Building optimisation with life cycle costs – the influence of calculation methods

Abstract

Purpose

The purpose of this paper is to demonstrate that the result of an optimisation via life cycle costs (LCC) depends on the assumptions made throughout the process of calculating LCC.

Design/methodology/approach

A framework is used to structure the assumptions made in the process of calculating LCC. These include the following three pairs: technical versus economic life‐span, static versus dynamic calculation method or costs only versus income minus costs. In a broader sense, these LCC are referred to as the life cycle economy (LCE). Two case studies form the basis for the LCC calculations. Using different assumptions, the LCC of virtual design variations of these buildings are compared to each other.

Findings

The rankings drawn from the calculations differ according to the chosen calculation method, i.e. the chosen variation for the optimisation of a building is not consistent.

Research limitations/implications

This is essentially an exploratory study and the prognosis of future cash flow in relation to certain design variations requires further research.

Practical implications

The credibility of life cycle costing should improve with a greater transparency of assumptions in the context of the outlined framework.

Originality/value

All players in facilities management who support their decisions with LCC will benefit from this quantification of the impact of different calculation methods. The extension of LCC to LCE will help planners, investors and owners of real estate in evaluating building options with respect to quality, image, flexibility or comfort.

Citation

Pelzeter, A. (2007), "Building optimisation with life cycle costs – the influence of calculation methods", Journal of Facilities Management, Vol. 5 No. 2, pp. 115-128. https://doi.org/10.1108/14725960710751861