Economic Factors and Whole Life Cycle Costing (WLCC)

BUILDING DESIGN AND MAINTENANCE STUDIES
By (Name)
ECONOMIC FACTORS AND WHOLE LIFE CYCLE COSTING
Dr. Elizabeth Daniels
University of Greenwich
London South East Colleges
January 7, 2020

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Introduction
In the ancient times, the design of buildings only emphasized on the need to have lower initial
construction costs. However, it later became apparent that the running cost of the building had
significant impacts on the occupant’s budget, prompting the need to look at the sustainability and
other approaches to design resulting into the concept of whole life cycle costing techniques.
In one of the studies, Whites and Ostwald (1976) postulated that the whole life costing is the sum
of expanded funds from the construction of a building (conception and fabrication), maintenance
and through its operation to the end of the building’s useful life.
More often, such operational costs up to the decommissioning of the building highly exceed the
initial cost of purchase, therefore proving reliable to use the Whole Life Cycle Costing (WLCC)
technique in design as composed to the ancient methods of design (Halim, 2004). Therefore, life
cycle costing can be defined as a methodology used for a systematic economic evaluation of the
whole life cost of a project for the whole period of its useful engineering life.
Marianna (2016) observed that clients make purchase decisions solely based on the initial cost of
the building and totally ignoring other long-term costs associated with the building. Despite the
concept of WLCC having been known to many people in the construction industry, the rate of its
adoption is very slow partly because there are no proper standards and specific guidelines as well
as unavailability of past accurate data as explained by Arditi and Messiha (1999).
The primary purpose of WLCC
Initially, life cycle costing was designed to help clients make decisions concerning the purchase
of buildings, as they could foresee the running costs of the entire useful life of the building as
well as the initial costing to make a more informed decision (Nilima, 2016). The objectives of
WLCC are outlined below.
 To make effective evaluation of investment options before making purchase decisions.
 To take into account all associated running costs and not only the procurement cost.
 To aid efficient management of completed construction projects.
 To make it easy in deciding the best alternative among the competing services.

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Based on these set objectives, the purposes of life cycle costing include:
 Used to carry out studies on affordability by determining the effects of Whole life cycle
costing on the long term budgets and maintenance costs.
 Making comparison of Whole life cycle costings from different suppliers of goods and
services in order to choose the best alternative in procurement.
 Used to make analysis on the level of repair by quantifying actual costs to be used as
opposed to the conventional methods of giving a specific percentage of construction cost
to be assigned to repairs.
 Helps in the adoption of low-cost building solutions by integrating the sustainability
aspects of the design.
Limitations of WLCC
Barrier Explanation Solution
Data  Unavailability of data as there is need to
forecast multiple factors such as running
costs, inflation rates and discounts over a
long period of time.
 Unavailability of set standards and
framework for collecting and keeping
data.
 There is need to apply
techniques of risk
modelling and sensitivity
analysis.
 There is need for a project
on simplifying data access
and storage possibilities.
Political  Most public procurements have
oversight authorities that are restricted in
their ability to transfer funds between
capital and revenue budgets.
 Procurement committees will always
accept the lowest initial costs and
transfer the project to the next authority
for other phases.
 Most buildings procured by government
agencies are for short term periods and
they may not lay emphasis on the entire
 There is need for flexibility
and coordination within
those tasked with the
management of a project.
 Apply innovation in design
to enable multiple uses of
the building in the future.

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useful life of the building, thus they only
consider the initial costs.
Capability  The authority personnel may have
insufficient information coupled by low
quality training.
 There is urgent need to
promotional campaigns for
life cycle costing,
including the materials for
training to increase the
capabilities.
Uncertainty and risk analysis
There are three main risk analysis techniques as discussed below.
a) Sensitivity analysis
According to Pierre (2006), modelling technique identifies the effect of altering the value
of an independent variable on the dependent parameter. Taking a whole life cost measure
to represent the dependent variable (NPV or the EAC) of the smallest cost alternative, the
input parameter is the risky uncertain input element.
A break-even point is then estimated which is always the value of input-data element
causing WLC measure of the least- cost alternative to equal that of the next-lowest-cost
alternative. This is illustrated in the figure below.