How do you incorporate life cycle cost analysis and value engineering into facilities engineering decisions?

1 What is LCCA?

LCCA is a method of comparing the total costs of different alternatives over their life span, taking into account factors such as initial investment, operation and maintenance, energy consumption, environmental impacts, and disposal or replacement. LCCA helps you to identify the most cost-effective option that meets your functional and performance requirements, as well as your budget constraints. LCCA can also help you to justify your decisions to stakeholders, demonstrate compliance with regulations, and optimize the use of resources.

2 What is VE?

VE is a systematic process of analyzing the functions and costs of a product, system, or service, and finding ways to enhance its value by eliminating or modifying unnecessary or excessive elements, without compromising its quality, reliability, or safety. VE helps you to achieve the best balance between function, performance, and cost, by encouraging creativity, innovation, and teamwork. VE can also help you to reduce risks, improve customer satisfaction, and increase competitiveness.

3 How do LCCA and VE work together?

LCCA and VE are complementary techniques that can be used at different stages of the facilities engineering life cycle, from planning and design to construction and operation. LCCA can help you to select the best alternative among several options, based on their life cycle costs. VE can help you to improve the value of the selected alternative, by reducing its costs and enhancing its functions. By applying LCCA and VE together, you can achieve the optimal solution that meets your needs and expectations, as well as those of your clients and users.

4 How to conduct LCCA?

To conduct LCCA, you need to define the scope and objectives of the analysis, and the criteria for comparing alternatives. Additionally, you should identify and describe the alternatives to be evaluated, and their functional and performance characteristics. Estimate the life cycle costs of each alternative using appropriate methods and data sources, while accounting for uncertainties and risks. Compare the alternatives based on their net present value (NPV), benefit-cost ratio (BCR), internal rate of return (IRR), or other indicators of economic efficiency and effectiveness. Additionally, sensitivity analysis should be used to test how the results change with different assumptions and scenarios. Finally, report and communicate the results and recommendations, as well as document the assumptions and limitations of the analysis.

5 How to conduct VE?

Conducting VE requires certain steps to be followed. Firstly, you need to define the scope and objectives of the study and the criteria for measuring value. Then, gather information about the current situation and identify the stakeholders and their needs and expectations. Additionally, analyze the functions and costs of the product, system, or service using tools such as FAST, value index, or Pareto analysis. Moving on, generate ideas for improving the value of the product, system, or service using techniques such as brainstorming, benchmarking, or morphological analysis. Afterward, evaluate and select the best ideas based on feasibility, impact and compatibility with objectives and criteria. Lastly, develop and present a proposal for implementing the selected ideas, estimate benefits and savings. Finally, monitor and verify results and outcomes of implementation while documenting lessons learned.

6 How to integrate LCCA and VE into facilities engineering decisions?

To effectively integrate LCCA and VE into your facilities engineering decisions, you must adopt a life cycle perspective that takes into account the long-term implications of your choices. Involving relevant stakeholders in the decision-making process and using LCCA and VE as tools to support your decisions is also essential. Additionally, it is important to apply LCCA and VE iteratively and continuously as the project evolves, while periodically reviewing and updating your results. By doing so, you can improve the quality, efficiency, and sustainability of your designs and projects, ultimately delivering more value to your clients and users.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?