The term is used collectively to include many different types of analyses e. 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. Since a project produces a product and then ends and the product stays for a longer time, the product life cycle is bigger than the project life cycle. Life cycle cost in construction projects and time value of. Through lcc one seeks to minimize the cost of obtaining a cer tain level of output. Guidelines for life cycle cost analysis sustainable stanford.
The project life cycle phases the project manager and project team have one shared goal. The common denominator of the analyses is that they analyse costs. The general concept of a life cycle cost is not new. At each stage, approval is generally required from outside the project team before proceeding to the next stage. Examples of lifecycle costing lcc in project management. Life cycle cost in construction projects and time value of money. Bridge, cost, life cycle cost analysis, procurement, investment, management. Life cycle costing is a method of economic analysis directed at all costs related to constructing, operating, and maintaining a construction project over a defined period of time.
The life cycle costing simply does not considers the least cost of construction, but it considers a mechanism to determine which alternatives offer the largest economic advantage by considering costs and benefit that occur throughout the life of the project from initial concept of project to its construction and its useful life to the time it is ready for replacement. Professional quantity surveyors perspective chiurugwi, t1. Life cycle costing colorado department of transportation 4 3. A project life cycle is the sequence of phases that a project goes through from initiation. In this article, we introduce life cycle costing and give examples of life cycle costing in making project management decisions. Lifecycle costing lcc is a term commonly used to describe a general method of economic evaluation by which all relevant costs over the life of a project are accounted for when determing the economic efficiency of the project. Life cycle costs are the costs required to maintain the asset past the point when the. Initial costs operating costs disposal costs life cycle costing. Life cycle costing lcc is a term commonly used to describe a general method of economic evaluation by which all relevant costs over the life of a project are accounted for when determing the economic efficiency of the project. Lifecycle costing is a methodology where costs of a given asset are considered throughout its lifecycle 201424eu art. Life cycle costing page 5 of 15 products in the case of the procurement of a product the only market cost that may be relevant is the purchase price.
It can be used to provide input to decisions regarding asset design, manufacture, installation, operation, maintenance support, renewalrefurbishment and disposal. The optimization of the lcc of a project, construction or equipment, is essential for the complex decisionmaking process. This is a tried and tested method for delivering projects on time, within budget and to the expected quality targets. The process of implementing a life cycle costing exercise 6. What is project life cycle and its main characteristics. These decisions on investments are analyzed for the payback over the life of the investment. However, several definitions of life cycle costing lcc exist that tend to be similar.
Issue 2 making a decision on the basis of lcc may make it more expensive upfront. If, however, there is a potential for energy or water to be consumed by that product. The principle of life cycle costing lcc offers a more comprehensive and. A project passes through several distinct phases as it matures, as illustrated in figure 1 8. Equipment lifecycle cost analysis lcca is typically used as one component of the equipment fleet management process and allows the fleet manager to make repair,equipment replacement, and retention decisions on the basis of a given piece of equipments economic life. Life cycle costing analysis can be carried out during any phase of an assets life cycle. This is a key concept for your pmp preparation pertaining to the project cost management knowledge area. Life cycle costing lcc is very applicable as a means of achieving the objectives of recent energy information policies in the u. Wholelife costing covers an assets costs from the time you purchase it to the time you get rid of it. Life cycle cost analysis lcca is a datadriven tool that provides a detailed account of the total costs of a project over its expected life. Target costing is a disciplined process for determining and realizing a total cost at which a proposed product with specified functionality must be produced to generate the desired profitability at. Project life cycle costing meaning definition categories of project life cycle optimization of project life cycle 2. Life cycle costing is particularly useful for the estimating total costs in the early stage of a project 5. A project life cycle is the sequence of phases that a project goes through from its initiation to its closure.
Life cycle cost in construction projects is a process of economic decision analysis, which helps taking decisions on investments in new construction. Projects life cycle every project has certain phases of development. When making funding decisions under constrained budgets, it is. Life cycle costing helps companies to be aware of where their products are in their life cycles, because in addition to the sales effects, the life cycle stage may have a tremendous impact on costs and profits. Purpose life cycle costing lcc is an important economic analysis used in the selection of alternatives that impact both pending and future costs. Life cycle costing is a methodology where costs of a given asset are considered throughout its life cycle 201424eu art. Sep, 2018 life cycle costing, or wholelife costing, is the process of estimating how much money you will spend on an asset over the course of its useful life. Nist handbook 5 lifecycle costing manual for the federal. In short, life cycle costing is the technique of considering the initial and subsequent running costs of an asset over its planned life. Manufacturers would base life cycle costing expense allocations on an expected number of units to be sold over the products life. The concept is not new, yet under used in the construction industry bull 1993. Considering that project managers in construction have key roles for a broader application of sustainable building it is interesting to investigate the interrelation between project management practice and lcc thinking. The project life cycle also allows for the gate procedure to be used.
The projects life cycle has identifiable start and end points which can be associated with time scale. It compares initial investment options and identifies the least cost alternatives for a twenty year period. However, over the life of the project, facility management cost is often two to three times higher than acquisition costs. Issue 3 a general appreciation for lcc is critical to change the procurement mindset from the best value for moneyto the best value across the asset life cycle. Buying an asset is a cost commitment that extends beyond its price tag. Jul 19, 2017 these are the costs which are required to maintain the deliverable, most often called life cycle costs. Energy price indices and discount factors for lifecycle cost. There is nothing intrinsically mystifying in the concept of life cycle costing. Lifecycle costing manual for the federal energy management program sieglinde k. Nist handbook 5 1995 edition life cycle costing manual for the federal energy management program sieglinde k. The phases of development are known as life cycle phases. Energy price indices and discount factors for lifecycle. Life cycle costing seems still to be missing within project management practice. Lifecycle costing lcc, which has been used in this project, is not as standardized as lifecycle assessment lca.
Click download or read online button to get life cycle costing for facilities book now. Lifecycle costing of new processes, materials, and products fissac. On the pmp exam, you may see a few questions on this topic, so understand it well. Pdf life cycle cost lcc is an important technique for evaluating the total cost of ownership between mutually exclusive alternatives. 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. This site is like a library, use search box in the widget to get ebook that you want. The project life cycle provides a framework for managing any. Life cycle costing make you consider the entire ownership costs of a project before making a decision. Lifecycle costing of new processes, materials, and products. Issue 1 life cycle costing is not yet considered to be a critical component of spp. Project life cycle vs product life cycle pm study circle.
The number and sequence of the cycle are determined by the management and various other factors like needs of the organization involved in the project, the nature of the project, and its area of application. Life cycle costing as an important contribution to. Life cycle costing is different from traditional cost accounting system which reports cost object profitability on a calendar basis i. In order to compare the life cycle costs of different product systems, a project has to be created. Standardized method of life cycle costing for construction procurement. These are the costs which are required to maintain the deliverable, most often called lifecycle costs. Simplified feasibility and project definition life cycle costing process. Definition, objectives and benefits of life cycle costing lcc 2. The factors affecting the investment life of a project 3. A general concept of target costing is discussed here. The life cycle impact on each of these items is shown in exhibit 17. In general, life cycle costing lcc is an economic analysis used in the. However, practitioners are encouraged to adopt the practices in this guidance note earlier if appropriate.
The costs and values included in a life cycle costing exercise 5. With its emphasis on costs, it is a suitable method for evaluating the economic feasibility of projects such as. Purpose the purpose of this research project is to develop guidelines that allow cdot to capture the longterm costs of adding additional capacity and other transportation related improvements to the state highway and bridge system. Lifecycle costing an overview sciencedirect topics. Life cycle costing, or wholelife costing, is the process of estimating how much money you will spend on an asset over the course of its useful life. The vice provost for land and buildings convened a team of staff from departments within land and buildings, along. A project passes through several distinct phases as it.
The life cycle costing process usually includes the following steps. Studies on lifecycle costing lcc in private finance initiatives pfipublicprivate partnership ppp projects abound, particularly in the uk. The project life cycle refers to the fourstep process that is followed by nearly all project managers when moving through stages of project completion this is the standard project life cycle most people are familiar with. Life cycle costing in construction projects a case study. Teams to consider not only the first costs of a building. Calculate project life cycle costs over a wide range of variables. Meaning it is a technique which takes account of the total cost owing a physical asset or making a product during its economic life. Life cycle costing lcc hereafter was first used in the united states by the department of defense. This project has received funding from the european unions horizon. 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. Lifecycle costing lcc is an essential element of capital management in. Life cycle costing for facilities download ebook pdf. Each periods internal income statement using life cycle costing would show revenues on a lifetodate basis alongwith total cost of goods sold, total r and d project costs and total distribution and other marketing costs. Life cycle costing in construction projects a case study of a.
Project life cycle phases and oscon application in order to be able to influence the uncertain relationships between present and future costs there is an urgent need to designate a clear and simple way for. The harvard life cycle costing policy and calculator was designed to aid harvard decision makers in considering all present and future costs related to new construction, renovation, equipment replacement, or any other project that involves upfront and ongoing expenditures. This method is also known as life cycle costing technique in construction industry. Life cycle cost analysis the cost analysis of buildings, systems or products in use. Nevertheless, the need and desire to implement life cycle costing was much talked about but little practised. Life cycle costing lcc, which has been used in this project, is not as standardized as life cycle assessment lca. Department of commerce technology administration national institute of standards and technology. Planningconstruction period before a project is put into service, and by allowing. The effective date of this guidance note is 1 july 2016. But, there is a limited empirical study on the factors influencing the usage of lcc outside pfippp context from professional quantity surveyors perspective. Every project has a beginning, a middle period during which activities move the project toward completion, and an ending either successful or unsuccessful.
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