Life-Cycle Cost Analysis

Definition

An analysis of a project that includes the first, installed cost of systems and ongoing maintenance costs of selected systems in order to calculate a return on investment. This is often done early on in the design stage to establish what building technologies provide sound long-term investment.

Purpose

Life-cycle cost analysis (LCCA) evaluates the total cost of ownership over the life of a project. This includes initial costs, operation, maintenance, and disposal costs. LCCA helps in making informed decisions to ensure long-term economic efficiency and sustainability.

Examples of Use

• Building design: Evaluating different HVAC systems to determine which offers the best long-term value.
• Infrastructure projects: Assessing the cost-effectiveness of materials and construction methods for roads and bridges.
• Energy efficiency upgrades: Comparing the long-term savings of installing energy-efficient windows versus standard ones.

Related Terms

• Return on Investment (ROI): A measure of the profitability of an investment.
• Net Present Value (NPV): The value of all future cash flows (positive and negative) over the entire life of an investment discounted to the present.
• Value Engineering: A systematic method to improve the value of goods or products and services by using an examination of function.

Notes

• LCCA requires accurate data on costs and performance over time.
• It is an essential tool for sustainable development and efficient resource allocation.
• The analysis should be updated periodically to reflect changing costs and conditions.