Life Cycle Costing Updates

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Most of India's habitat and civil infrastructure is yet to be built. The existing ones need rehabilitation and to be built better. The "LiFE mission" without enabling and integrating the construction industry is incomplete.  


The model above depicts an integration of the two and is considered the first practical step towards a circular economy. Civil Infra Life Cycle need to assimilate and integrate with LiFE. The above model for moving towards sustainability and the Circular Economy is an extension of the earlier proposal in the Azadi Ka Amrit Mahotsav conference on Indigenous Engineering Solutions. Does writing integration of LCC with the LiFE mission make sense when we have not even started with Life Cycle Costing in construction practice?

While green buildings and technologies help reduce the detrimental impact of construction on the environment, some industry stakeholders need more convincing about the monetary returns of investment in resource efficiency. Sceptics accuse 'green building and/or net zero certification' of greenwashing. 

Sustainable buildings and other Civil Infrastructure require transparently quantifying their environmental impact during their life cycle. It is the most critical sustainability consideration. Mission LiFE's parameters in the decision-making for the life cycle assessment and costing are essential first steps towards achieving a circular economy.   

However, the construction industry in the public sector, despite explicit suggestive policy on life cycle as a decision-making consideration, rarely practices it. 
Life cycle costing (LCC) has been taught in our classrooms for a long time. It started as a formal tool for the US Department of defence forces in the 1960s. Industrial and consumer segments successfully applied it. LCC has developed due to specific applications rather than a hypothetical model. This decision-making tool has primarily been used in isolation.
As used in the field, life cycle costing has been detailed and documented in the following blogs. These are used in isolation and need integration in the full schemes.   
A project has many more such elements, and adapting the new and effective technologies requires many more templates. Using this skill wholistically involves a difficult learning curve, then meeting prescriptive compliance as required in many green codes. This seems to be the main reason why construction practitioners shy away and not adopting it as a practice?

India's General Financial Regulations 2017 with specific LCC mentions that “while designing the projects etc., principles of Life Cycle cost may also be considered,” brought it into public policy. A 2019 reminder on the issue informs us of the importance and that, despite sincere efforts, it is yet to be initiated. 

The LCC of a Project needs to evolve and follow frameworks and a baseline. ISO: 14040 provides a broad framework that ensures that LCC is conducted rigorously and transparently. 

ISO: 15686-5: 2017 guides the practitioners in defining the goal and scope, fixing system boundaries, reference study period, discount rates and sensitivity analysis parameters. The relevant costs and calculation methods are done in the Life Cycle Inventory phase. Analysing costs, comparing results, and drawing conclusions is the interpretation phase of the Life Cycle. The concluding, reporting, and critical reviews of LCC analysis are perhaps the most important aspect of the whole exercise. The method details, assumptions, limitations, and implications of LCC must be followed up for validation. All phases of LCC require expert judgements which would get refined with every new project.

Besides Mission LiFE, Sendai Framework on Disaster Risk Reduction and  Sustainable Development Goals (SDGs) framework is shaping and evolving new professional challenges on resilient and cost-effective infrastructure. One size won't fit all projects, and adopting Life Cycle Costing would be more challenging than ever. 

 The National Building Code of India does not explicitly cover provisions on the Life Cycle Costing or assessment, but this should not deter the Construction teams from going for the Life Cycle costing of Projects. As defined in part Zero of NBC, collaborative teams must gear up to resolve all Life Cycle Costing issues and create and integrate value delivery.  

An ounce of practice is better than tonnes of theory. In her PhD dissertation, Dr Priyanka Kochhar evaluated three CPWD Institutional Buildings, which provide us with many practical aspects of the above theory. I wish the analysis part had been done in Excel, enabling the practitioners to create their own scenarios. Even then, there is no valid reason why all government construction procurements should not follow the Life Cycle methodologies in decision-making.    


Comments

  1. seep learnJuly 14, 2024 at 12:15 AM

    Life Cycle Costing (LCC) is a financial analysis method that assesses the total cost of ownership of a project or asset over its entire lifespan. This approach considers all costs associated with the acquisition, operation, maintenance, and disposal of an asset, helping organizations make more informed financial decisions. Here’s an overview of key components and benefits:

    Key Components of Life Cycle Costing:
    Acquisition Costs:

    Initial purchase price or construction costs, including any associated fees (e.g., permits, taxes).
    Operating Costs:

    Ongoing expenses for operating the asset, such as utilities, labor, and materials.
    Maintenance Costs:

    Expenses related to regular maintenance, repairs, and upgrades needed to keep the asset functioning effectively.
    Financing Costs:

    Interest and fees associated with financing the purchase or construction of the asset.
    Depreciation:

    The reduction in value of the asset over time, which can impact financial reporting and tax obligations.
    End-of-Life Costs:

    Costs associated with the disposal, decommissioning, or recycling of the asset at the end of its useful life.
    Benefits of Life Cycle Costing:
    Informed Decision-Making:

    Provides a comprehensive view of costs, enabling better budgeting and financial planning.
    Cost Optimization:

    Identifies opportunities to reduce total costs through efficient design, procurement, and maintenance practices.
    Long-Term Perspective:

    Encourages organizations to consider long-term implications rather than focusing solely on initial costs.
    Sustainability Considerations:

    Promotes sustainable practices by factoring in environmental and social costs, such as energy consumption and waste management.
    Risk Management:

    Helps in identifying potential risks and uncertainties related to costs over the asset's lifecycle.
    Applications of Life Cycle Costing:
    Construction Projects: Used to evaluate the total cost of buildings and infrastructure over their operational lives.
    Manufacturing: Applied to assess costs associated with machinery and equipment from acquisition through operation to disposal.
    Public Sector: Utilized in government projects to justify investments based on long-term financial benefits.

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