Cost controls and efficiencies are the responsibility of a facilities manager, who is likely to be increasingly under pressure to do more with less. Whether hard or soft services, facilities managers must have oversight of a building’s life cycle costs, from maintenance to technical investments.

What is Life Cycle Costing in FM?

Life cycle costing, which is often referred to as whole-life costing, is a process of estimation that helps facilities managers understand how expensive a building and/or its assets will be across its useful life, from purchase to disposal. This helps facilities managers make critical, cost-effective decisions in relation to the whole useful life of an asset, including its performance, longevity, and resilience.

As a calculation, life cycle costing is the same as a building’s total cost of ownership after facility maintenance is deducted.

When is Life Cycle Costing Helpful?

Even though life cycle costs look and feel like the total cost of owning an asset, this approach allows managers to monitor and supervise long term building costs. Most often these plans focus on preventative maintenance costs, rather than including the likes of energy costs. Life cycle costing is what facilities managers use to align maintenance costs with budgets.

An Example of Life Cycle Costs

Life cycle costing can be helpful when determining the cost-effectiveness of an asset.

For example, a workplace may require a new HVAC (heating, ventilation, and air conditioning) system. Upfront costs, energy consumption and life expectancy are, largely, the major drivers when making economic decisions regarding HVAC systems. Where the initial costs may be high, a workplace could benefit from long term reductions in operating and maintenance costs, demonstrating the cost-effectiveness of the asset.

But in the scenario of equipment failure, where there’s urgency to immediately replace them, facilities managers should be just as weary about energy efficiency as bringing in new assets with speed. This is the most common scenario where economic decisions are quickly made out of the urgency to bring in new assets to replace failed equipment.

The Benefits of Life Cycle Costing in Facilities Management

For facilities managers, costs can be compared like-for-like throughout the life cycle of an asset. With greater cost control and efficiency, FM’s can help clients ensure their workplaces are truly sustainable. Cost control is especially important during economically challenging times.

The second edition of the International Cost Management Standards (ICMS) captures life cycle costing to robustly benchmark and analyse spending. According to the Royal Institution of Chartered Surveyors (RICS), costing assets across a fuller cycle of useful life helps facilities managers regain “control of the total ownership costs and ensuring robust analysis, benchmarking and understanding of where money is spent.” 

The process of acquiring, operating, maintaining, and disposing of a building’s assets can be costly. When facilities managers want to align asset acquisition with cost-efficiencies, it can be advantageous to use life cycle costing. This is most valuable when the costs between assets are significant, and the facilities manager wants to see a reliable comparison of assets before investing in one.

Overall, the benefits of life cycle costing include:

• Improved cost-efficiencies
• Helps with facility-related decision making
• Uses analysis to understand assets better

Disadvantages of Life Cycle Costing

Often in a life cycle costing program, energy management costs are excluded to afford greater focus on the role of maintenance within a budget. This can quickly become a disadvantage where energy management systems offer cost savings from lower long term energy consumption. The potential discount on lowering long term energy consumption costs should not, however, be ignored by building owners.

Improving Cost Efficiency Today

Life cycle costing allows facilities managers to understand the return on investment from an asset, a repair, or upgrade. Where energy consumption is often excluded, this is to the benefit of understanding the costs associated with an asset and the long-term maintenance in keeping it operational.

With our approach to sustainable, cost-effective operation, Anabas is equipped to help in many aspects of your workplace. Our experience covers a range of different market sectors, helping businesses across the UK to benefit from cost-effective facilities.

Get in touch to find out how we can help.