Life cycle cost analysis (LCC) in the United States green building industry. Dave Nornes

1. Life cycle cost analysis (LCC) in the United States green building industry.Dave Nornes

2. Impact of the built environment • 40% of the world’s energy • 25% of the timber harvested • 16% of the fresh water used • 50% ozone depleting CFC’s • 30% of raw materials used • 35% of CO2 emissions • 40% of landfill waste

3. Green Building “An integrated framework of design, construction, operations, and demolition practices that encompass the environmental, economic, and social impacts of buildings.” “Building practices recognizing the interdependence of the natural and built environment and seek to minimize the use of energy, water, and other natural resources while providing a healthy and productive indoor environment.”

4. Green Building • Sustainable • Durable/Adaptable • Building beyond the codes • Build for the occupant • Whole systems approach

5. Barriers to Green • Codes • Education • Cost • Products not available • Breaking tradition

6. Reasons to Build Green • Mandated • Market demands • Occupant comfort and health • Save $ • Environmental responsibility

7. Reasons to build green “Building to code means that if a building were designed any worse it would be against the law.”Randy Croxton, Architect

8. Life Cycle Costing Economic assessment of alternatives that considers all of the significant costs of ownership over the useful life expressed in equivalent dollars. • initial costs • financing costs • operational costs

9. History of LCC 1933-- Comptroller of the U.S. Government • factored maintenance costs in bids for tractor acquisition 1940-- WW II • Shortage of materials and labor. • Lawrence D. Miles (General Electric Inc.) created value engineering model for substitute materials and procedures.

10. LCC applied to buildings 1970’s--U.S. General Accounting Office applied LCC to hospital facilities. • Operation and Maintenance costs equal initial investment costs in 1-3 years. • Focused primarily on energy costs.(Arab oil embargo)

11. Standardized LCC methods American Society for Testing and Materials (ASTM) 1980--Set a series of standards for building economics. • LCC analysis • Benefit to Cost Ratio • Internal Rate of Return (IRR) • Net Benefits • Payback Period

12. LCC characteristics LCC treats design decisions as investments in buildings and building components. LCC compares the estimated costs of different options taking into account both initial capital costs as well as costs that may be incurred over the life cycle.

13. LCC objectives To provide an analytical tool that can establish the interaction between planning and design decisions and long term costs. To promote interdisciplinary communication and look at the building as a whole and not merely its component parts.

14. Recent LCC trends • Infrastructure • durability/ longevity • Federal/State Buildings • efficiency/ obsolescence • Green Buildings • LCC/ LCA studies

15. LCC Uncertainties • Input data • estimating • assumptions • Parameters • discount rate • useful life/ study period • future prices

16. Literature LCC importance to promote green features. Little evidence exists about if, who, how, and where LCC is applied.

17. Statement of the Problem Green building initiatives are predicated on the fact that benefits accrue over the life of the building. Use of LCC is needed to increase adoption of green building practices.

18. Research Questions • What are the goals of LCC? • Who are the drivers of the studies? • To which types of projects is LCC applied? • Which building components are analyzed? • What constraints are faced with LCC?

19. Methodology Survey Research Human Characteristics • thoughts • behaviors

20. Instrument Web-based questionnaire • 18 scaled, nominal, and ordinal questions • Part 1- set framework for parameters of study • Part 2- specific use and application • 3 open ended response questions • Part 3- LCC and Green building (opinions and perceptions)

21. Sample Sample Population LEED registered project contacts • 1000 cover letters with hyperlink to questionnaire

22. Response rate 104 total responses (10.4 %) • 84 questionnaires completed 45% Architects 17% Engineers 9% Consultants

23. Projects utilizing LCC 70 60 50 Responses LEED projects 40 30 All projects 20 10 0 0-25% 25-50% 50-75% 75-100% Percentage of projects Findings Current use of life cycle cost analysis

24. Project types using LCC Highway/Infrastructure Institutional Residential Renovations Commercial Private Public 0 5 10 15 20 25 30 35 40 45 50 Responses Findings Types of projects utilizing LCC

25. LCC Driver and Analyst 60 50 40 Analyst Responses 30 Driver 20 10 0 Other Owner Vendor Engineer Architect Consultant Government Group Decision Facility manager Project manager Findings Team member(s) initiating the interest of conducting LCC Individual responsible for the analysis

26. Findings Goals of the LCC

27. Findings LCC application to building components

28. Findings Accuracy of LCC projections

29. Constraints encountered in LCC Lack of savings justified Added time involved Inaccurate input data Added cost involved Forecasting uncertainties/ complex tools 0 5 10 15 20 25 30 35 40 45 Responses Findings Constraints encountered in the LCC

30. Conclusions Why do you suspect you are not using or under utilizing LCC on the LEED project you are associated with? • Shift costs/ budget • Lack of expertise/user friendly tools • Lack of time

31. Conclusions Where are improvements needed in the LCC process? • User friendly tools • Better input data • Owner education benefits

32. Conclusions Do you think LCC is an effective tool to increase sustainable building practices?

33. Future Research How can the cost to perform an LCC be justified? How can the time to perform an LCC be reduced? What improvements are needed in LCC software? How can the industry have better trained LCC practitioners?