Chapter 3: Low cost sustainable building solutions

Life cycle cost as base to define low cost sustainable building

solutions

Sofia Ferreira Real

Student of Master in Civil Engineering, IST, Technical University of Lisbon, Lisbon, Portugal
Manuel Duarte Pinheiro
Ph. D. Environmental Engineering Professor, Department of Civil Engineering and Architecture, IST,
Technical University of Lisbon , Lisbon, Portugal

ABSTRACT: Life cycle cost (LCC) is an approach that assesses the total cost of an asset over
its life cycle including initial capital costs, maintenance costs, operating costs and the asset’s re-
sidual value at the end of its life.
Nowadays, most builders are only concerned with the initial capital costs (land, project and con-
struction costs), working towards their minimization. The same logic can be applied to sustaina-
ble building.
This leads to an emphasis on the initial cost, in detriment of the other life cycle costs, and, in
some cases, to the supporting of solutions that require smaller investment but have higher opera-
tional costs (such as the application of less insulation resulting in higher need for heating and
cooling energy) and also lower sustainable levels (like higher carbon emissions).
In this context, the application of LCC to the sustainable building approach could bring a fresh
perspective to the LCC methodology as well as a strong contribution to the economic dimension
of sustainable construction.
The objective of this paper is to present a review of the main LCC approaches, different applica-
tion cases to sustainable building and discuss the potential and limitations of this methodology
including a case analysis.
A selected LCC methodology approach is proposed to be applied in the specific case study
Hexa building (a six floor building, with commercial purposes in the ground floor and residen-
tial purposes in the other five) developed by the Sustainable team of System LiderA.
The case study shall compare the life cycle costs of diverse alternative solutions taking into ac-
count several issues such as construction materials, insulation options, glazing area and type,
and also other solutions that range from an E to an A and A+ LiderA class.
Based on the Hexa building LCC preliminary results, the limitations and potential of this ap-
proach will be discussed and other research matters, to be developed in this article and future
perspectives to this methodology application, will be pointed out.

1 LCC AND ITS IMPORTANCE

Life Cycle Costing is a methodology for systematic economic evaluation of the life cycle costs
over a period of analysis, as defined in the agreed scoping (ISO 15686-5, 2006).
In other words, it is an economic methodology for selecting the most cost-effective design alter-
native over a particular time frame, taking into consideration its construction, operation, main-
tenance, replacement, rehabilitation costs and also residual value.

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Figure 1 - LCC and efficient alternatives

According to the Royal Institute of Chartered Surveyors (1983), the objectives of LCC are:
• To enable investment options to be more effectively evaluated;
• To consider the impact of all costs rather than only initial capital costs;
• To assist in the effective management of completed buildings and projects;
• To facilitate choice between competing alternatives.

2 SUSTAINABILITY AND LCC

Ever since the Brundtland report (1987) stated that sustainable development is the “develop-
ment that meets the needs of the present without compromising that ability of future generations
approach has been consistently in-
to meet their own needs”, the importance of the Sustainable approach
creasing. It brings economic, environmental and social concerns together looking to stimulate
the equilibrium between the three dimensions. In this perspective, sustainable construction
doesn’t look for an excellent environmental
environmental performance sacrificing economic viability of a
company, or an excellent financial performance at the expense of important adverse environ-
mental and social effects.
According to Pinheiro (2006), sustainable construction takes into account the total life cycle
of the asset and considers that the resources of construction are materials, soil, energy and wa-
ter. From these resources, Kibert established the five basic principles of sustainable construc-
tion:
• Reduce resource consumption;
• Reuse resources whenever it is possible;
• Recycle materials at the end of the building’s life and use recyclable resources;
• Protect natural systems and its function in all activities;
• Eliminate toxic materials and its byproducts in every life cycle phase.
Traditional construction is mostly concerned with cost, time and quality. Sustainable con-
struction adds to those criteria the minimization of the use of scarce resources and environmen-
tal degradation, and also the creation of a healthy built environment (Kibert, 1994).
According to Godfaurd (2005), sustainable construction involves the consideration of the
building’s life cycle because the minimization and reduction of the impacts on nature depends
on the performance of the building during all its phases. Following this line of thinking, life
cycle cost analysis should replace the sole consideration of the initial investment cost.
As a reference, Gupta (1983) mentions that approximately 75% of the life cycle cost of an as-
set is related to the operation and maintenance phase, which makes unavoidable the considera-
tion of life cycle cost when analyzing an asset.
If costs are analyzed in an equilibrated perspective of the life cycle it is understandable that
the application of sustainability to the construction industry without sacrificing the economic
component is a reachable reality and is of extreme importance.

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In reality, few are the companies that seek to produce buildings with high quality and durabil-
ity, due to the size of the initial investment needed to ensure reduced operation and maintenance
costs. As the builder is usually not the final user of the asset, construction costs are supported by
a different entity than operation and maintenance costs, thus the builder doesn’t have any advan-
tage in implementing such measures, raising his costs in order to reduce the costs of others.

3 LCC APPROACH

In approaches such as LCC, it becomes necessary to divide costs into groups that can be defined
and estimated separately, making it easier to quantify the costs and compare different alterna-
tives.
The process of LCC analysis depends mainly on identifying all relevant costs which occur
over a specified period of study. If the analysis period is the asset’s life cycle, those costs in-
clude all possible costs from the initial acquisition costs to the end of life costs.
In that case, a possible cost breakdown structure would be (Davis Langdon Management
Consulting, 2007 based on ISO 15686-5, 2006) the one shown in Table 1.

3.1 Basic steps

Several authors propose possible steps to generate an effective LCC analysis such as King
County (n.d.), Davis Langdon Management Consulting (2007) and Kelly and Hunter (2007).
However, in every set of steps the same essential points can be identified.
According to Kelly and Hunter (2007), Ruegg et al (1980) and Flanagan and Jewell (2005)
there are five basic steps to making decisions about options:
• Identify project objectives, options and constraints;
• Establish basic assumptions with respect to the period of study, the discount rate, the
level of comprehensiveness, data requirements, cash flows and inflation;
• Compile data;
• Discount cash flows to a comparable time base;
• Compute total life cycle costs, compare options and make decisions.
3.2 Method of cost evaluation and risk assessment techniques
There are many different methods to evaluate the life cycle cost of an asset. As the primary
objective of LCC is to facilitate the effective choice between a number of competing alterna-
tives, the most used method is the Net Present Value (NPV).
The NPV of an alternative is the summation of all costs occurred during the period of study
of the life cycle of the asset, converted to their present value (using a discount rate) so that they
are comparable. The alternative with the highest NPV is the most cost effective choice (King
County, n.d.).LCC deals with the future and, as the future is unknown, there is a need to be able
to forecast a long way ahead in time, many factors such as life cycles, future operating and
maintenance costs, and discount and inflation rates. This difficulty is worsened by the difficulty
in obtaining the appropriate level of information and data. Therefore, the treatment of uncertain-
ty in information and data becomes crucial to the implementation of LCC (Kishk et al., 2003).
To deal with these problems there are various risk assessment techniques. Nowadays, the
most used ones are Sensitivity Analysis (deterministic approach), Monte Carlo Simulation
(probabilistic approach) and the Fuzzy Set Theory.

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 Table 1 - Cost Breakdown Structure from Davis Langdon Management Consulting (2007)
Acquisition – Acquisition – design End of life/ dis- Income
Operation Maintenance Rehabilitation
non-construction costs and construction posal/hand-back
Professional services
Site (lease/ purchase of Maintenance Adaptation
(project management, Final condition Sales of land,
land and/ or existing Facilities management management (evacuation, works,
architecture, structural/ inspection interests in
building(s) /asset(s), (cleaning, security, (inspections, re-commissioning,
Portugal SB10: Sustainable Building Affordable to All

civil/ environmental including fees assets,

including related fees and waste management) contracts fit-out)
engineering, cost and salvaged
local taxes) management)
value management) materials
Major replacement/
Finance (interest or cost Site clearance, Rates / local taxes, land Minor repairs/ Restoration/
renewal/ refurbishment Grants, tax
of money; wider temporary works charges replacements/ reinstatement
(evacuation, works, re- allowances
economic impacts) renewals (as required by
commissioning, fit-out)
lease/contract)
Client’s in-house Construction Third party
Loss of facility /
resources (property/ (infrastructure, Regulatory costs (fire, Loss of facility / De- income (rents,
business
project management, structure, envelope, access inspections) business opportunity commissioning service
opportunity costs
administration/ services, fitting out, costs during downtime charges)
during downtime
overheads) commissioning,
handover)
Energy
Professional advice Fixtures, fittings, Grounds Demolition,
(heating, cooling, small
(planning, legal, preparing furnishings maintenance disposal, site
power, lighting, internal
brief, sustainability) clean-up
transport (lifts))
Landscaping, external Utilities (water,
Redecoration
works sewerage, telephone)
Rent Cleaning
Insurances

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4 APPLICATIONS

The presented LCC methodology approach is being tried out on a model building project called

Figure 2 - Type floor of the HEXA building

HEXA (developed by the Sustainable team of System LiderA), which is a six floor sustainable
multifamily habitation building (except for the ground floor which has commercial purposes)
that applies the LiderA criteria to all its components.
The objective is to compare different solutions and find out which ones are best suited to the
intended life span of the building and its costs by taking LiderA’s criteria into account.
For these comparisons to be possible there is need for information such as material, labour
and equipment costs for the application of the possible solutions, energetic inertias of the com-
ponents and the effect it has on a specific type of room, material and components’ quality, dura-
bility and performance, energy usage of electric heaters and coolers.
There are different sources of information such as the manufacturers, suppliers, contractors
and testing specialists, historical data and data from modeling techniques. The difficulty of life
cycle cost estimation lies on the unavailability of some types of information in the design phase
such as operation and maintenance costs.
4.1 Case study
To begin the study, a base HEXA building had to be made, to serve as reference to compare
costs and savings of the other different solutions. Its characteristics are presented in Table 2.

Table 2 - Main characteristics of the base HEXA building

Characteristic Description
Location Lisbon
External walls Double brick 0.11+0.15
Insulation Non existent
Internal concrete walls to Lna Concrete + 3cm of outside XPS
Roof Plain gardener roof + 3 cm XPS
Thermal Inertia Strong
Glazing windows (sliding) Metal frame, double glazing with 6mm in between
Solar orientation N(kitchen) – S(living room)
Ventilation Natural ventilation (NP 1037-1)
Solar panels* 1m2/person
Conventional water heating syst. Gas water-heater
Heating system Electrical resistance
Cooling system Freezer machine (absorption cycle)

The study was conducted for a dwelling on the top floor by varying the characteristics of the
external walls and windows. The variations introduced were the following:

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• Solution 1 – Applying 3 cm of insulation inside the double brick external walls of the
base case;
• Solution 2 – Appling 3 cm of external insulation on a 0,22m brick wall instead of the
double brick one of the base case;
• Solution 3 - Appling 6 cm of external insulation on a 0,22m brick wall instead of the
double brick one of the base case;
• Solution 4 – Changing solar orientation of the dwelling to S(kitchen) – N(living
room) (all solar orientation possibilities were studied, but this was the only one that
introduced savings in comparison to the base case);
• Solution 5 – Applying double glazing with 16 mm in between instead of the 6mm of
the base case;
• Solution 6 – Applying thermal cut to the glazing windows;
• Solution 7 – Applying PVC frame instead of the metal frame of the base case.
An HEXA dwelling has approximately 130 m2 of floor area, 84 m2 of external wall area and
17 m2 of window area.
A study conducted by Ferreira (2010) revealed the energy consumption of, not only the base
case, but also the other considered solutions. These are presented in Table 3, as well as the sav-
ings resulting from the comparison of the solutions with the base case, considering no discount
rate and the energetic needs cost as the one currently applied in Portugal.

Table 3 - Energetic characteristics and costs of the solutions

Energetic needs Differential Differential
Energetic
(kgep/m2 of floor savings over a 20 savings over a 50
class
area.year) year period (€) year period (€)
Base case 4,41 B -- --
Solution 1 4,20 B 222,50 556,26
Solution 2 4,19 B 233,36 583,40
Solution 3 4,03 B 407,02 1017,55
Solution 4 4,38 B 27,13 67,84
Solution 5 4,38 B 27,13 67,84
Solution 6 4,36 B 48,84 122,11
Solution 7 4,33 B 81,40 203,51

On Table 4 the variation of construction and maintenance costs resulting from the compari-
son of the solutions with the base case. The construction costs were provided by a construction
company and the maintenance costs were calculated as a percentage of the construction costs
chosen according with knowledge of the different solutions.

Table 4 - Construction and Maintenance cost variations

Maintenance cost Maintenance cost
Construction cost
variation over a Variation over a
variation (€)
20 year period (€) 50 year period (€)
Base case external walls -- --
Solution 1 251,20 0,00 0,00
Solution 2 921,05 2076,55 5191,38
Solution 3 1758,37 2076,55 5191,38

Base case glazing windows -- --

Solution 5 83,80 0,00 0,00
Solution 6 429,75 42,98 85,95
Solution 7 171,90 4724,44 9448,88

The base case and solution 4 have the same construction and maintenance costs.

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Total cost variation and differential savings of the different solutions over a 20 and 50 year
period can be seen in Table 5 e Table 6.

Table 5 – Cost variation and differential savings over a 20 year period

Total cost variation Differential savings
over a 20 year period (€) over a 20 year period (€)
Base case external walls -- --
Solution 1 251,20 222,50
Solution 2 2997,61 233,36
Solution 3 3834,93 407,02

Base case windows -- --

Solution 5 83,80 27,13
Solution 6 472,73 48,84
Solution 7 4896,34 81,40

Table 6 - Cost variation and differential savings over a 50 year period

Total cost variation Differential savings
over a 50 year period (€) over a 50 year period (€)
Base case external walls -- --
Solution 1 251,20 556,26
Solution 2 6112,44 583,40
Solution 3 6949,76 1017,55

Base case windows -- --

Solution 5 83,80 67,84
Solution 6 515,70 122,11
Solution 7 9620,78 203,51

In this study demolition costs were considered as being the same for every solution.
As the base case and Solution 4 have the same construction and maintenance costs, only sav-
ings are introduced by this solution, which makes solution 4 always better than the base case.
Solution 1 is a good long term investment, having a 21 year simple payback.
Solution 5 does not present good results, having a 62 year simple payback. As most build-
ings’ expected life rounds 50 years, it is not a useful solution.
The remaining solutions present even worse results, never reaching a simple payback.
As kgep cost is always varying, the solutions were tested for an event where that cost doubled
the original one. In that case, solution 1and 5’s simple payback is reduced half the original time,
and the rest of the solutions 2, 3 and 3 still do not have any simple payback. This means that so-
lutions which are not viable in the present situation, may be in the future. The same may happen
as constructive methods and the components’ quality improve.

4.2 Limitations and perspectives

Despite the advantages that the LCC methodology brings to sustainable construction, it has
found limited application so far. The main problem identified was the lack of reliable informa-
tion and the difficulty in forecasting over a long period of time factors such as life cycles, future
operating, maintenance and demolition (especially if it is selective) costs and discount rates.
Another problem of the LCC approach is variability of:
• Construction costs of the same component (depending on the company that produces
it and the quantity needed);
• Maintenance and disposal costs;

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• Energetic savings (depending on several aspects, such as having other buildings next
to the studied one or not, and the location of the dwelling in the building);
• Component life cycle and performance (depending on the company that produces it).
If the data is not reliable, the results cannot be valid. It is concept known as “garbage in, gar-
bage out”.
On the other hand, the LCC approach makes the simple paybacks of the different solutions
evident, showing which solutions are viable.
It may also take into account intangible aspects such as the fact that the higher the comfort of
an office the higher tends to be the productivity of the people working there.

5 CONCLUSIONS

This paper presented a review of the main Life Cycle Cost (LCC) approaches and a possible ap-
plication to a case study was briefly described.
The LCC approach presents itself as way to define low cost sustainable buildings. The pre-
sented case study showed that the decision may be different if LCC analysis is included in the
process.
Another important aspect is that this kind of approach still needs further research to overcome
all its limitations and also requires a valid cost data base. It is essential to gather information
and create a solid database about maintenance, product performance (durability and other as-
pects) and costs, so that analysis can be made with less uncertainty and more precisely applied
and LCC becomes a current method in Portugal and around the World.

6 REFERENCES

Davis Langdon Management Consulting. [2007]. “Life cycle costing as a contribution to sustainable con-
struction: a common methodology”.
Ferreira, Joaquim. [2010]. “Is the Portuguese Energetic Certification System of Buildings an efficient tool
to achieve the sustainability?”.
Flanagan R. and Jewel C. [2005]. “Whole Life Appraisal for construction”, Blackwell, Oxford.
Godfaurd, J., Clements-Croome, D., & Jeronimidis, G. [2005]. “Sustainable building solutions: A review
of lessons from the natural world”. Building and Environment.
Gupta, Y. P. [1983]. “Life Cycle Cost Models and Associated Uncertainties”. Electronics Systems Effec-
tiveness and Life Cycle Costing, NATO ASI Series.
ISO 15686-5 [2006].
Kelly, J. & Hunter, K. [2008]. “Cobra 2008 – The construction and building research conference of the
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Kibert, C. [1994]. “Establishing Principles and a Model for Sustainable Construction”. In Proceedings of
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Kishk, M., Al-Hajj, A., Pollock, R., Aouad, G., Bakis, N. & Sun, M. [2003]. “Whole life costing in con-
struction: a state of the art review”. RICS, UK.
Pinheiro, M. [2006]. “Ambiente e Construção Sustentável”, Instituto do Ambiente (Conselho Cientifico:
Correia, F. N., Branco, F., Guedes, M.). Lisboa

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