Design and Development
The life cycle cost analysis procedure considers the
option of selecting from a set of alternatives, the building
design or plant with the lowest whole of life cycle cost.
The design and development aspect of the project
analysis procedure recognises that many of the facilities
that will provide future sporting and recreational services
Consideration of funding applications for sport or
recreation facilities will fall into two categories:
- New sporting or recreation facilities
- Refurbished or redeveloped sporting or
recreation facilities (Brownfields).
New sporting or recreation facilities
A Greenfields project for new facilities provides the
facility owner the greatest opportunity to minimise the
total cost for construction, operation and maintenance
through total asset management strategies.
This can be achieved through the adoption of an
integrated facility asset management program early in
the development stage of a new facility (see figure 1.0).
The issue of deferred maintenance typically does not
encumber Greenfields projects and consequently the
project manager can adopt maintenance and budgetary
projections with a greater level of confidence.
The format for LCCA reports shall be similar to the
format of these guidelines that have been adapted from
Australian Standard for Life Cycle Costing. Information
is to be clearly presented and understandable to all
parties in the process (facility, financial and technical).
LCCA reports are to be stand–alone documents
containing all support documentation and be capable of
The analysis process for either a new or refurbished
facility must factor all of the costs associated with the
concept planning, design, documentation, tendering,
construction/modification, operation, maintenance and
eventual decommissioning of the facility. The Greenfields
application will clearly identify rights and responsibilities
of all parties involved in the project and detail all
estimated cost exposures over the life of the project.
Refurbished or redeveloped sporting or recreation facilities
Brownfields projects are those where submissions are
made for existing facilities to be upgraded or refurbished
or a new facility developed on a site currently being used
for other purposes,
Facilities funding processes (both capital and operating)
for existing local government facilities are typically
exposed to the pressures of annual budget bids in a very
competitive financial environment. Exposing existing
facilities to this style of budgetary process may lead to
inadequate maintenance funding that ultimately results in
their premature deterioration.
The dangers of a competitive budgetary process might
include a lowering of priorities being placed on routine and
scheduled maintenance for existing facilities, and as a
result – a “deferred maintenance” debt.
When calculating the deferred maintenance exposure, a
facility manager needs to undertake a facility condition
assessment (refer to the Asset Management Guide for a
This process begins with a multi–disciplined team
conducting a thorough inspection of the facility. If
all systems of the facility are being included in the
facility plan, the team should include an architectural
representative and structural, mechanical and electrical
engineers. Where this is not practical due to budgetary
constraints, qualified staff within your organisation should
conduct the process.
If the scope of the plan is being limited, then a
representative of only those disciplines to be included
is required. In all cases, the inspection team can be the
owner’s personnel, external consultants or a combination
of the two. The scope of the plan can also be expanded
to include room fixtures, fittings and equipment where
knowledgeable personnel are available. Other specialists
such as gas testing specialists or roofing inspectors may
also be added to the team as appropriate. In all cases,
the inspectors must be experienced and knowledgeable
practitioners in their field.
In most cases, the inspection is entirely visual and
therefore the inspectors are called upon to make value
judgements by extrapolation from their observations.
Where necessary, more invasive and preferably non–
destructive methods may be employed to gain better
insight into the condition of the facility.
For ease of inspection, each discipline (i.e. architectural,
mechanical) is divided into a number of individual
components. The mechanical systems for example can be
divided into eight basic components that are;
- Site Services
- Fire Protection
Each of these components is then further divided into
sub–components. Plumbing for example could have the
- M02 Plumbing
- M0213 Storm Drainage
- M0214 Plumbing Fixtures
- M0215 Special Systems
The data gathered with respect to the deferred
maintenance deficiencies will include building component
and sub–component which includes a sequential reference
number and a deficiency rating, location and description.
A deficiency repair cost will be added later.
The deficiency rating system is flexible and can be
adjusted to meet specific project needs. Typically, a
process would use a rating system from one to five based
upon the relative level of disrepair and the effects on the
overall facility, with one being poor to catastrophic and
five being in a good state of repair. A numeric rating of
one would be for aspects that contravene code, health,
and regulation or Act violations – thus requiring immediate
The costs apportioned for remedial repair (including
regional adjustments) are to be provided by a quality
surveyor or qualified contractor and have the capacity to
be reviewed in accordance with a recognised industry
building estimates publication such as Rawlinsons
Australian Construction Handbook.
The purpose of undertaking this procedure is to identify
the true cost exposure for the various funding bodies and
also gather valuable baseline data for the formulation of a
fully integrated asset management plan.
In each case the analyst has to consider design
alternatives for the domestic/commercial hot water system,
lighting system, combinations of building envelope–HVAC
(heating, ventilation, and air–conditioning) systems, pool
design, pool heating, court surfaces etc.
When applicable, the analyst is to consider design
alternatives for on–site electricity generation. Each
analysis is to be based on a 20–year study period. In order
to be considered as an effective investment, an energy
application project should have a simple payback period of
five years or less.
The analysis methodology must consider the relationship
between energy–using systems. When the amount of
energy consumed by one system impacts the energy
consumed by another, this interaction must be carefully
considered in the analysis. The accepted methodology
is for the analysis to first evaluate independent systems,
followed by those systems that interact. A particularly
useful reference for life cycle costing procedures is the
Australian Standard for Life–Cycle Costing
Time value of money
A key concept of the life cycle analysis equation is that of
the time value of money.
The challenge in determining the best whole of life
financial option is to achieve a position where the various
options under consideration can be fairly evaluated. When
considering various proposals, you will be faced with
comparing capital and operating costs that are expended
at different times. In evaluating the financial impacts of
the various alternatives all costs for each option under
consideration are expressed in “today’s dollar value”.
This provides the basis to accurately judge the costs and
benefits associated with various alternatives.
The definition given: “A concept that
acknowledges that money changes value over a period
of time; that a sum of money today is worth more that
the same sum of money at a future date, because of the
fact that the money received now can be invested to earn
interest” considers the value of money invested in future
In order to better understand the issue, examples have
been provided at page 25. Each option considers the
replacement of an air conditioner and factors the purchase
cost and the life cycle annual maintenance and running
costs. The present values chart at page 36 shows the
future value of a dollar at a nominated discount rate.
The example cites a discount rate of 12% for air
conditioners of varying qualities. Option one considers an
air conditioner of lesser quality that requires replacement
at more frequent intervals and has a higher annual running
and maintenance cost. Conversely, option two considers
a more expensive unit requiring a lesser level of annual
maintenance and running costs. Due to reliability, over
the period considered (30 years) option two requires
replacement once at year 15.
The result demonstrates that the total present value of
installing, operating and maintaining an air conditioner of
the size considered is significant over a thirty–year period.
Option 1 demonstrates that the lesser value investment
system costs at present day values a total life cycle
cost of $468 013. Option 2, whilst being a high initial
cost demonstrates a life cycle cost of $413 689. These
examples shows that option 2 delivers a better whole of
life cost benefit of $54 324.
The aim of these examples demonstrates the time value of
money and how investments may be fairly compared using
an appropriate discount factor at today’s dollar value.