Life cycle costs (LCC)

Groups: 
  • Design-Build Contracts
Category: 
  • Life Cycle Costs (LCC)
  • Environment
  • Buildings

Basic

Requirements and Criteria Type: 
  • Technical Specification (Requirement Specifications)

Main Objective: 

Motive

Investment and operating budgets are often not viewed together. If, for example, budget responsibility at the buyer is divided between an investment environment and an operating environment, the two environments will often have different incentives. For example, the investment environment's goal will be to achieve the lowest possible investment costs, while the operating environment will want the lowest possible operating costs. This difference has often resulted in sub-optimum technical and economic qualities and solutions for those who are going to administer, operate and maintain the solution, who will often end up with higher expenses than they would have had had they applied the life cycle perspective instead.

Acquisition costs (investment costs) account for approx. 50% of the total costs of a building during its entire service life. Other costs are linked to administration, operation and development. In sum, these are the life cycle costs (LCC) over its service life and per year, which are expressed as annual costs. If you only focus on the investment costs and do not assess options in relation to life cycle costs, you risk ending up with unnecessary operating and maintenance costs. Calculating life cycle costs provides an overview of when during the period of use maintenance, replacements and costs will come, meaning you will learn the actual costs of the project and achieve greater predictability regarding future costs.

Argument

The aim is to find the most cost-effective balance between administration, operation and development, investment costs and operating costs. Requiring calculations of life cycle costs ensures decisions are made based on a long-term, perspective and that they are of the right quality. It makes the total costs associated with constructing, administering, operating and maintaining the building visible. The Public Procurement Act therefore requires you to assess LCC. Using LCC therefore represents good administration of tax payers' money. This requirements specification sets out how you can use LCC as part of the decision-making process in execution.

Requirement Specification: 

An LCC analysis based on NS 3454:2013 must be conducted that documents expected annual costs for the entire building at the end of the detailed design project and before the building is handed over (as built).

Contractors must conduct two alternative assessments based on life cycle costs for the following elements:
  • Climatic buffer (roof and facade solution)
  • Operating and cleaning concept
  • Energy concept
  • Building type

      Upon concluding the detailed design project, you must document how the analysis has affected the decisions that have been made in the project.

      Documentation of the Requirement Specification: 

      Leverandøren skal dokumentere i prosjektet med ein rapport at alternativsvurderingar av pårekna livssykluskostnadar med LCC-utrekningar er gjennomførte for heile bygget etter NS 3454:2013 med desse føresetnadene:

      • Økonomiske levetider er lagt til grunn for LCC-utrekningar.
      • Ein skal gi opp basisår og kalkulasjonsrente for kalkylen
      • Årskostnadar skal ein gi opp per kvadratmeter BRA og per brukar.
      • Avskastningskrav 4 %
      • Utrekningsperiode 60 år
      • Restverdi etter 60 år vert sett til 0
      • Forvaltingskostnadar skal ikkje reknast med
      • Energipris 1 kr/kWh

       

      Det skal dokumenterast kva erfaringstal som er brukt og kva levetidene for de ulike komponentane er basert på.

      For alternativsvurderingar skal det gjerast samanlikningar når det er relevant for avgjerder. Desse skal dokumenterast med både gjennomførte utrekningar og referat frå dei aktuelle prosjekteringsmøta.

      Information about the Requirement Specification: 

      LCC are all the costs over the building's entire service life as defined in NS 3454:2013. This means acquisition costs and all of the costs associated with administration, operation, maintenance, replacement, development, supply, cleaning and residual value that accrue during the use phase. The disposal value is deducted, such that the residual value is set to 0.

      Proposed indicators for calculating annual costs per indicator:
      Building type NS 3031 Indicator NOK per
      Office building FTEs
      Kindergarten Kindergarten place
      School building Pupil
      Nursing home Resident day
      Sports buildings User and use time
      Cultural building User and use time

      Where the client has historical figures from MOMD, these must be stated in the tender documentation. If you do not have such figures, you must obtain them. It is important that the figures are representative for the building you are going to erect. You will need help with this from a contractor if you do not have your own historical figures. This must be done prior to the tender competition and must be stated in the tender documentation.

      (Since a need has been identified, different documents can be prepared such as response forms, background documents, guidance materials or enclosures, e.g. Excel calculations for LCC)

      Advanced

      Requirements and Criteria Type: 
      • Technical Specification (Requirement Specifications)

      Main Objective: 

      Motive

      Investment and operating budgets are often not viewed together. If, for example, budget responsibility at the buyer is divided between an investment environment and an operating environment, the two environments will often have different incentives. For example, the investment environment's goal will be to achieve the lowest possible investment costs, while the operating environment will want the lowest possible operating costs. This difference has often resulted in sub-optimum technical and economic qualities and solutions for those who are going to administer, operate and maintain the solution, who will often end up with higher expenses than they would have had had they applied the life cycle perspective instead.

      Acquisition costs (investment costs) account for approx. 50% of the total costs of a building during its entire service life. Other costs are linked to administration, operation and development. In sum, these are the life cycle costs (LCC) over its service life and per year, which are expressed as annual costs. If you only focus on the investment costs and do not assess options in relation to life cycle costs, you risk ending up with unnecessary operating and maintenance costs. Calculating life cycle costs provides an overview of when during the period of use maintenance, replacements and costs will come, meaning you will learn the actual costs of the project and achieve greater predictability regarding future costs.

      Argument

      The aim is to find the most cost-effective balance between administration, operation and development, investment costs and operating costs. Requiring calculations of life cycle costs ensures decisions are made based on a long-term, perspective and that they are of the right quality. It makes the total costs associated with constructing, administering, operating and maintaining the building visible. The Public Procurement Act therefore requires you to assess LCC. Using LCC therefore represents good administration of tax payers' money. This requirements specification sets out how you can use LCC as part of the decision-making process in execution.

      Requirement Specification: 

      An LCC analysis based on NS 3454:2013 must be conducted that documents expected annual costs for the entire building at the end of the detailed design project and before the building is handed over (as built).

      Contractors must conduct alternative assessments based on the LCC-analysis method in NS 3454:2013.

      Contractors must conduct two alternative assessments based on life cycle costs for the following elements:

      • Climatic buffer (roof and facade solution)
      • Operating and cleaning concept
      • Energy concept
      • Building type

      Upon concluding the detailed design project, you must document how the analysis has affected the decisions that have been made in the project.

      In addition, an LCC analysis based on NS 3454:2013 must be conducted that documents expected annual costs for the entire building at the end of the detailed design project and before the building is handed over (as built).

      Documentation of the Requirement Specification: 

      Leverandøren skal dokumentere i prosjektet med ein rapport at alternativsvurderingar av pårekna livssykluskostnadar med LCC-utrekningar er gjennomførte for heile bygget etter NS 3454:2013 med desse føresetnadene:

      • Økonomiske levetider er lagt til grunn for LCC-utrekningar.
      • Ein skal gi opp basisår og kalkulasjonsrente for kalkylen
      • Årskostnadar skal ein gi opp per kvadratmeter BRA og per brukar.
      • Avskastningskrav 4 %
      • Utrekningsperiode 60 år
      • Restverdi etter 60 år vert sett til 0
      • Forvaltingskostnadar skal ikkje reknast med
      • Energipris 1 kr/kWh

      Det skal dokumenterast kva erfaringstal som er brukt og kva levetidene for de ulike komponentane er basert på.

      For alternativsvurderingar skal det gjerast samanlikningar når det er relevant for avgjerder. Desse skal dokumenterast med både gjennomførte utrekningar og referat frå dei aktuelle prosjekteringsmøta.

      Information about the Requirement Specification: 

      LCC are all the costs over the building's entire service life as defined in NS 3454:2013. This means acquisition costs and all of the costs associated with administration, operation, maintenance, replacement, development, supply, cleaning and residual value that accrue during the use phase. The disposal value is deducted, such that the residual value is set to 0.

      Proposed indicators for calculating annual costs per indicator:
      Building type NS 3031 Indicator NOK per
      Office building FTEs
      Kindergarten Kindergarten place
      School building Pupil
      Nursing home Resident day
      Sports buildings User and use time
      Cultural building User and use time

      Where the client has historical figures from MOMD, these must be stated in the tender documentation. If you do not have such figures, you must obtain them. It is important that the figures are representative for the building you are going to erect. You will need help with this from a contractor if you do not have your own historical figures. This must be done prior to the tender competition and must be stated in the tender documentation.

      (Since a need has been identified, different documents can be prepared such as response forms, background documents, guidance materials or enclosures, e.g. Excel calculations for LCC)

      Criteria Relations and Conflicts: 

      Miljøkompetanse hos tilbudt personell

      Relatert kriterium

      To ensure good LCC calculations, you can have a condition that the contractor has LCC competence.

      Miljøkompetanse hos byggeplassledelsen

      Relatert kriterium

      To ensure good LCC calculations, you can have a condition that the contractor should have a certain level of LCC-competence.

      Related links: 

      Supporting documents/references

      A good deal of information about LCC in procurements can be found on anskaffelser.no:

      Published: 29. Jan 2018, Last modified: 05. Nov 2018