Life Cycle Cost Analysis (LCCA) is an economic methodology for selecting the most cost-effective design alternative. The methodology is beneficial as it addresses not only typical owner concerns of design effectiveness and construction cost, but also reflects future costs associated with maintenance, operation and replacement. LCCA looks at the value of a building or capital project over time, overcoming "first cost" limitations.
The methodology can be applied to a wide variety of decisions, including accepting or rejecting options, design and sizing, location, replacement, lease or buy options, system interdependence, budget allocation, and priority or ranking methodologies.
LCCA is traditionally used to assess direct costs of a building such as energy costs, building renewal and replacement, and operation & maintenance (O&M) costs. LCCA can also be applied to indirect costs such as staff salaries, staff productivity, lost construction time, fire insurance, lost revenues due to downtime, and other costs that are not directly related to the cost of the building. While these indirect costs are often more difficult to estimate, they are significant and should be considered in the decision-making process.