General Article

International Journal of Sustainable Building Technology and Urban Development. 30 June 2022. 221-230
https://doi.org/10.22712/susb.20220018

# MAIN

• Introduction

• LCCA as a Decision-Making Process

• LCCA Inputs

• Environmental and Social Considerations in LCCA

• LCCA Analysis Methods

• LCCA Case Study

• Interpretation and Implementation of LCCA

• Summary and Conclusions

Introduction

Life Cycle Cost Analysis (LCCA) is used in our daily life to make simple decisions and in the selection of best alternatives in complex infrastructure projects. Regardless of the applications of LCCA, at the end of this process, someone must select the best alternative based on this tool. In this paper, applications and challenges in the application of LCCA for transportation infrastructure projects and more specifically for roads and pavements will be investigated. In many cases, organizations and their engineers conduct LCCA to support and justify their decisions. However, the accuracy and reliability of LCCA outputs depend on many parameters.

A simple model of LCCA is shown in Figure 1. As it can be seen in Figure 1, a LCCA includes input parameters, an analysis method or model, and outputs or ranking of several alternatives. An important step that must be considered is interpretation or validation of results before implementation of LCCA outputs.

### General Life Cycle Cost Analysis Processes.

LCCA as a Decision-Making Process

LCCA can be used for different infrastructure projects such as buildings, bridges, dams, pipelines, pavements, sidewalks, and other assets that their owners or designers should select the best alternative from several options. In the pavement engineering area, LCCA can be applied for the selection of pavement structure for new roads or it can be applied to pavement maintenance and rehabilitation projects to select the best road treatments.

LCCA can be conducted at different stages of a project. For example, it can be used in the planning, design, maintenance, and rehabilitation of an asset. In most infrastructure LCCA projects, it is expected to look at the Whole Life Cycle Cost (WLCC) which includes initial construction costs, costs and times of required maintenance and rehabilitations, and even disposal of the asset. The definition of “whole” in a WLCCA could be different in different industries, for example, in pavement engineering, one common concept of “whole” could be incorporation of all important factors such as energy consumption related to extraction and production of materials, CO2 generation from all project’s activities, and social costs such as users’ delay and even cost of accidents. Incorporating environmental and social costs in an infrastructure project is a challenging task in LCCA as will be explained more in the next sections.

LCCA Inputs

The most important input parameters in any LCCA are costs and service lives of different alternatives. This looks a simple task; however, it will be a complex process for major projects and requires comprehensive investigation and research to find accurate costs and service lives of different materials or alternatives. Initial costs are the highest and most important input parameter which will impact the LCCA results more than the future project’s costs. Some agencies consider the initial project costs as the only project’s cost. This approach might work for some assets when future costs of the project are relatively low; however, for long-term projects that have high maintenance costs, it is not the best methodology. For example, in the selection of best surfacing material (asphalt vs concrete) for a paving project, if only the initial cost is considered, asphalt pavement must be selected for all projects as the initial cost of concrete could be 3 to 4 times more than the initial cost of asphalt; however, if the cost of required maintenance and rehabilitations during the life of a rod are considered, results could change. Municipal agencies use concrete paving for their bus stops or at their intersections as the maintenance cost of asphalt paving is very high at these locations.

### Converting Alternative’ Costs to Net Present Value in a LCCA.

One common question is if the inflation rates must be applied to each future cost of alternative? As prediction of future inflations, during AP in a LCCA, is not possible, the future costs are estimated based on today’s costs.

LCCA analysis methods are classified into deterministic and probabilistic methods. In a deterministic LCCA method, average values of input parameters are considered as the best estimate of them. Using a LCCA method, the output also will be a value for each alternative. As it was discussed before, it is difficult to estimate only one value for LCCA costs and their timelines; therefore, considering a range for each project’s costs and activity times could provide various scenarios for LCCA results. Probabilistic methods, using different computer algorithms, consider a range of values and distribution shapes for each input parameter. Therefore, the output is not a fixed value, but a range of possible scenarios which provides a better tool for the decision maker. Figure 6 depicts a LCCA output for two different scenarios, with and without users’ costs for a typical pavement project (2). Parameters such as the difference in NPV at specific cumulative probability and difference in probabilities at specific NPV, from probabilistic results, can be used for comparison between alternatives (for example 90% probability and \$3.2 M NPV in Figure 6).

### Example of a Probabilistic LCCA Result [2].

LCCA Case Study

To show subjectivities in LCCA results, two case studies are shown from literature. One related comparison between selection of asphalt or concrete for a new road construction. The objective of this comparison is not to say which one is right or wrong, but to show that results of LCCA can change by considering different assumptions.

The first study published by the European Concrete Paving Association (EUPAVE) considered two typical pavement structures paved with concrete and asphalt surfaces. A LCCA was conducted for these two alternatives with a discount rate of 4% and 90 years AP and different assumptions for type and time of maintenance and rehabilitation. Results of NPV from this study are shown in Figure 7. Based on this study a road with concrete surface will be approximately 8.5% less costly than a road with asphalt surface during its life (90 years) with a discount rate of 4%; however, when the discount rate increased to 6%, asphalt alternative was approximately 5% less costly. This study did not consider any GHG and users’ costs [15].

### NPV Results for Asphalt and Concrete Roads by EUPAV [15].

Another European study by Scheving compared the NPV of asphalt and concrete roads in Iceland for different traffic levels. For this comparison, an AP of 40 years and discount rate of 6% were considered. Results are shown in Figure 8. Based on this LCCA, at traffic below 14,000 AADT, concrete pavement was 10% to 15% higher than asphalt; however, concrete was competitive when traffic was higher than 14,000 AADT. This study did not look at any environmental costs, but included the users’ delay costs [16].

### NPV Results for Asphalt and Concrete Roads by Scheving [16].

Interpretation and Implementation of LCCA

There are subjectivities and uncertainties in any LCCA that a designer must be careful about. Some considerations in the application of LCCA for infrastructural projects are summarized below:

⦁The source, accuracy, and reliability of input parameters must be verified.

⦁Generally, more efforts must be made on accurate estimation of higher and earlier costs as they impact the results more.

⦁Historical costs and past performance experiences of agencies could be considered in LCCA processes; however, they must be reviewed and revisited frequently to reflect the real world conditions.

⦁Probabilistic LCCA models provide a better view of various scenarios for projects’ alternatives than deterministic methods.

⦁Biased or predetermined decisions must be identified and prevented in any LCCA.

⦁Agencies must develop a guide or manual for their LCCA to provide consistency in their LCCA applications.

⦁If LCCA results of various alternatives are very close, other factors such as lower initial cost or shorter construction time can be considered as the best alternative.

⦁In addition to LCCA results, other project management considerations such as risk evaluation, quality control and assurance, complexity of alternatives, project’s delivery and payment methods, and performance-based construction specifications must be considered in the selection of the best projects’ alternatives.

Summary and Conclusions

LCCA is a decision supports tool that prioritizes different alternatives for infrastructure projects. Selection and accuracy of input parameters are important steps in conducting a LCCA. The new trends in transportation infrastructure is to consider environmental and social and users’ costs in LCCA. Challenges in considerations of environmental impacts and user costs for pavement projects were discussed. This paper attempted to review important factors in LCCA and to bring attention to subjectivities and uncertainties in LCCA.

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