LIFE CYCLE COST

BY: DR IZATUL LAILI JABAR

DEFINITION

 THE LIFE CYCLE COST OF A BUILDING OR STRUCTURE INCORPORATES

THE TOTAL COSTS ASSOCIATED WITH IT FROM INCEPTION THROUGH
THE EVENTUAL DEMOLITION

 FLANAGAN AND NORMAN (1983) – AN ASSET AS THE TOTAL COST OF THAT

ASSET OVER ITS OPERATING LIFE, INCLUDING THE INITIAL
ACQUISITION COSTS AND SUBSEQUENT RUNNING COST
 LIFE CYCLE PHASES
LIFE-CYCLE PHASE DESCRIPTION ASSOCIATED COSTS
1. Brief The formulation of the client’s Initial cost connected with land purchase
requirements and translating these into and professional fees
2. Design an acceptable design
3. Tender Costing a design Initial cost related to the construction
of a building

4. Construction & commissioning The construction process up to
completion and the handing over of the
project to client
6. Completion
a. Maintenance The use of the building for its intended
purpose
b. Modification Alterations necessary to keep the
building in a good standard of repair or
to improve the current-day standard
Recurring cost necessary for
occupational charges such as rate,
insurance, repairs, improvements, fuel,
cleaning and estate control
Recurring cost required for major
changes to building in respect of
refurbishment and redevelopment

7. Replacement The evaluation of the building for major

refurbishment, or the site for
redevelopment
OBJECTIVES
BREAKDOWN OF TOTAL COSTS
THE TERMINOLOGIES
BENEFIT OF THE APPLICATIONS:
 A WHOLE OR TOTAL COST APPROACH UNDERTAKEN IN THE
ACQUISITION OF ANY CAPITAL COST PROJECT/ASSET, RATHER
THAN CONCENTRATING ON THE INITIAL CAPITAL ALONE
 ALLOWS MORE EFFECTIVE CHOICE, THE METHOD WILL TAKE INTO
ACCOUNT THE CAPITAL, REPAIRS, RUNNING & REPLACEMENT
COST & EXPRESS THESE IN CONSISTENT & COMPARABLE TERM
 ASSET MANAGEMENT TOOLS – ALLOWS THE OPERATING COST OF
PREMISES TO BE EVALUATED AT FREQUENT INTERVAL
 ENABLE COST TO BE CORRELATED WITH CHANGES IN WORKING
PRACTICES, SUCH AS HOURS OF OPERATION, THE INTRODUCTION
OF NEW PLANT/MECHINERY AND USE OF MAINTENANCE ANALYSIS
THE LIFE CYCLE COST APPROACH SHOULD BE
ADOPTED DURING THE FOLLOWING STAGE:
1) DESIGN STAGE
TO EVALUATE VARIOUS OPTIONS IN THE DESIGN IN
ORDER TO ACCESS THEIR ECONOMIC IMPACT
THROUGOUT THE PROJECT’S LIFE
2) PROCUREMENT STAGE
UNDER CONTRACTUAL & PROCUREMENT
ARRANGEMENTS – MANUFACTURERS AND SUPPLIERS
ARE ENCOURAGED TO SUPPLY GOODS, MATERIALS &
COMPONENTS WHICH ENSURE LOWEST INITIAL COST
INRESPECTIVE OF THEIR FUTURE COST IN USE
3) CONSTRUCTION STAGE
 CONTRACTOR’S METHOD OF CONSTRUCTION
 THE CONTRACTOR CAN BENEFIT FROM ADOPTING A
LIFE CYCLE COSTING APPROACH TO THE PURCHASE,
LEASE/HIRE OF THE CONSTRUCTION PLANT &
EQUIPMENT
 PROFESIONAL INPUT TO THE SCRUTINY OF THE
DESIGN BY CONSTRUCTION MANAGER IN THE
CONTEXT OF MANUFACTURE & CONSTRUCTION & IN
THE WAY THAT THE PROJECT WILL ASSEMBLED AT
SITE
4) DURING THE PROJECT USE AND OCCUPATION
 PHYSICAL ASSET MAINTENANCE MANAGEMENT
 COST ATTRIBUTE TO MAINTENANCE CAN BE REVIEWED
AT FREQUENT INTERVAL
 LIFE CYCLE COST PLAN
IS A PLAN OF THE PROPOSED EXPENDITURE OF A CONSTRUCTION PROJECT OVER ITS ENTIRE LIFE SPAN
 Project:
 Date:
 Discount rate:

Description Discount Estimate cost Present

Factor value

1. Capital cost
2. Maintenance (per annum)
3. Redecoration (interval)
4. Minor new work (year)
5. Energy (per annum)
 Aircond
 Lighting
 Power
6. Cleaning (per annum)
7. General rates (per annum)
8. Insurances (per annum)
9. Estate mgt. (annual)
10. Tax allowance (per annum)
Total net present value (NPV)
Annual equivalent
 THE FORMULA
AMOUNT
1 5
 AMOUNT OF RM 1 YEAR

 RM 1 PER ANNUM

PRESENT
VALUE
 PRESENT VALUE OF RM1

 PRESENT VALUE RM1 PER ANNUM/ YEARS PURCHASE

**MUST HAVE SPECIFIC INTEREST RATE

 AMOUNT OF RM 1
TO DETERMINE THE SUM TO WHICH A DEPOSITS WILL ACCRUE, IF INVESTED
NOW AT SPECIFIC RATE OF COMPOUND INTEREST

AMOUNT = (1+ i)n

i = interest, n = no of years

Eg.
WHAT SUM WILL BE OBTAINED IF RM 10,000 IS TODAY FOR 10 YEARS AT 7%

SUM RM 10,000
AMT OF RM 1.967
10 YRS@7%
ACCUMULATED OUTLAY 19,670