picture of expenditure and longevity of the building. Approach on life cycle costing lcc and its benefits.
Lcca is a term that highlights the cost ing aspect of life cycle assessment lcaa 28 add cost information to lca. Life cycle costing gives governmental agencies a standard for evaluating the quality and total cost of equipment being considered for purchase. On developments of the terminology of lcc, life cycle costs is an older term for wholelife costs. The process of life cycle costing lcc fundamentally involves. It is also known as a lifecycle cost, which includes. What is the difference between life cycle costing and whole.
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