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How a wider scope brings better focus to purchase decisions

Written by: Sheila Sheridan
ecoPreserve is pleased to bring you this guest article from Sheila Sheridan, IFMA Fellow, CFM, Retired. We are further honored to participate in the panel that Sheila will moderate at this year’s IFMA World Workplace (October 26-28, 2021 in Kissimmee, Florida). The panel, Today, Tomorrow and Beyond – Waste Management, will explore circular economy strategies for keeping waste materials out of landfills!   —  Alexa Stone, ecoPreserve President

Costs do not end when the invoice is paid. Knowing that, building professionals are likely to use Life Cycle Assessment (LCA) and Life Cycle Costing (LCC) to evaluate product durability and lifespan before authorizing a purchase.

Life cycle cost estimating

Often, the differences between life cycle evaluation tools are not understood. An LCA is an environmental accounting procedure. It quantifies the cost of ownership and analyzes the impact and burden of the environmental components. An LCC is an economic accounting procedure. It has greater scope, estimating the total cost of a physical asset throughout its life cycle. Results are based on all costs of ownership while achieving environmental goals.

Use of an LCC need not be limited to capital expenditure decisions. Facility managers should integrate LCC into purchasing processes within their Operations and Maintenance (O&M) budgets. Within the O&M analysis, LCC can assess environmental cost/benefit, such as energy use impact of lamps being purchased, or the water that cleaning equipment would use.

Planning and preparing

Before products and services are evaluated, the facility manager should determine if the organization has a sustainability or corporate responsibility statement. Either will contain information that is relevant to the evaluation of products and services. An early visit to the internal purchasing department is likely to yield valuable assistance and cooperation. Senior management must also be fully informed about the LCC model. An example LCC can help gain stakeholder support by illustrating the steps involved and benefits to be gained. A successful LCC will have management and staff support, agreeing that purchasing decisions must be based on more than initial cost.

Calculating Life Cycle Costs (LCC)

When estimating the LCC of a purchase, these are the essential items:

  • First time cost
  • Cost of installation
    This includes business continuity/disruption issues.
    The facility manager may see the first time cost and installation cost as one price.
    Instead, those costs should be listed separately in the Request For Proposal (RFP)
  • Maintenance costs during the expected life
    Consider services provided through warranty.
    Facility managers should consider how long the warranty will cover maintenance. Also, a warranty usually specifies some service by the purchaser. That increases maintenance costs.
  • End life issues
    • Removal
    • Disposal
    • Reclamation or reuse
      Reclamation or reuse cost brings benefit to the environment.

The LCC will be the sum of these costs, divided by the expected life.

After obtaining management and staff buy-in, facility managers should list the O&M budgeted purchases to be assessed using LCC. The facility managers should then evaluate a single budgeted item, to test the LCC process. Information cut sheets from suppliers may provide valuable product information.

Once the Facility Management (FM) department has become proficient in the process, LCC can be used to develop a list of potential products and systems within the capital budget. Roofing, window, and mechanical systems are ideal candidates for LCC. Adapting the LCC tool to specific needs and experience is essential to success.

The LCC model can be used to develop Requests for Proposal (RFP). Those RFP should ask that the product’s quantitative and qualitative components be listed as separate line items. Initial cost, O&M, and disposal would be quantitative items. Design or installation costs may be included in the product cost. In evaluating the response, any warranty — and the services it specifies as purchaser-provided — should not be overlooked.

Qualitative analysis

After planning and preparing, the evaluation can weigh estimated product acceptance by occupants, along with ease of use and aesthetics. The FM department must determine those, applying its knowledge of which qualitative aspects are important at a particular facility. Products like flooring and ceiling tiles would require such qualitative evaluation.

In an RFP, relevant qualitative information should be requested or a form provided to provide it. A product cut sheet and Material Safety Data Sheet (MSDS) should also be requested. Both are essential as common measurements to assess RFP responses.

Completing the cycle

The LCC process extends beyond product use, until the item’s eventual disposal. The increased disposal costs of many items are sadly well-known to facility managers. At the same time, negative impacts can literally spill into the environment — like mercury contamination from discarded fluorescent lamps. Ideally, suppliers and vendors responsibly provide for disposing any products offered that require special handling.

Many vendors provide necessary disposal and LCC information. However, if a facility manager does not receive that information they may choose to request a letter, written on the vendor company’s letterhead,  that details a recommended disposal process.

Facility Managers (FM) can transform the market by requesting disposal guidelines for products they are evaluating. If FM ask the right questions, the answers will be significant factors in determining preferred sources to meet a facility’s needs.

Enjoying the benefits

Use of LCC tools will yield better-informed choices about product purchases. Those can make a difference in meeting O&M budgets. As LCC calculations are incorporated into more product categories, greater value is returned for each dollar spent. First cost analysis, a standard practice outside of major renovation projects, will fall short of estimating full lifecycle cost.

As FM become proficient in LCC analysis, they may bring closer focus on a product’s environmental attributes. That can and should happen after FM departments gain experience using the LCC tool and then share their success stories within the organization.

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Sheila Sheridan

IFMA Fellow, CFM, LEED AP O+M

Sheila Sheridan retired from Harvard University’s Kennedy School of Government, where she was Director of Facilities and Services. She is a past Chair of the International Facility Management Association (IFMA) and currently is a volunteer member. She also is past vice chair of the US Green Building Council’s LEED Operations and Maintenance Committee.

A recognized global speaker concerning facilities and sustainability, Sheila has lectured at universities around the world. She also has participated as faculty for IFMA and USGBC courses, and been a visiting lecturer at universities around the world.