Lifecycle Cost Analysis

Lifecycle Cost Analysis is a method of assessing which asset option, will be the most economical over an extended period of time.

International Infrastructure Management Manual

The International Infrastructure Management Manual defines Lifecycle Cost Analysis as any technique which allows assessment of a given solution, or choice from among alternative solutions, on the basis of all relevant economic consequences over the service life of the asset.

Methodology

  • To calculate the Lifecycle Cost of an asset all cashflows, both positive (inflows) and negative (outflows) need to be identified for each year of the useful life of the asset.
  • Cashflows should be stated in actual cash terms, that is all costs and incomes are at the levels expected in that year. No allowance should be made for inflation.

Outflows

There are probably 4 main outflows to consider:

The above costs will vary greatly depending on the type of asset being considered.

The table below shows typical annual maintenance & operational costs expressed as a percentage of the capital cost of a range of asset types.

Type of Asset Annual Maintenance Cost Annual Operational Cost
BBQ 22.5% 22.5%
Bridges 0.1% *
Building 0.7% - 4% *
Car Parks 0.2% *
Drainage 0.10% - 0.15% *
Footpaths 0.1% *
Parks and Open Space 10% *
Roads 0.6% *

Notes:

  1. For the moment the table is based on very limited data and should be referred to with caution, but it could eventually become a good starting point for anyone looking at lifecycle costs for the first time, provided a few councils start contributing data to it.
  2. Annual building maintenance & operational costs may be a function of a building's NABERS rating.

Related Pages

External Links & References

  1. Google Search
  2. Australian National Audit Office
  3. Alaska Department of Education & Early Development Life Cycle Costing Handbook
  4. Whole Building Design Guide
  5. NSW Treasury
  6. Sustainable Long Term Capital Planning and Lifecycle Costs
  7. Life Cycle Cost Calculator
  8. University of Washington Road Lifecycle Cost Analysis Notes
  9. Asset Life Cycle Cost Modelling
  10. Reliability
  11. WBDG.org
  12. Whitestone Research
  13. IPWEA Life Cycle Cost Analysis Discussion
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