Adding Value With Life-Cycle Cost Analysis
In today’s challenging economic environment, many construction companies are looking for a competitive edge that distinguishes them from other contractors in their markets. One way to differentiate yourself is to offer customers value-added services beyond your usual functions on a job site. Life-cycle cost analysis (LCCA), for example, can create a new source of revenue for your construction company while providing long-term added value for property owners.
A Sustainable Approach
Typically, preconstruction analysis looks at upfront costs — such as land acquisition, design, construction and mechanical equipment. LCCA goes beyond identifying these initial costs to estimate a construction project’s overall cost of ownership over its “useful life cycle.” It then strives to identify design or construction alternatives that will minimize costs over that life cycle.
In many cases, investing in these alternatives, though they may cost more up front, can pay off over the long term in lower operating costs. Examples include:
- Energy and water conservation measures (such as energy-efficient building envelopes, lighting or HVAC systems),
- Design alternatives that enhance a building’s residual value (such as incorporating techniques that make it easier for a buyer to adapt the building to other uses), and
- Alternative building approaches that streamline the construction schedule.
An LCCA examines various factors affecting the cost of operating a building — from utility and labor costs to available tax credits, grants and rebates for energy-efficient properties.
The Contractor’s Role
Ideally, an LCCA should be conducted as early as possible in a project. This way, its findings can be incorporated into critical choices regarding design, materials and scheduling.
To help identify the highest value design and construction solutions, you’ll want to form a multidisciplinary team to share expertise and reach a consensus. Such teams typically include architects, engineers, estimators, construction professionals and other experts.
One critical topic of conversation should be the project delivery method. LCCA is generally best suited to design-build projects, which usually involve all the aforementioned disciplines from the beginning.
In addition to recommending upfront investments that can streamline the construction process, an LCCA-friendly contractor can help identify design, construction, equipment or materials choices that will likely reduce long-term energy or other operating costs. Knowledgeable contractors can also enhance the building’s residual value or otherwise improve the owner’s return on investment.
To start exploring the feasibility of adding LCCA services to your construction company’s repertoire, research continuing education and training courses both online and at local trade schools. Although the potential benefits are considerable, you’ll want to be fully committed to the concept before investing time and money into it.