Four influencing factors of cost projection
- Cost factors (labor and material availability, easy transportation access)
- Project scope
- Quality
- Budget
What is included in life cycle costs?
Operational costs, maintenance costs, taxes, financing, replacement, and renovation.
Modification
- A written amendment to the contract signed by both parties
- A change order
- A construction change directive
- A written order for a minor change in the work issued by the architect
Percentage fee
Compensation based on a percentage of construction costs; it is applicable to either construction contracts or professional service agreements.
One of the proposed HVAC system options for a project has an upfront cost of $12,000 with an estimated life span of 15 years and a salvage value of $1,500. What is the annual depreciation of the system?
$700: $12,000 (upfront cost) − $1,500 salvage value = $10,500, divided by life span of 15 years = $700 annual depreciation.
Residual value
The remaining value of a system or component at replacement or the end of a study period. This includes the salvage value, resale value, or scrap value less the disposal and/or conversion costs.
Annually recurring fixed cost vs. annually recurring escalating cost
Annually recurring fixed cost is a fixed payment service contract that includes the cost of inflation over time. Annually recurring escalating cost, on the other hand, is a bit more difficult to accurately predict because it includes service and maintenance, which involves increasing amounts of work, as well as frequent replacements that escalate at a rate different than inflation.
OM&R
In life cycle cost calculating, the OM&R value refers to the operation, maintenance, and repair cost. This value does not include fuel operating costs.
What are the three types of cost periods in a life cycle cost analysis (LCCA)?
- Length of study period: This period must be the same for all alternatives considered. It begins with a base date, to which all cash flows are discounted. It includes any planning, construction, implementation, service, and occupancy period.
- Service period: Begins either when the building is occupied or when the system begins service. It is the period during which operational costs and benefits are evaluated. (Federal Energy Management Program [FEMP] projects limit this period to 40 years.)
- Contract period: Begins when project team formally accepts the project and generally ends when the loan is paid off.
Value engineering
An organized effort directed at analyzing designed building features, systems, equipment, and material selections for the purpose of achieving essential functions at the lowest life cycle cost consistent with required performance, quality, reliability, and safety.
Cost-saving measures
- Reducing material volume.
- Using standard, common, and readily stocked materials.
- Reducing complexity; savings are achieved when builders anticipate simplicity.
- Using materials that are familiar to the builders.
- Speed of construction might be a major advantage, depending on the project.
True or False? Preliminary design decisions are usually not significant in the overall determination of a project because everything can always be changed.
False. As a project progresses from broad strokes to detailed parts, the possibility of going back to readdress previously made decisions disrupts the progress of the work. Therefore, the preliminary design is often considered the most sensitive and requires the most sound and experienced judgment to execute.
