When project owners invest in construction jobs, they invariably look for long-term value. Whether road, residence or commercial real estate, the final deliverable needs to stand the test of time and provide a return on investment.
To help ensure positive outcomes, many owners now engage in life-cycle cost analysis (LCCA). Construction businesses, typically general contractors, play an important role in this practice. And the better your company is at contributing, the more it can differentiate itself from competitors.
Operating costs
Conventional preconstruction often involves forecasting initial project costs — such as land acquisition, design and construction. However, LCCA goes one step further. It estimates the total ownership cost of a project’s final deliverable over its “useful life cycle.”
LCCA also strives to identify design or construction alternatives to minimize contributing costs over that life cycle. In many cases, investing in these alternatives — though they may be more expensive upfront — can pay off over the long term. Examples include:
- Energy and water conservation measures (such as energy-efficient building envelopes, lighting or HVAC systems, and low-flow fixtures and fittings),
- Design alternatives that enhance a deliverable’s residual value (for example, incorporating features that make a building more adaptable for multiple uses), and
- Nimble construction approaches that streamline scheduling.
LCCA examines various factors affecting a property’s total lifetime operating cost — from utility and labor costs to available tax credits, grants and rebates for environmentally friendly attributes.
Team effort
To help identify the highest value design and construction solutions, project owners form multidisciplinary LCCA teams to gather and analyze data and reach a consensus on how to proceed based on the results. Such teams typically include architects, engineers, construction professionals and various consultants.
Now you might be wondering: Who are these mysterious construction professionals? Why it could be you, the construction business owner, who joins an LCCA team. In other cases, one of your top project managers may take on the job.
Contractors typically help identify design, construction, equipment and materials choices that will enhance and streamline the project and reduce long-term energy or other operating costs. Your experience and knowledge can help maximize the residual value of the final deliverable — and the owner’s return on investment — from a decidedly pragmatic and real-world perspective.
LCCA usually occurs as early as possible on a project so its findings can be incorporated into critical design, materials and scheduling choices. For this reason, it’s best suited for jobs using construction methods such as design-build and integrated project delivery.
Optimal opportunities
Generally, LCCA is most prevalent on commercial and publicly funded infrastructure projects. However, you could encounter it elsewhere. If you start running into the practice regularly, you may want to invest in training and software to enable you or key employees to perform optimally on owners’ LCCA teams. We can help you identify, organize and analyze pertinent construction-cost data.
