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Life cycle costing in a public building project
April 29, 2016
ABSTRACT
SARI SAHLBERG:
Life cycle costing in a public building project
Tampere University of Technology
Master of Science Thesis, 57 pages, 6 Appendix pages
February 2016
Master’s Degree Programme in Civil Engineering
Major: Construction Production
Examiners: Professor Kalle Kähkönen and M.Sc. Juhani Heljo
Keywords: life cycle costing, cost accounting, LCC, sensitivity analysis, public constructor
The purpose of this thesis is to study the suitability of life-cycle cost analysis as a method of feasibility studies for public construction projects. The thesis research is done from the Espoo Premises Department’s (public utility) point of view. Life cycle costing has not been previously used by the city of Espoo to examine the construction costs. The previous calculations have included only construction costs and possible finance costs, excluding costs of operations and maintenance. Costs have not been analysed over a longer time, thus operational and maintenance costs have not influenced decision making.
In this thesis the plan is to research one construction project using a life-cycle costing software and to see the effects of life-cycle costing analysis on project economics and investment decision. In the research sensitivity analyses will be used to find the break-even points of variables affecting the overall profitability of the investment project.
The costs and incomes of the Opinmäki campus, completed June 2015 in Espoo, are used as input values of the research. The term of the life-cycle costing analyses have been defined to 25 and 50 years.
The research showed that all the life-cycle costing scenarios analysed where profitable. Hence the decision to invest proved to be right. In sensitivity analyses all crucial variables where changed to more unfavourable to see the effect on life-cycle profitability. The sensitivity analyses showed that this investment project wasn’t sensitive to small changes.
The software used in the research was found useful in public building owner’s life-cycle cost analysis.
The complete thesis work in Finnish.