Suitability of life cycle cost analysis (LCCA) as asset management tools for institutional buildings

Abstract

Purpose The purpose of this paper is to evaluate the accuracy of life cycle cost analysis (LCCA) for institutional (higher education) buildings as a predictor of actual realised facility costs. Design/methodology/approach Research methodology includes a comprehensive literature review to identify issues, best practices and implementation of LCCA in the construction industry. A case study was conducted to evaluate the accuracy of LCCA in predicting facility costs. Findings Notwithstanding the benefits of LCCA, its adoption has been relatively slow for institutional buildings. The case study revealed that the average difference between estimated and actual construction cost is 37 per cent, whereas the average difference between the actual and estimated maintenance cost is 48 per cent. There is an average difference of 85 per cent in the actual and estimated administration cost. Research limitations/implications While limited to a few buildings, the case study underscores that LCCA methods should not be used for cost predictions of facility performance but rather for comparing total costs of alternative building features and systems, as well as building types. Sensitivity analysis also revealed that the selection of a discount rate would have less impact on recurring costs estimates compared to non‐recurring cost estimates. Facilities managers' involvement in LCCA technique developments and implementations will likely improve its performance during programming phases. Practical implications The value of LCCA procedures is limited as a predictor of actual realised facility costs. Educational institutions can use the methods described in this paper to replicate the study and arrive at their own conclusions regarding the LCCA techniques and their potential use in programming stages. Originality/value The paper evaluated the accuracy of LCCA for institutional buildings and the potential of LCCA as an asset management tool for institutional buildings and provided suggestions to improve its adoption in facilities management.

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