Life Cycle Calculation 1
Last Updated: August 09, 2016; First Released: January, 2013
Author: Kevin Boyle, President, DevTreks
Version: 2.0.0
A. Life Cycle Cost (LCC) and Benefit (LCB) Introduction
This reference summarizes the main calculations in life cycle Input and Output calculators. The goals of these calculators were to: 1) match the life cycle calculations in the NIST 135 reference, 2) extend the NIST 135 methods to include Allocated Overhead Costs, Outputs, Outcomes, Revenues, and Operating Budgets, 3) extend the NIST 135 context beyond energy conservation to include natural resources conservation and other fields, and 4) tie into “best practice” data management techniques (GAO, 2009). The NIST 135 reference (1*) explains life cycle techniques in depth and should be read prior to this reference.
The following image (GAO, 2009) provides context for the importance of examining life cycle costs and benefits. The examples that follow demonstrate that life cycle costs and benefits are important regardless of the scale of the investment.
B. Data
The Calculators demonstrated in this reference can be found at the following URL. These calculators belong to the Reconstruction Science club in the BuildTreks network group (if needed, switch default clubs).
https://www.devtreks.org/buildtreks/preview/commercial/linkedviewgroup/Life Cycle Cost and Benefit Calculators/49/none/
C. Life Cycle Calculators Properties
The following image shows that Step 2 of Life Cycle Assessment (LCA) calculators contain up to 10 individual SubPrices. Inputs contain SubCosts which are computed using Life Cycle Cost (LCC) calculators. Outputs contain SubBenefits which are computed using Life Cycle Benefit (LCB) calculators
These properties are defined as follows:
Price Type: Type of base Input or Output price to update when the calculators are saved. Options include
* oc or Operating Costs: In operating and capital budgets, the value of expendable Inputs.
* aoh or Allocated Overhead Costs: In operating budgets, anything that is not an operating cost. Networks can decide whether to include these costs in capital budgets.
* cap or Capital Costs: In capital budgets, the value of durable, or capital, Inputs.
* rev or Revenues: In operating and capital budgets, the value of Outputs.
Amount: The quantity of the LCA element to be used to determine costs or benefits. Unit costs and benefits often will use an amount of 1.
Unit: The unit of measurement of the LCA element.
Price: The unit price of the LCA element to be used to determine costs or benefits.
Escalate Rate: Rate of price increase or decrease over the life span of the Input. Will be divided by 100 in the calculations. The initial SubCost or SubBenefit will be multiplied by this rate and used with the linear or geometric Escalate Type property.
Escalate Type: Type of price escalation used to calculate life cycle costs and benefits. The options are used as followed:
* none: Use this option, along with the Discount Years and Salvage Value properties, to determine a present value SubCost or SubBenefit.
* upvtable or uniform present value: Use this option, along with the Discount Factor property, if NIST 135-style price indexes are being used to compute escalated costs and benefits.
* spv or single present value: Use this option, along with the Discount Years property, to calculate discounted costs and benefits.
* caprecovery or capital recovery: Use this option, along with the Discount Years and Salvage Value properties, to calculate an amortized annual cost. In addition, the Discount Times property can be used to compute 'cost/benefit per hour' of use style calculations.
* uniform: Use this option, along with the project-related properties, to calculate a uniform price escalation. Use the ‘linear’ or ‘geometric’ options, along the Escalate Rate property, to calculate linear or geometric series price escalation.
Discount Factor: A value taken from NIST 135-style price escalation indexes. The index should be for a period that sums together the service life of the project and the planning construction years. See table 5-4 in the NIST 135 reference.
Discount Years: The number of years to use in single present value and capital recovery discount formulas. Used when the Escalate Type property is 'spv' (Single Present Value) or "caprecovery" (Capital Recovery).
Label: Work Breakdown Structure label used to aggregate SubCosts and SubBenefits.
Discount Year Times: The number of times to use the Discount Years property to calculate recurrent costs. Only used when the Escalate Type property is 'spv', or Single Present Value, and the Discount Years property is greater than zero. Total number of times will not exceed the service life of the investment.
Price Basis Type: The type of price used to calculate SubCosts or SubBenefits. Options include none, market, list, contracted, government, production, copay, premium, incentive, penalty, fee, engineered, and consensus. When possible, use market prices.
Salvage Value: Used with an Escalation Type of spv and Service Life Years > 0 to calculate a discounted salvage, or residual, value. Also used with an Escalation Type of caprecovery and DiscountYears > 0 to calculate an annual capital recovery cost for operating budgets.
Total Cost or Benefit: Not a data entry field. Shows the total LCC cost or LCB benefit after calculations are run.
Unit Cost or Benefit: Not a data entry field. Shows the total LCC unit costs or LCB unit benefits after calculations are run.
The following image shows that Step 3 of LCA calculators contain project-related properties that are used to aggregate Step 2’s SubCosts or SubBenefits:
These properties are defined as follows:
Service Life: The life span of the Input or Output.
Planning Construction Years: Number of years in the planning and construction period. Also known as the preproduction period.
Years from Base Date: The base date is the Input or Output’s date. Enter an integer that specifies the specific year within the Planning Construction Years when the Input is installed or Output’s revenue received. The NIST reference uses examples that are installed in 1 year and given a value of 1 for this property. A project with a Planning Construction Years greater than 1 would insert whichever year within the period when the Input is actually installed.
Per Unit Amount: An amount used to derive per unit costs. For example, a 1000 ft2 (m2) house would use a value of 1000.
Per Unit Unit: A unit used in per unit costs. For example, a 1000 ft2 (m2) house would use a value of ft2 (m2).
Alternative Type: Type of alternative used in the comparison of different Inputs or Outputs. Options include A, B, C … Other base elements use NPV calculators to set this property.
Target Type: This property supports setting goals and targets for Inputs and Outputs. The Benchmark option is used to define a baseline, or benchmark, Input or Output. The Actual option is used to define the actual results for an Input or Output. The Full Target and Partial Target options are used to carry out progress and goal-related analyses. Other base elements use NPV calculators to set this property.
Real and Nominal Interest Rates: Set using Step 2 of the calculators.
The results of running the calculators use the following properties:
Individual SubCost or SubBenefit: The total discounted cost or benefit derived from running the calculator.
Total Discounted Revenue, OC, AOH, and CAP prices: Sum of the discounted SubCosts or SubBenefits that will be added to base Input or Output prices. The Price Type property determines which price to update –either an Output’s Revenue price or an Input’s Operating Cost (OC), Allocated Overhead (AOH), or Capital (CAP) prices.
Total Life Cycle Cost: Sum of the Total OC, AOH, and CAP costs.
Total Equivalent Annual Annuity: Amortizes the life cycle cost over the service life years, using an equivalent annual annuity discounting formula.
Total per Unit Cost: Total Life Cycle Cost divided by the Per Unit Amount.
Per Unit Unit: Unit of measurement for the Total per Unit Cost.
D. Life Cycle Calculations
Life cycle calculations can include revenues, operating costs, allocated overhead costs, and capital costs in Capital or Operating Budget totals. In contrast, basic capital budgets (see the Capital Budget 1 tutorial) leave operating and allocated overhead costs completely out of the evaluation –in effect, discounted cash flow evaluations. Capital budgets usually account for capital costs by discounting their full cost and counting them as capital, rather than allocated overhead, costs. Operating budgets usually account for capital costs by allocating a portion of the full cost, generally an amortized portion, to allocated overhead costs. DevTreks life cycle calculations can be carried out several ways:
1. NIST-style Life Cycle Calculation: This method follows the procedures detailed in the NIST 135 Handbook (1996). Complete capital budgets are completed for each ‘preproduction’ or ‘planning and construction phase’ year. All Inputs and Outputs in these budgets are calculated using DevTreks Life cycle Input and Output calculators. The Input and Output calculators compute all discounted, price escalated, totals. The budget’s Net Present Value calculator just sums the Input and Output totals. Double discounting can be avoided in the NPV calculations by setting Input and Output dates equal to Component, Operation, and Outcome dates, and by switching “off” discounting at the Time Period element of budgets.
2. Cost and Return-style Life Cycle Calculation: This method follows the procedures detailed in the Hallam et al (1999) reference (Task Force on Commodity Costs and Returns (2*)). Although DevTreks Life cycle Input and Output calculators can still be used to compute SubPrices totals (such as power and water), the calculators’ SubPrices are given a Discount Years property set to zero, and an EscalationType property set to none. The LCA calculators will set the base Input or Output Prices which can then be discounted using DevTreks standard Net Present Value calculators (see the Net Present Value 1 tutorial).
3. Mixed NIST and Cost and Return-style Life Cycle Calculation: This method uses both of the two previous styles. SubPrices that are capital costs can be computed using capital recovery options that calculate annual allocated overhead costs. Additional operating costs can be calculated by setting appropriate life cycle properties (set the Discount Years property to zero, set the EscalationType property set to none). Care is needed not to double discount the Inputs and Outputs when both Net Present Value and Life Cycle calculators are run (using Input and Output prices that have been set using the life cycle calculators).
4. Unit Costs and Benefits: DevTreks recommends that all base element Inputs and Outputs be calculated as unit costs and benefits. For example, a 2 x 4 wood stud should be entered as a base Input using a quantity of 1 stud, rather than the number of studs needed by any specific structure. That allows the stud to be reused in multiple Components and Operations. The Input quantity can be adjusted correctly when the stud is used in a specific structure (a Component or Operation). The Input and Output examples that follow were required to match their associated NIST reference, so their quantities appear to be related to a specific structure. We discourage this practice unless the resultant cost or benefit can be interpreted as a reusable unit cost or benefit.
Choose whichever style best meets your needs. Closely examine the examples below and experiment with additional techniques. This version limits the display of SubCosts and SubBenefits to the first 10 summary items encountered. The summation is carried out using the “Label” property of each SubCost or SubBenefit. Although only 10 items are displayed, the total cumulative costs and benefits will be for the total number of SubCosts or SubBenefits being aggregated.
E. Life Cycle Cost (LCC) Input Calculator 1
This calculator carries out life cycle cost calculations using methods that are explained in NIST Handbook 135 and some additional methods that support general budgeting. Up to 10 ‘SubCosts’ (i.e. electric, power, taxes …) can be included in the calculations. Unlike other calculators, this calculator does not automatically calculate repair, water, power, capital recovery, or other costs. Instead, the user must enter prices and quantities for each ‘SubCost’ and the calculator will then compute discounted costs. Recurring costs can be calculated using uniform, linear, or geometric growth types or the techniques explained in the NIST Handbook 135 reference. The calculator updates the base Input’s OCPrice, AOHPrice, and CAPPrice with the calculated composite costs, but does not change their units or amounts. These examples demonstrate that environmental impacts can be included as SubCosts or SubBenefits (3*).
Example 1. NIST-style Building Reconstruction LCC (see NIST 135 Handbook table 5-2)
The following image (US NIST, 1996) displays the LCC calculations that will be carried out in this example. Real discount rates, with constant money, are used to discount costs.
Input URIs (4*)
https://www.devtreks.org/buildtreks/preview/commercial/input/2012 NIST 135 Example 5-2/2147397445/none/
http://localhost/buildtreks/preview/commercial/input/2012 NIST 135 Example 5-2/2147409725/none/
SubCost 1:
$302,600.000 (Electricity, Total Cost 1) = (250,000 (Amount 1, kWh) * $0.08 (Price 1, per KwH)) * 15.13 (discount factor: 20 years, 3%, FEMPUPV)
$302.60 (per SF, Unit Cost 1) = $302,600.000 (Electricity, Total Cost 1) / 1,000 SF (Per Unit Amount)
SubCost 2:
$104,160.000 (OMR, Total Cost 2) = (1 (Amount 2, annual) * $7,000.00 (Price 2, per year)) * 14.88 (discount factor: 20 years, 3%, UPV)
$104.16 (per SF, Unit Cost 1) = $104,160.000 (OMR, Total Cost 2) / 1,000 SF (Per Unit Amount)
SubCost 3 (4*):
$170 (Global Warming, Total Cost 3) = 8,500 (Global Warming Potential) kg CO2 equivalents * $0.02/kg carbon* 0 Discount Factor (3%, 0 year from base date)
A market price for carbon was found and therefore dollar values could be determined for this impact. Since the impact has a Price Type of ‘capital’. This cost is added to Total Discounted Capital Costs.
SubCost 4 (4*):
$0 (Habitat Alteration, Total Cost 3) = 0.60 (Habitat Alteration Potential) TE Species Count equivalents * $0/HAE
A market price for Habitat Alteration Equivalents could not be found, so they are priced at $0. Impacts without prices are used in cost effectiveness evaluations. Note that market prices for some types of wildlife may be available (this might make an interesting calculator).
SubCost 5:
$8.416.56 (Plant Replacement, Total Cost 5) = $12,000.00 (Plant Replacement Cost) * 0.701 (discount factor: 12 Repl Years From Base Date, 3%)
SubCost 6:
$101.062.13 (Initial Investment, Total Cost 6) = $103,000.00 (Initial Investment Cost) * 1 (discount factor: 0 Discount Years) – ($3,500.00 (Salvage Value) * 0.554 (discount factor: 20 years Service Life + 0 Planning Construction Years, 3%) * -1)
Discounted Total Costs:
$109.648.69 (Input.CAPPrice) = $101.062.13 (Initial Investment, Total Cost 6) + $8.416.56 (Plant Replacement, Total Cost 5) + $170 (Global Warming, Total Cost 3)
$0.00 (Input.AOHPrice) = $0.00
$406,760.00 (Input.OCPrice) = $302,600.000 (Electricity, Total Cost 1) + $104,160.000 (OMR, Total Cost 2)
$516.408.69 (Total LCC) = $109.478.69 (Input.CAPPrice) + $0.00 (Input.AOHPrice) + $406,760.00 (Input.OCPrice)
$516.41 (Total Unit LCC) per SF = $516.408.69 (Total LCC) / 1,000 SF (Per Unit Amount)
$34.710.76 (Total EAA) = $516.408.69 (Total LCC) / x (equivalent annual annuity discount factor: 20 years, 3%)
$34.71 (Total Unit EAA) per SF = $34.710.76 (Total EAA) / 1,000 SF (Per Unit Amount)
Example 2. NIST-style Building Reconstruction LCC (see NIST 135 Handbook table 5-4)
The following image (US NIST, 1996) displays the LCC calculations that will be carried out in this example. Real discount rates, with constant money, are used to discount costs.
Input URIs (4*)
https://www.devtreks.org/buildtreks/preview/commercial/input/2012 NIST 135, table 5-4/2147397446/none/
http://localhost/buildtreks/preview/commercial/input/2012 NIST 135, table 5-4/2147409726/none/
SubCost 1:
$7,933.41 (Replacement Fan, Total Cost 1) = (1.0 (Amount 1, each) * $12.000.00 (Price 1, per each)) * 0.661 (discount factor: 14 years, 3%, SPV)
$7.93 (per SF, Unit Cost 1) = $7,933.41 (Replacement Fan, Total Cost 1) / 1,000 SF (Per Unit Amount)
SubCost 2:
$142,800.000 (Electricity, Total Cost 2) = (125,000 (Amount 2, kWh) * $0.08 (Price 2, per KwH)) * 14.28 (discount factor: 20 years, 3%, FEMPUPV)
$142.80 (per SF, Unit Cost 2) = $142,800.000 (Electricity, Total Cost 2) / 1,000 SF (Per Unit Amount)
SubCost 3:
$171,679.43 (Natural Gas, Total Cost 3) = (1700 (Amount 3, GJ) * $5.93 (Price 3, per GJ)) * 17.03 (discount factor: 20 years, 3%, UPV)
$171.68 (per SF, Unit Cost 3) = $171,679.43 (Natural Gas, Total Cost 3) / 1,000 SF (Per Unit Amount)
SubCost 4:
$98,210.00 (OMR, Total Cost 4) = (1 (Amount 4, annual) * $7.000.00 (Price 4, per year)) * 14.03 (discount factor: 20 years, 3%, UPV)
$98.21 (per SF, Unit Cost 4) = $302,600.000 (OMR, Total Cost 4) / 1,000 SF (Per Unit Amount)
SubCost 5:
$48,410 (Second Investment, Total Cost 5) = (1 (Amount 5, each) * $51,500.00 (Price 5, per each)) * 0.943 (discount factor: 2 years, 3%, SPV)
$48.41 (per SF, Unit Cost 5) = $48,410 (Second Investment, Total Cost 5) / 1,000 SF (Per Unit Amount)
SubCost 6:
$194.17 (Global Warming, Total Cost 6) = 10,000 (Global Warming Potential) kg CO2 equivalents * $0.02/kg carbon * .971 Discount Factor (3%, 1 year from base date)
Life Cycle Comp ChangeSubCost 7:
$0 (Habitat Alteration, Total Cost 7) = 0.03 (Habitat Alteration Potential) TE Species Count equivalents * $0/HAE
SubCost 8:
$36,300.99 (Plant Replacement, Total Cost 8) = $60,000 (Plant Replacement Cost) * 0.605 (discount factor: 17 Repl Years From Base Date, 3%)
SubCost 9:
$39,562.15 (Initial Investment, Total Cost 9) = $51,500.00 (Initial Investment Cost) * .971 ( discount factor: 1 Discount Years, 3%) + (-$10.440 (Discounted Salvage Value))
-$10.440 (Discounted Salvage Value) = $20,000.00 (Salvage Value) * 0.522 (discount factor: 20 Service Life + 2 Planning Construction Years, 3%) * -1
Discounted Total Costs:
$132.400.73 (Input.CAPPrice) = $7,933.41 (Replacement Fan, Total Cost 1) + $48,410 (Second Investment, Total Cost 5) + $194.17 (Global Warming, Total Cost 6) + $36,300.99 (Plant Replacement, Total Cost 8) + $39,562.15 (Initial Investment, Total Cost 9)
$0.00 (Input.AOHPrice) = $0.00
$412,689.43 (Input.OCPrice) = $142,800.000 (Electricity, Total Cost 2) + $171,679.43 (Natural Gas, Total Cost 3) + $98,210.00 (OMR, Total Cost 4)
$545.090.16 (Total LCC) = $132.400.73 (Input.CAPPrice) + $0.00 (Input.AOHPrice) + $412,689.43 (Input.OCPrice)
$545.09 (Total Unit LCC) per SF = $545.090.16 (Total LCC) / 1,000 SF (Per Unit Amount)
$36.638.62 (Total EAA) = $545.090.16 (Total LCC) / x (equivalent annual annuity discount factor: 20 years, 3%)
$36.64 (Total Unit EAA) per SF = $36.638.62 (Total EAA) / 1,000 SF (Per Unit Amount)
Example 3. Same as Example 2 but no FEMPUPV indexes
This example is the same as Example 2 but uses 1% uniform escalating prices instead of the NIST 135 price indexes.
Input URIs (4*)
https://www.devtreks.org/buildtreks/preview/commercial/input/2012 Example 3, Uniform Growth/2147397444/none/
SubCost 1:
$297,549.50 (Electricity, Total Cost 1) = (250,000 (Amount 1, kWh) * $0.08 (Price 1, per KwH)) * 14.88 (discount factor: 1% growth, 20 years, 3%, UPV)
$297.55 (per SF, Unit Cost 1) = $297,549.50 (Electricity, Total Cost 1) / 1,000 SF (Per Unit Amount)
SubCost 2:
$104,142.32 (OMR, Total Cost 2) = (1 (Amount 2, annual) * $7,000.00 (Price 2, per year)) * 14.88 (discount factor: 1% growth, 20 years, 3%, UPV)
$104.12 (per SF, Unit Cost 1) = $104,142.32 (OMR, Total Cost 2) / 1,000 SF (Per Unit Amount)
SubCost 3:
$250 (Global Warming, Total Cost 3) = 12,500 (Global Warming Potential) kg CO2 equivalents * $0.02/kg carbon* 0 Discount Factor (3%, 0 year from base date)
SubCost 4:
$0 (Habitat Alteration Potential, Total Cost 4) = 0.60 (Habitat Alteration Potential) TE Species Count equivalents * $0/HAE
SubCost 5:
$8.416.56 (Plant Replacement, Total Cost 5) = $12,000.00 (Plant Replacement Cost) * 0.701 (discount factor: 12 Repl Years From Base Date, 3%)
SubCost 6:
$101.062.13 (Initial Investment, Total Cost 6) = $103,000.00 (Initial Investment Cost) * 1 (discount factor: 0 Discount Years) – ($3,500.00 (Salvage Value) * 0.554 (discount factor: 20 years service Life + 0 Planning Construction Years, 3%) * -1)
Discounted Total Costs:
$109,728.69 (Input.CAPPrice) = $250 (Global Warming, Total Cost 3) + $8.416.56 (Plant Replacement, Total Cost 5) + $101.062.13 (Initial Investment, Total Cost 6)
$0.00 (Input.AOHPrice) = $0.00
$401,691.82 (Input.OCPrice) = $297,549.50 (Electricity, Total Cost 1) + $104,142.32 (OMR, Total Cost 2)
$511,420.51 (Total LCC) = $109,728.69 (Input.CAPPrice) + $0.00 (Input.AOHPrice) + $401,691.82 (Input.OCPrice)
$511.42 (Total Unit LCC) per SF = $511,420.51 (Total LCC) / 1,000 SF (Per Unit Amount)
$34,375.49 (Total EAA) = $511,420.51 (Total LCC) / x (equivalent annual annuity discount factor: 20 years, 3%)
$34.38 (Total Unit EAA) per SF = $34,375.49 (Total EAA) / 1,000 SF (Per Unit Amount)
Example 4. Same as Example 3 but recurrent operating costs
This example is the same as Example 3 but changes the OMR expense from annual to biannual. The SubCost.Times property demonstrates how to account for these types of recurrent costs.
Input URIs (4*)
https://www.devtreks.org/buildtreks/preview/commercial/input/2012 Example 4, Recurrent Costs/2147397492/none/
http://localhost/buildtreks/preview/commercial/input/2012 Example 4, Recurrent Costs/2147409776/none/
SubCost 1:
$297,549.50 (Electricity, Total Cost 1) = (250,000 (Amount 1, kWh) * $0.08 (Price 1, per KwH)) * 14.88 (discount factor: 1% growth, 20 years, 3%, UPV)
$297.55 (per SF, Unit Cost 1) = $297,549.50 (Electricity, Total Cost 1) / 1,000 SF (Per Unit Amount)
SubCost 2:
$51,301.64 (OMR, Total Cost 2) = 1 (Amount 2) * $7,000.00 (Price 2, biannual)) * .943 (discount factor: 2 Years, 3%, SPV) and then discounted 9 additional times with 2 years added to the discounting on each round (Discount Years = 2, Discount Years Times = 10)
$51.30 (per SF, Unit Cost 1) = $51,301.64 (OMR, Total Cost 2) / 1,000 SF (Per Unit Amount)
SubCost 3:
$250 (Global Warming, Total Cost 3) = 12,500 (Global Warming Potential) kg CO2 equivalents * $0.02/kg carbon* 0 Discount Factor (3%, 0 year from base date)
SubCost 4:
$0 (Habitat Alteration Potential, Total Cost 4) = 0.60 (Habitat Alteration Potential) TE Species Count equivalents * $0/HAE
SubCost 5:
$8.416.56 (Plant Replacement, Total Cost 5) = $12,000.00 (Plant Replacement Cost) * 0.701 (discount factor: 12 years, 3%)
SubCost 6:
$101.062.13 (Initial Investment, Total Cost 6) = $103,000.00 (Initial Investment Cost) * 1 (discount factor: 0 Discount Years) – ($3,500.00 (Salvage Value) * 0.554 (discount factor: 20 years Service Life + 0 Planning Construction Years, 3%) * -1)
Discounted Total Costs:
$109.728.69 (Input.CAPPrice) = $250 SubCost 3+ $8.416.56 (Plant Replacement, Total Cost 5) + $101.062.13 (Initial Investment, Total Cost 6)
$0.00 (Input.AOHPrice) = $0.00
$348,851.13 (Input.OCPrice) = $297,549.50 (Electricity, Total Cost 1) + $51,301.64 (OMR, Total Cost 2)
$458,579.83 (Total LCC) = $109.728.69 (Input.CAPPrice) + $0.00 (Input.AOHPrice) + $348,851.13 (Input.OCPrice)
$458.58 (Total Unit LCC) per SF = $511,420.51 (Total LCC) / 1,000 SF (Per Unit Amount)
$30,823.77 (Total EAA) = $458,579.83 (Total LCC) / x (equivalent annual annuity discount factor: 20 years, 3%)
$30.82 (Total Unit EAA) per SF = $30,823.77 (Total EAA) / 1,000 SF (Per Unit Amount)
Example 5. Cost and Return-style Operating Budget Costs
This is the first example demonstrating how costs can be computed for Operating Budgets rather than Capital Budgets. Annual capital costs can be computed by setting the SubCost.EscationType property to “caprecovery”, the SubCost.PriceType property to aoh (Allocated Overhead), the SubCost.DiscountYears property to a value greater than one, and the SubCost.Salvage property value to an appropriate value. Additional operating costs can be calculated by setting the SubCost.EscationType property to “none” or “spv” (Single Present Value), the SubCost.PriceType property to oc (Operating Cost), and the SubCost.DiscountYears property to zero.
This example is the same as Example 2 but changes the Electricity, Natural Gas, and OMR costs to annual costs with a 1 year Service Life. In addition, the Initial Investment and Second Investment are combined into a single SubCost ($103,000), with a Salvage Value of $20,000, and calculated as an annual capital recovery cost. The Replacement Fan is also calculated as an annual capital recovery cost. Using the Fan as an example, the annual cost is derived by: 1) setting the SubCost.EscalationType to caprecovery, 2) setting the SubCost.DiscountYears property to 14, 3) setting the SubCost.PriceType to aoh (allocated overhead), and 4) and setting the SubCost.SalvageValue to $500. Note that a cost per hour of Operation can be derived for the Fan by setting the SubCosts.Times property to a number greater than 1. The derived Capital Recovery Cost will be divided by the SubCosts.Times property when that property is greater than 1. For example, a fan with a Capital Recovery Cost of $100 that runs for 100 hours per year (SubCosts.Times) will have a final total of $1/hour allocated overhead cost (this technique is appropriate when the base Input has “hour” units).
Input URIs
https://www.devtreks.org/buildtreks/preview/commercial/input/2012 Example 5, Operating Budget Costs/2147397493/none
http://localhost/buildtreks/preview/commercial/input/2012 Example 5, Operating Budget Costs/2147409778/none/
SubCost 1:
$200 (Global Warming, Total Cost 1) = 10,000 (Global Warming Potential) kg CO2 equivalents * $0.02/kg carbon * 1 (discount Factor: 0 years, 3%)
(Note: the PriceType = allocated overhead cost)
SubCost 2:
$6,178.90 (Initial Investment, Total Cost 2) = ($103,000.00 (Initial Investment Cost) + (-$1,340 (Discounted Salvage Value)) * .067 (capital recovery factor: 20 Discount Years, 3%) +)
-$1,340 (Discounted Salvage Value) = $20,000.00 (Salvage Value) * .067 (discount factor: 20 Discount Years, 3%) * -1
SubCost 3:
$1,033.05 (Replacement Fan, Total Cost 3) = ($12.000.00 (Replacement Fan Cost) + (-$44.50 Discounted Salvage Value)) * 0.089 (capital recovery factor: 14 years, 3%)
-$44.50 (Discounted Salvage Value) = $500 (Salvage Value) * 0.089 (capital recovery factor: 14 years, 3%) * -1
SubCost 4:
$10,000.000 (Electricity, Total Cost 4) = (125,000 (Amount 4, kWh) * $0.08 (Price 4, per KwH)) * 1 (discount Factor: 0 years, 3%)
SubCost 5:
$10,081.00 (Natural Gas, Total Cost 5) = (1700 (Amount 5, GJ) * $5.93 (Price 5, per GJ)) * 1 (discount Factor: 0 years, 3%)
SubCost 6:
$7,000.00 (OMR, Total Cost 6) = (1 (Amount 6, annual) * $7.000.00 (Price 6, per year)) * 1 (discount Factor: 0 years, 3%)
SubCost 7:
$4,557.15 (Replacement Cost, Total Cost 7) = ($60,000 (Plant Replacement Cost) + ($0 Salvage Value)) * 0.076 (capital recovery factor: 17 years, 3%)
Discounted Total Costs:
$0 (Input.CAPPrice) = 0
$11,969.11 (Input.AOHPrice) = $200 (Global Warming, Total Cost 1) + $6,178.90 (Initial Investment, Total Cost 2) + $1,033.05 (Replacement Fan, Total Cost 3) + $4,557.15 (Replacement Cost, Total Cost 7)
$27,081.00 (Input.OCPrice) = $10,000.000 (Electricity, Total Cost 4) + $10,081.00 (Natural Gas, Total Cost 5) + $7,000.00 (OMR, Total Cost 6)
$39.050.11 (Total LCC) = $11,969.11 (Input.AOHPrice) + $27,081.00 (Input.OCPrice) + (don’t include capital costs in operating budgets)
$39.05 (Total Unit LCC) per SF = $39.050.11 (Total LCC) / 1,000 SF (Per Unit Amount)
$0 (Total EAA) = $39.050.11 (Total LCC) / x (equivalent annual annuity discount factor: 0 years, 3%)
F. Life Cycle Benefit (LCB) Output Calculator 1
This calculator carries out life cycle benefit calculations using the same methods as the Input Cost Calculator. Instead of discounting a stream of costs, this calculator discounts a stream of benefits. Up to 10 ‘SubBenefits’ (i.e. retail sales, rental income, revenue sharing returns, subsidies, incentives …) can be included in the calculations. Recurring benefits can be calculated using uniform, linear, or geometric growth types or the techniques explained in the NIST Handbook 135. The calculator updates the base Output’s Price with the calculated composite benefits, but does not change the units or amounts.
Example 1. AdHoc (NIST 135 does not include examples of Output calculations)
This adhoc example demonstrates that the Output calculator works the same as the Input calculator.
Output URIs
https://www.devtreks.org/buildtreks/preview/commercial/output/2012 NIST 135 style Example 1/2141223440/none/
http://localhost/buildtreks/preview/commercial/output/2012 NIST 135 style Example 1/2141223440/none/
SubBenefit 1:
$178,529.70 (Rentals-midprice, Total Benefit 1) = (10 (Amount 1, each) * $1,200 (Price 1, per each)) * 14.88 (discount factor: 1% uniform growth, 20 years, 3%)
$35.71 (per SF, Unit Benefit 1) = $178,529.70 (Rentals-midprice, Total Benefit 1) / 5,000 SF (Per Unit Amount)
SubBenefit 2:
$59,509.90 (Rentals-lowprice, Total Benefit 2) = (5 (Amount 2, each) * $800 (Price 2, per each)) * 14.88 (discount factor: 1% uniform growth, 20 years, 3%)
$11.98 (per SF, Unit Benefit 1) = $59,509.90 (Rentals-lowprice, Total Benefit 2) / 5,000 SF (Per Unit Amount)
SubBenefit 3:
$48.54 (Global Warming Potential, Total Benefit 3) = 2,500 (Amount 3) kg CO2 equivalents * $0.02/kg carbon * .971 (discount Factor: 1 years, 3%)
SubBenefit 4:
$155.34 (Fossil Fuel Depletion Potential, Total Benefit 4) MJ surplus energy equivalents = 2,000 (Amount 4) * $0.08/MJ * .971 (discount Factor: 1 years, 3%)
Discounted Total Benefits:
$238,243.48 (Output.Price) = $178,529.70 (Rentals-midprice, Total Benefit 1) + $59,509.90 (Rentals-lowprice, Total Benefit 2) + $48.54 (Global Warming Potential, Total Benefit 3) + $155.34 (Fossil Fuel Depletion Potential, Total Benefit 4)
$238,243.48 (Total LCC) = $238,243.48 (Output.Price)
$47.65 (Total Unit LCC) per SF = $238,243.48 (Total LCC) / 5,000 SF (Per Unit Amount)
$16,013.70 (Total EAA) = $238,243.48 (Total LCC) / x (equivalent annual annuity discount factor: 20 years, 3%)
G. Other Life Cycle Calculations
Life cycle analysis can be used to quantify any life span-dependent costs and benefits. These analyses can be used in the fields of health care, human capital, environmental improvement, food production, safety efficacy, and disaster prevention/recovery. The Resource Stock Calculation 1 reference includes additional examples of natural resource stock Life Cycle Analysis.
H. Performance Measures and Multimedia support
The NIST 135 and GAO references contain examples of Performance Measures, such as Return on Investment or Estimated Cost at Completion, which can be used to reach decisions about alternative investments. The Performance Analysis tutorial contains several examples take from those references. The examples include communication aids that help decision makers to decide among alternative investments, including the following graphs:
I. Life Cycle Analyzers
The Life Cycle Analysis tutorial explains how to aggregate and analyze this life cycle calculation data.
Summary
Clubs using DevTreks can carry out basic life cycle calculations for a wide assortment of Inputs and Outputs. They can aggregate and analyze these calculations in a wider assortment of Operations, Components, Outcomes, Capital Budgets, and Operating Budgets. Clubs can tackle issues vexing their communities involving energy conservation, natural resources conservation, transportation improvement, food production, safety and disaster prevention effectiveness, health care expenditures, and human capital performance. Networks can build knowledge banks of benefit and cost data that can help future generations improve lives and purses. The result may be people who improve their lives and livelihoods.
Footnotes
1. The NIST 135 reference uses examples of energy conservation to explain life cycle costs. Life cycle assessments are appropriate in any cost and benefit context, including health care, human capital, environmental improvement, food production, safety efficacy, and disaster prevention/recovery.
2. The Cost and Returns reference is explained in DevTreks’ Net Present Value 1 tutorial.
3. Section F explains that environment impacts can be included in life cycle assessments. These impacts can be obtained from full life cycle environmental analyses. When possible, the impacts should be given dollar prices. These examples do not use escalated prices for the environmental impacts because research was not done to justify the escalation rate. Environmental indicators and their impacts can be tracked more thoroughly using DevTreks Monitoring and Evaluation (M&E) tools (see the M&E tutorials) or Resource Stock tools (see the Resource Stock tutorials).
4. When testing for the first time, the calculations must be run on your localhost or web server. DevTreks recommends using uniform sequences of SubCosts and SubBenefits when entering data. For example, if a Global Warming SubPrice is going to be included in all SubCosts, enter it in the same sequence position (first, third). That will allow the SubCosts and SubBenefits to line up uniformly when displayed in subsequent analyses (see the Life Cycle Analysis 2 tutorial).
References
U.S. Department of Commerce, National Institute for Standards and Technology. Handbook 135, Life-Cycle Costing Manual. 1996 Edition.
United States Department of Interior. National Parks Service. Cost Estimating Requirements Handbook. February, 2011.
United States Government Accountability Office. Applied Research and Methods. GAO Cost Estimating and Assessment Guide. Best Practices for Developing and Managing Capital Program Costs. March, 2009.
Hallam, Eidman, Morehart and Klonsky (editors). Commodity Cost and Returns Estimation Handbook, Staff General Research Papers, Iowa State University, Department of Economics, 1999
References Note
We try to use references that are open access or that do not charge fees.
Improvements, Errors, and New Features
Please notify DevTreks (devtrekkers@gmail.com) if you find errors or can recommend improvements.
Video tutorials explaining this reference can be found at:
https://www.devtreks.org/commontreks/preview/commons/resourcepack/Life Cycle Analysis 1/497/none/
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