How Long Will This Last?

life-cycle cost analysis

Photo courtesy of THOMAS HAIR

EVERYBODY LIKES A NEW BUILDING — OR SHORT OF THAT, ONE THAT HAS BEEN NEWLY RENOVATED. BUT NOTHING LASTS FOREVER.

As a part of the planning that leads to construction or renovation of any campus building, a life-cycle cost analysis (LCCA) stands as an essential tool.

“It’s extremely important to consider LCCA as an integral part of the design process,” says Fiske Crowell, principal at Sasaki Associates, a multinational planning and design firm. “We find that the evaluation should actually start in the early part of the design effort, focused on using LCCA as a way to compare options. In this manner, it becomes a critical part of decision making.”

Such an approach is inherently different than using life-cycle cost analysis as an evaluation tool after the completion of the design process, Crowell adds. In any case, it’s a no-brainer that upfront analysis holds great potential over the long haul.

“Facilities personnel understand that the majority of cost associated with a building occurs after the certificate of occupancy is issued,” says Steven Eckman, executive director of facilities planning at Florida’s Daytona State College. He says this is normally the case whether those costs are associated with utilities, keeping the building available for its intended purpose or making sure the building looks inviting for its intended users.

At the same time, potential changes in the purpose of a building should also be considered. This may be especially important on a college or university campus, according to Eckman, where a building’s focus tends to change over the 50-plus years a facility may remain in use. And even if the purpose remains unchanged, operational challenges are sure to develop over time.

“We all understand how much something costs right now, but owners of a building or project could be operating that facility for decades,” Crowell says. He notes that utilizing LCCA for assessing the total cost of facility ownership takes into account all costs of acquiring, owning and disposing of a building or building system.

“In this respect, it’s valuable to consider LCCA not just for complete buildings, but also for separate infrastructure and equipment systems within new and existing buildings,” he says.

GET AN EARLY START

Starting early may be a key to effective analysis of life-cycle costs. “The sooner an organization builds effective scope, schedule and cost controls into their construction program, the better ability they will have to reduce cost and achieve desired project outcomes,” says Curtis Matthews, partner in charge of the Moss Adams business risk management and control solutions practice.

He says that construction contracts often have built-in profit centers that owners are not aware of and ultimately pay. Fortunately, scope management and effective change order controls can prevent the vast majority of excess in construction project cost.

Once proper plans are in place, the cost of operating the facility over its life will be lessened.

“Maintenance and utility costs should be less, Eckman says. “And the less quantifiable measure of keeping the building inviting for its intended users will also be achieved.”

A BALANCED APPROACH

As administrators at Cornerstone University in Grand Rapids, MI, prepare to celebrate the institution’s 75th anniversary, the need to plan for deferred maintenance and life-cycle costing of new buildings holds great importance, according to Bob Priolo, director of campus services. With an undergraduate enrollment of 2,200, the school has 27 buildings on a 130-acre campus, with construction dates ranging from 1964 to this year.

“LCCA can be pretty intimidating to a small university,” Priolo says. “But for me the answer has been surrounding myself with a smart project team who can help balance initial construction costs versus the costs to maintain over the long term.” Key players are an energy manager/commissioning agent, controls contractor and a construction team that knows the institution’s standards.

A major goal has been to reduce utility costs, which has been accomplished in part by adopting an automated building management system. The ability to control temperatures and adjust for varying occupancies throughout the school year has been a plus. Last year the university received more than $100,000 in energy rebates from local gas and electric utility providers thanks to new projects, renovation projects and bringing existing buildings on line.

In looking to deferred maintenance, planners listed the key building systems and focused on what they evaluated as the top five, which were roof-top units greater than 15 tons, boilers, roofing, pavement and a medium-voltage campus loop. For each system, they identified each piece of equipment, determined a replacement year and cost and assigned that cost over a five-year planning horizon. Then for each fiscal budget year, a priority list will be followed in using all of the available funding.

Priolo says that an effective practice has been to split the deferred maintenance projects into two planning periods: the start of the fiscal year and the end of the fiscal year. Since Cornerstone’s year runs from June through May, some projects are slated for the June-August period, and others in May after commencement.

“This has added the necessary margin in our budget to handle large unplanned emergencies,” he says. “An added benefit is to still have funding for projects in May, when the campus is empty. In the past very little happened at that time because we were out of funding.”

MAKING INFORMED DECISIONS

Along with helping planners understand the financial impact of a building, analyzing lifecycle costs is important in supporting informed design decisions on sustainability and green design goals, according to Sasaki Associates’ Fiske Crowell.

“Appreciating the entire amount necessary for a project, including operating expenses and disposal costs, provides a more complete picture of the actual cost,” he says. “An LCCA enables clients to determine the lowestcost way to accomplish a project and enables projects to be evaluated by their long-term costs rather than just their initial construction cost.”

Cost-saving ideas are generated that can be applied to more than one alternative, Crowell adds. Such ideas can direct the final design of a project toward cost-effective construction and enhance the overall value of a project. Analyses can be used to study new construction projects, compare the long term cost effectiveness of two or competing materials, or examine preservation strategies for existing assets.

AN INDIVIDUALIZED FOCUS

Even if not done for buildings in their entirety, the LCCA process can be helpful on a more focused basis. That’s the approach taken at Florida Gulf Coast University in Fort Myers, according to Tom Mayo, director of facilities planning. “While we do life-cycle cost analysis for our building mechanical systems, we do not for whole-building designs,” he says. “For building mechanical systems, it is our best way to select the most efficient and cost-effective systems for the long term.”

He says that a life-cycle cost analysis can be completed by internal personnel if they have the right expertise, but if not, an RFQ for such services should be issued and the right consultant should be selected for the work. Once the most cost-effective system is selected, balance will be achieved in minimizing long-term costs.

Ideally the design team should complete the LCCA with input from internal personnel, Eckman says. “The design team will have more information on the latest products and materials available for consideration,” he says. “Codes that made one system right in the past may now eliminate a system from consideration. New products may now be considered that weren’t available a decade ago.”

He adds that input from facility users and maintenance staff can be critical to the process even if they are not the best-prepared personnel to complete the analysis.

“Internal personnel will have important information on parts and service availability, as well as which systems maintenance staff are trained to operate and service,” Eckman notes. Regardless of who conducts the analysis, campus leaders can use it in making smart choices.

“Unlike developers who may construct, sell and then move on, colleges live with their facilities for decades and in some instances centuries,” Eckman says. “LCCA is a valuable tool for helping campus leaders choose between what will be beneficial to the institution for both the now and the future.”

RESOURCES FOR MORE INFORMATION

Analysis,” produced by Stanford University in 2005, remains a helpful guide. It includes sections on the importance of LCCA, operations and maintenance cost benchmarking, comparative analysis, selecting cost-effective alternatives and more. You can check it out at lbre.stanford.edu.

The National Institute of Standards and Technology (NIST) offers “Life-Cycle Cost Analysis (LCCA)” by Sieglinde Fuller at www.wbdg.org. Contents include a description of LCCA methods, cost considerations in areas ranging from energy and water costs to replacement costs, parameters for present-value analysis and life-cycle cost calculation. And as noted by Fiske Crowell of Sasaki Associates, ASTM standard E917-02 “Standard Practice for Measuring Life-Cycle Costs of Buildings and Building Systems” is the standard industry procedure for analyzing life-cycle costs.

This article originally appeared in the October 2015 issue of College Planning & Management.

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