Bringing TCO to the TBL!
Owners and managers of built assets gain the best Return On Investment (ROI) when all relevant categories of cost and benefit are explored. When making calculations, resiliency, environmental impact, and workplace wellness belong in the equation.
LifeCycle Cost Analysis (LCCA) calculations are a treasure hunt. The starting point is strategic sourcing and investment. The hunt may focus on finances, but the resiliency associated with environmental and social factors are present as well.
Whether evaluating a single asset or an entire business campus, the LCCA compares strategic options. For each asset, the study looks beyond initial purchase to anticipate the operational, maintenance, and disposal costs which will occur over 20 years or the asset life.
Starting with the financials
The LCCA treasure hunt begins with the initial costs. Those represent only 15% of a building’s total cost. The necessary expansion of vision over the asset’s lifecycle requires some research. That limits variance risks and is likely to reveal further opportunities. Professionally-completed research is a knowledge investment that returns short-term and long-term value.
Operations and Maintenance (O+M) costs are estimated for each year of asset life. Inflation adjustment rates may significantly vary. Utility rate inflation will likely increase more rapidly than other O+M costs, particularly if fossil fuels are involved.
For the final year of asset life, estimates should include Liquidation Cost minus any Resale or Salvage Valued.
Reporting the numbers
Enterprise tools are available for data input, analysis, and reporting. When those are not in the budget, calculations can be performed within a spreadsheet.
The reporting tool or spreadsheet should present summary information and provide drill-down to the details. This can be accomplished through business intelligence reporting, or on a spreadsheet workbook that has a summary tab. The many years of asset life should be presented in vertical rows, while the potential assets being compared should each have columns for Acquisition, Operations, and Maintenance costs.
Including relevant social and environmental factors
Additional drill-down reports or spreadsheet tabs should back up the summary table with details, calculations, and adjustments. Resiliency and environmental factors like these examples should not be overlooked:
- Commissioning and adjustment of HVAC and other building systems
- Verifying the environmental design
- Workspace configuration
- Environmental impact compliance reporting and mitigation
- Utility costs
- Pollution control
- Sustainable supplies
- Workplace wellness
- Training for efficient use
- Hazardous waste disposal
- Other waste disposal and recycling
- Planned/scheduled maintenance
- Available documentation
- Upgrades and refurbishing
Coupled with energy monitoring and sensor use, investment in LCCA data gathering and analysis focuses asset management decisions. Cost is optimized and estimated over each year of the facility life cycle. Most maintenance can be planned and budgeted predictively. The expectations of tenants and other stakeholders can be better managed.
When social and environmental stewardship are quantified along with financials, a greater and more accurate ROI is found at the Triple Bottom Line.