Life Cycle Cost Estimation for Facilities and Healthcare

During Phase I, the team found that the industry needs standards and guidelines to calculate the economic benefits of high-performance buildings, including integrating holistic benefits such as occupant health and productivity and the environment. Standards exist for facility life cycle costing (LCC), both in the U.S. (e.g., ASTM) and internationally (e.g., ISO). International standards have also been established for conducting life cycle analysis (LCA) in general (e.g., ISO) and specifically for buildings (e.g., CEN-EN). However, RT-FHC-02 did not find standards for calculating the economic impacts of buildings and building systems on occupants’ health, productivity, and performance. Peer-reviewed publications that report on studies of occupant benefits employ different methods and approaches, and a broad consensus does not exist (FR-FHC-02, p. 11).

Recommendation: A standards organization should establish and publish a standard process to measure and monetize the economic benefits of different types of buildings and building systems on the health, efficiency, and productivity of occupants.

In terms of data sources, many sources of comprehensive cost data are proprietary, while relatively few are freely available. Improving the availability and quality of data would improve LCC results (FR-FHC-02, p. 17).

Recommendation: Sponsored data sources maintained by users for users, which can be evaluated and made available for further research and study, would create a resource as well as a community of LCC practitioners. Cost data banks can be sponsored by industry associations for general use. For organizational data, it may be feasible to create a system for systematically collecting life cycle cost data for whole buildings and building systems from past or ongoing projects.

It is essential to have tools that address the cost, environment, and occupant impacts of buildings. Most of these tools found were focused on cost (e.g., LCC tools); few tools or frameworks addressed all three impact areas (FR-FHC-02, p. 7).

Recommendation: Develop tools that include more than one building analysis impact area (i.e., cost, occupant effects, and environmental impacts). The analysis should consider all endpoints affected by buildings and building systems that are important to the organization and/or stakeholders.

Investors and business owners tend not to invest in high-performance building systems that have higher initial costs, even though they decrease costs over the service life (FR-FHC-02, p. 28).

Recommendation: Additional studies need to be conducted to increase interest in and acceptance of the benefits, so that investors and owners will be encouraged to apply building systems that result in occupant benefits and reduce service life costs. There is a need to communicate the benefits of a life cycle value perspective and to develop business cases for better built environments, both to clarify the benefits and to develop straightforward approaches to evaluating the alternatives.

Triple Bottom Line (TBL) Life Cycle Cost (LCC) calculations help decision-makers transparently and quantitatively capture the operational, natural, and human capital benefits of high-performance buildings and systems. Incorporating the three “bottom lines” in a life cycle cost framework allows investment decisions to be made upon a common platform based upon financial metrics over an agreed project life. TBL LCC moves decision-makers away from first-cost comparisons and toward investing in high-performance systems based on commitments to operational, environmental, and social benefits (FR-FHC-02a, p. 1).

Recommendation: The methodology proposed in Final Report FHC-02a provides a roadmap and a guide for TBL LCC assessments. The case studies provide strong evidence of the impacts of factors traditionally not included in decision-making and illustrate the application of the methodology.

During Phase II, the team observed two case studies and discovered that the shift away from basing decisions exclusively on first costs can be especially meaningful for long-term building owners. Natural capital benefits contribute significantly to corporate social responsibility (CSR) and environmental, social, and governance (ESG) reporting and to emerging global goals to address climate change and environmental quality. The TBL LCC calculations presented in the case studies confirm the initial assumption that human capital benefits often overwhelm other cost benefits in the justification of high-performance building design alternatives, because buildings have a major effect on occupant health and productivity as well as organizational effectiveness (FR-FHC-02a, p. 6).

Recommendation: Use TBL LCC to illuminate the broad scope of benefits of facility investments, especially for long-term building owners and high-performance alternatives.