Life Cycle Costs as a Benchmark

Andrea Pelzeter

ERES from European Real Estate Society (ERES)

Abstract: Life Cycle Costs (LCC) are an indicator for economic sustainability. Its specific characteristic consists in the integration of all phases of a life cycle. LCC are utilised to prepare decisions between different alternatives in regard to its long-term advantage. But as the main part of considered costs has to be forecasted and no standardised method of LCC-calculation exists so far, LCC may only be used for the in-house comparison of alternatives. An external comparison based on LCC in the sense of a benchmark needs distinct conventions. This paper points out which aspects of the calculation of LCC have to be commonly defined, before LCC can be used as an external benchmark. 1. Structure of data -- Which data are relevant in order to indicate the differences between possible alternatives? How can be assured hat all data refer to the same base? Which norms or circumstances are applicable to structure the data? Does one structure fit the needs for different types and life cycle phases of real estate? // 2. Cost data -- How is the dynamic of price trends addressed? Whose perspective on prices is regarded? Is it possible to create a common cost/price-pool? Which external costs are likely to be internalised in the near future and should therefore be integrated in a long-term prognosis? // 3. Method of calculation -- How is the time value of money considered? Which method of calculation shall be used? Which result suits for a benchmark? etc. // All those questions have to be discussed being aware that a balance has to be found between a desirable completeness of information and an acceptable effort to collect and process the data.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2005-01-01
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