- Is it the lowest first-cost structure that meets the program?
- Is it the design with the lowest operating and maintenance costs?
- Is it the building with the longest life span?
- Is it the facility in which users are most productive?
- Is it the building that offers the greatest return on investment?
The following three overarching
principles associated with ensuring cost-effective
construction reflect the need to accurately define
costs, benefits, and basic economic assumptions.
•Utilize Cost and Value
Engineering Throughout the Planning, Design, and
Development Process
As most projects are authorized/funded without a means
of increasing budgets, it is essential that the project
requirements are set by considering life-cycle costs.
This will ensure that the budget supports any first-cost
premium that a life-cycle cost-effective alternative may
incur. Once a budget has been established, it is
essential to continually test the viability of its
assumptions by employing cost management throughout the
design and development process. An aspect of cost
management is a cost control practice called Value
Engineering (VE). VE is a systematic evaluation
procedure directed at analyzing the function of
materials, systems, processes, and building equipment
for the purpose of achieving required functions at the
lowest total cost of ownership.
•Use Economic Analysis to
Evaluate Design Alternatives
In addition to first costs, facility investment
decisions typically include projected cost impacts of,
energy/utility use, operation and maintenance and future
system replacements. At the beginning of each project,
establish what economic tools and models will be used to
evaluate these building investment parameters. The
methodologies of life-cycle cost analysis (LCCA) will
typically offer comparisons of total life-cycle costs
based upon net present values. Other methods usually
used as supplementary measures of cost-effectiveness to
the LCCA include Net Savings, Savings-to-Investment
Ratios, Internal Rate of Return, and Payback.
•Consider Non-Monetary Benefits
such as Aesthetics, Historic Preservation, Security, and
Safety
Most economic models require analysts to place a dollar
value on all aspects of a design to generate final
results. Nevertheless it is difficult to accurately
value certain non-monetary building attributes, such as
formality (for example, of a federal courthouse) or
energy security. The objective of a LCCA is to determine
costs and benefits of design alternatives to facilitate
informed decision-making. Costs can be more readily
quantified than benefits because they normally have
dollar amounts attached. Benefits are difficult because
they often tend to have more intangibles. In some cases,
these non-monetary issues are used as tiebreakers to
quantitative analyses. In other instances, non-monetary
issues can override quantitatively available cost
comparisons, for example, renewable energy application.
These cost-effectiveness principles serve as driving
objectives for cost management practices in the
planning, design, construction, and operation of
facilities that balance cost, scope, and quality.
Analyzing the environmental costs through Life Cycle
Assessment (LCA) can be complementary to the dollar cost
implications of the design, materials selection, and
operation of buildings. The LCA methodology, which can
enhance information gleaned from an LCC, includes
definition of goal and scope, an inventory assessment,
life-cycle impact assessment, and interpretation-an
iterative process.