The Life Cycle Cost Analysis
TheLife Cycle Cost Analysis
Oneof vital assessment framework that guides on the decision over whichproject, product or materials to use to accomplish a task based on auseful and proper cost analysis attached is the Life Cycle CostAnalysis tool. It proves to be a key indicator of sustainability. Itconcisely deals with the cost implications without necessarilytouching on the environmental consequences (Fuller,2010).Because of this specificity, most of the planners have adopted theuse of the tool to effectively help in determining the shelf life ofvarious projects based on the economic equivalence and long-termsustainability. It is one of the most useful frameworks that helps inproper decision-making because it includes all expenses of buying,claiming ownership, maintaining, and laying off a building system.
FactorsConsidered in Life Cycle Cost Analysis and Importance of SuchAnalysis
Methodsof Life Cycle Analysis act as the regular checker of the overallcosts that project alternatives will incur and therefore, it createsa chance of identifying the gaps and altering the selection ofdesigns. The selected alternative project is based on the expectedtime frame with the main aim of provision of the lowest overall costof ownership.
PresentValue Analysis Parameters
Thisfactor is based on determining cost periods, discount rate, treatmentof inflation, and discounting convention. Cost terms are useful inthe estimation of duration that certain costs have been incurred(Fuller,2010).It mainly evaluates service period, contact period, and length of theperiod. The discount parameters help in converting the expendituresto current values to determine the overall sustainability of theproject.
Evaluationof expenses incurred is a valuable factor to consider in the analysisof LCC. The prices include Fuel costs, operation, maintenance, andrepair costs, replacement, initial costs, Finance charges, residualvalues, and other non-monetary benefits. Revaluation of differentprices helps to estimate the overall workability of the LCC.
Theyact as subsidiary values that cover in the gaps realized in theplanning and implementation of the Life Cycle Cost Assessment. Itmainly evaluates the Net Savings-to-Investment Ratio. Otherparameters such as Simple Payback( SPB) can as well be assessed togauge on the direction in which the adopted project is skewedtowards.
UncertaintyAssessment in LCCA
Thefactor provides insight into the mechanisms that can be widely takento analyze uncertainty about the costs and the potential savings.Since undertaking LCCA provides a good bargaining ground on talking aproject with a long shelf life but at a sustainable cost, it cannotbe obliviously deduced that once LCCA is adopted, the project willoperate smoothly without incurring losses of uncertainty cases. Itis, therefore, vital that mechanisms that for uncertainty assessmentbe put in place to realize effective mitigation strategies of anyimpending gap.
Toaccomplish the task, various tools are used. Sensitivity analysis,for example, determines the number of uncertain input values anddeduce the economic evaluation about it. It also helps in determininghow the variability of different inputs range. Break-even analysis isan equally evaluative tool for uncertainty assessment (Fuller,2010).It helps in determining the highest cost that if implemented, willstill allow a substantive break-even of the project without chargingsignificant damages. Lastly, H-Design and Analysis Tools are alsonecessary reinforcement measures, which allows for performance ofcomputations to enhance precision.
Inconclusion, Life Cycle Cost Analysis is an integral tool that savesmany planners and investors in conducting a proper feasibility testbefore settling on a project. It helps in comparing costs of variousperformances, balances the initial monetary expense with thelong-term investment, and identifies trade-offs that exist betweenlow initial costs and long-term cost savings through an excellentcomparative analysis (Fuller,2010).LCCA is, therefore, an effective tool that should be adopted toachieve sustainability when it comes to project planning anddevelopment.
Fuller,S. (2010). Life-cycle cost analysis (LCCA). NationalInstitute of Building Sciences, An Authoritative Source of InnovativeSolutions for the Built Environment, 1090.
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