Every owner wants a cost-effective building. But what does this mean? In many respects the interpretation is influenced by an individual's interests and objectives, and how they define "cost-effective".
- 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?
While an economically efficient project is likely to have one or more of these attributes, it is impossible to summarize cost-effectiveness by a single parameter. Determining true cost-effectiveness requires a life-cycle perspective where all costs and benefits of a given project are evaluated and compared over its economic life.
A building design is deemed to be cost-effective if it results in benefits equal to those of alternative designs and has a lower whole life cost, or total cost of ownership. For example, the HVAC system alternative that satisfies the heating and cooling requirements of a building at the minimum whole life cost, is the cost-effective HVAC system of choice. Components of the whole life cost include the initial design and construction cost, on-going operations and maintenance, parts replacement, disposal cost or salvage value, and of course the useful life of the system or building.
The federal government has numerous mandates that define program goals with the expectation that they be achieved cost-effectively.
The challenge is often how to determine the true costs and the true benefits of alternative decisions. For example, what is the economic value in electric lighting savings and productivity increases of providing daylight to workplace environments? Or, what is the value of saving historic structures? Alternately, what is the cost of a building integrated photovoltaic system (BIPV), given that it may replace a conventional roof?
The following three overarching principles associated with ensuring cost-effective construction reflect the need to accurately define costs, benefits, and basic economic assumptions.
- Consider Non-Monetary Benefits such as Aesthetics, Historic Preservation, Security, Safety, Resiliency, and Sustainability
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.
- Code of Federal Regulations, 10 C.F.R. § 436 "Federal Energy Management and Planning Programs"
- Executive Order 13693, "Planning for Federal Sustainability in the Next Decade"
- National Energy Conservation Policy Act
- OMB Circular A-94 Guidelines for Benefit-Cost Analysis of Federal Programs
- A Guide to Integrating Value Engineering, Life-Cycle Costing and Sustainable Development by the Federal Facilities Council, 2001.
- Air Force Military Construction and Family Housing Economic Analysis Guide, 1996.
- Building Economics for Architects by Thorbjoern Mann. New York: Van Nostrand Reinhold, 1992. ISBN 0-442-00389-7.
- Building Economics: Theory and Practice by Rosalie Ruegg and Harold Marshall. New York: Van Nostrand Reinhold, 1990. ISBN 0-442-26417-8.
- HB 135 Life-Cycle Costing Manual for the Federal Energy Management Program by the National Institute of Standards and Technology (NIST), 1995 Edition.
- P-442 Economic Analysis Handbook by the Naval Facilities Engineering Command (NAVFAC), 2013.
- P120 Project Estimating Requirements by the General Services Administration (GSA), 2006.
- PBS P100 Facilities Standard for the Public Buildings Service —Chapter 1.10 Methodologies by the General Services Administration (GSA), 2015.
- Standard Estimating Practice, Ninth Edition by the American Society of Professional Estimators. BNI Publications, Inc. 2014.
- GSA Sustainable Facilities Tool (SFTool)—SFTool's immersive virtual environment addresses all your sustainability planning, designing and procurement needs.