Importance of life cycle costing for construction projects

Abstract

The purpose of this paper is to highlight the role of life cycle costing in the preparation phase of construction projects, especially in the public sector. Life cycle costing is a method of economic analysis directed at all costs related to constructing, operating, and maintaining a construction project over a defined period of time. The main question for a sustainable design is how to put economic optimization into the early design stages. Design decisions made at this project phase are determining the whole life effectiveness of the building. In the early phase of construction projects, the enormous benefit of life cycle costing could be gained. The commonly used construction cost minimization approach should be substituted for life cycle costs optimization. In order to gain the maximum value for money, all costs incurred over the whole life span must be estimated. The optimization of the life cycle costs of a project, construction or equipment, is essential for the complex decision-making process. All in all, the solution with the minimum value of life cycle costs can be chosen. Public investors are required to meet the objectives of sustainable building, and together they face limited financial resources and frequently a very strict institutional framework including procurement procedures. The quantification of life cycle costs, when deciding on the construction, is required by the public sector in the Czech Republic. In addition, the amount of estimated life cycle costs has become a criterion in public tenders. This paper summarizes the experiences of valuating building designs in terms of life cycle costs. After identifying the public sector benefits, some significant difficulties are also summarized. Besides stressing the importance of life cycle costing, case studies of construction projects are provided.