DEPARTMENT OF QUANTITY SURVEYING

FACULTY OF ARCHITECTURE, PLANNING AND SURVEYING

UNIVERSITI TEKNOLOGI MARA SARAWAK

DQS 356

CONSTRUCTION ECONOMICS III

ASSIGNMENT 3

LIFE CYCLE COSTING AND FEASIBILITY STUDY

PREPARED BY :

1. Muhammad Aliff Haiqal Bin Zulkifli (2019247308)

2. Muhammad Yazid Bin Othman (2019421918)

3. Muhammad Aiman Nurfirdaus Bin Samsudin (2019685124)

4. Muhammad Ajmal Farhan Bin Muliadi (2019258406)

5. Aliesa Binti Sahdi (2019685096)

PREPARED FOR : SR. DR. AHMAD FAIZ ABD RASHID

CLASS : AP114 6E

1
 AKNOWLEDGEMENT

Thankfully , with relentless effort , we are able to successfully complete the assigned tasks
while adding knowledge on the topic which is life cycle costing and feasibility study.

The highest appreciation is especially to Sr. Dr. Ahmad Faiz Abd Rashid our lecturer , for
giving knowledge and encouragement in completing this task . Without his guidance , this
task may not be able to be completed successfully by all of us.

Next, guidance from friends is also one of the motivators for us . The knowledge we gain
during the completion of this assignment , we will practice in daily life.

2
 TABLE OF CONTENT

CONTENT PAGE

INTRODUCTION 4

TASK (A) FEASIBILITY STUDY 4

TASK (B) ESSAY QUESTION 5

FACTORS TO BE CONSIDERED IN 5-6

CALCULATION OF LCC
COMMON CRITISM IN THE IMPLEMENTATION 6-8
OF LCC
CONCLUSION 8

REFERENCES 9

3
INTRODUCTION

According to (Corrosionpedia, 2017), Life-cycle costing (LCC) is a method for

calculating the total cost of ownership. It is a system that tracks and aggregates the actual
expenses and profits associated with a cost object from its inception through its demise. It
enables comparative cost analyses over a specified time period, taking into consideration
key economic aspects such as original capital expenditures as well as future operations and
asset replacement costs. Since all LCC estimates are in the same currency unit, impact
assessment via description models is unnecessary. However, risk cost concepts that are
consistent with midpoint and endpoint implications could be defined.

According to (Wikipedia, 2022), a feasibility study evaluates the viability of a project

or system. A feasibility study seeks to uncover the strengths and weaknesses of an existing
business or proposed venture objectively and rationally, as well as the opportunities and
threats present in the natural environment, the resources needed to carry out the project,
and, ultimately, the prospects for success. In its most basic form, the two factors for
determining feasibility are the money necessary and the value to be obtained.

A well-designed feasibility study should include a history of the company or project, a

description of the product or service, accounting statements, operational and management
information, marketing research and policies, financial data, legal needs, and tax duties
according to (Wikipedia, 2022). In most cases, feasibility assessments come before
technical development and project implementation. A feasibility study assesses the project's
likelihood of success; thus, perceived objectivity is a crucial aspect in the research's
credibility for possible investors and financing institutions.

4
TASK B: ESSAY QUESTION

1) FACTORS TO BE CONSIDERED IN THE CALCULATION OF LCC

There are several factors to be considered in the calculation of LCC. The first
factor is the investment's lifespan. The primary goal of life cycle costing analysis is to
calculate the investment life duration. In general, the investment life span is the
amount of time that the organization that will be employing the facility expects to
receive a return on its investment. At the conclusion of the investment's life cycle, the
building and land will have a residual value. The nature of the client organization, the
type of project, and the risk level of the project all influence the investment life cycle.
The project life span can range from three to sixty years, depending on the nature of
the project.

Secondly, component life span is one of the aspects to consider when

calculating life cycle cost. Some components, if correctly chosen, installed, and
maintained, may have a long-life cycle. The component life duration is determined by
a variety of elements, including the correct choice, manufacture, quality, installation,
maintenance, general repairs, and structural usage.

Thirdly, the building's life span must be considered when calculating the life
cycle cost. A building's usage life span is affected by various factors, including
construction methods and the amount of maintenance conducted on the building over
its life span. A structure, on the other hand, has two life spans: physical or structural
life span and economic life span. Buildings' physical or structural durability
deteriorates at varied rates based on the materials employed in their construction. It
is the time period over which the building is intended to provide income or returns.
Physical life lengths are by definition greater than economic life spans.

Then, there is obsolescence. "That which is no longer practiced or utilized,

discarded, out of date, worn out, afflicted by wearing out, atrophy, or degeneration,"
according to the dictionary. It is connected to changes in requirements that will
prevent an item from fully functioning. Obsolescence develops as a result of rapid
economic and technological changes. As a result of early obsolescence, structures in
the future will most certainly have a shorter life lifetime. This has substantial
implications for property design and administration, as well as the allocation of
financial resources.

5
 Finally, there is the interest rate. Choosing an acceptable interest rate in LCC
is a difficult issue. Interest shifts with time and over lengthy periods of time. LCC
examines the realities that investments in long-term assets such as buildings and
building components bind the owner/operator of the facility to both present and future
costs. Choosing an acceptable interest rate in LCC is dependent on the building
owner/financial operator's status and the long-term estimate of interest rate
movement. The interest rate selected should be "ethical and in accordance with best
professional practice." In practice, the chosen interest rate usually indicates the cost
of borrowing, which must be changed based on the predicted inflation rate or over
the life of the project.

2.2.2 COMMON CRITICISM ON THE IMPLEMENTATION OF LCC

According to (Zaki, 2019) in order for a project to successfully achieve a balance

between its strategic objectives, LCC is seen as being crucial. The LCC, which makes it
possible for relative price evaluations to be calculated over a predetermined time period and
take into account vital socioeconomic factors like upfront cost expenditure, running cost,
operational, recovery value, savings factors, redevelopment, and costs of removal, must be
applied through particular procedures that follow a predetermined framework.

First, based on the research by (Langdon, 2006) numerous projects in Europe have
run into difficulties due to a lack of current, accurate data for the application of LCC analysis.
According to the survey, the majority of LCC predictors in the projects preferred applying
alternative techniques to those present in risk management procedures. For instance,
interviewing a variety of property owners, keeping an eye on and analysing LCC specialists,
suppliers, and industry professionals in the construction sector Due to a shortage of data
needed as input for risk assessment analysis, such as sensitivity analysis, the LCC
estimators were forced to adopt these alternate methodologies.

Furthermore, according to (Rashid, 2013) The Public Works Department (PWD) of

Malaysia is implementing the Garis Panduan Pengiraan Kitaran Hayat standard LCC
guideline (KKH). This guideline was developed to provide the proper method for applying
LCC analysis to upcoming infrastructure projects in Malaysia's construction sector. For

6
public construction and civil infrastructure projects in Malaysia, it offers cost breakdown
structure (CBS) laws, LCC models, techniques, and other essential LCC components.

On top of that, based on the journal by (Norhanim Zakaria, 2020) the clients' refusal
to pay the LCC due to a lack of interest on their part has been recognised as the key issue
or barrier to include the LCC in the project. Due to the fact that most clients are unaware of
the benefits the LCC would bring to the project, this is the case. For reasons that are unique
to the clients, long-term economic models are incorporated into various phases of a
construction project. Due to this, it is crucial to let clients know about LCC's requirements so
that they may understand the importance of applications. Due to the increased costs of
management issues, some clients also refuse to apply the LCC technique. It would also be
too expensive for them because the operational costs of a project rise as its lifespan extends
due to the frequently limited project funding available to them.

Besides, according to (Maria Saridaki, 2019) the remaining complaints about LCC
implementation focus on the technological limitations of the tools at hand. The study's
research findings revealed, after analysis, that LCC practitioners had trouble using the
available tools to implement LCC. Although the gadgets used mathematical methods,
physical labour was necessary because there were no automated processes. LCC users
manually enter every item of information pertaining to a project, including material quantities,
cost information, and upcoming maintenance procedures, which causes the process to take
too long and be too labour-intensive. A LCC expert called the LCC computations "a complex
and time-consuming operation." Due to a lack of sufficient software tools, calculation of LCC
in the construction industries is now a labour-intensive process that is vulnerable to human
mistake, as is frequently observed in the study. Most of the current technology is constantly
evolving as a result.

Last but not least, according to (Zaki, 2019) the inexperience of the design consultant
team is a major point of criticism of the LCC implementation. Therefore, some research
findings indicate that there is still room for improvement in the professional design team's
LCC implementation even though most expert teams have a solid understanding of LCC
analysis and the parameters that should be taken into account, but only at the minimal
phase. This and other issues are due to the expert team's continuous dependence on

7
manual rather than automated techniques. The methodology continues to make it difficult for
them to comprehend the project's complete life-cycle costs.

3.0 CONCLUSION

To conclude, life cycle costing (LCC) is a crucial approach in construction economics

for determining a project's overall cost. The adage can help us decide on prices more
precisely. LCC can determine the project's overall cost, which takes into account all related
expenses. In addition, LCC may help by evaluating the current building or making use of a
comparable facility that is already in operation in order to suit the needs of the client and the
new development project. This is done to make sure the client has enough money to
successfully complete the job.

In addition, a comparison of the similarities and differences between various material

forms, the installation of mechanical and electrical systems, and building components might
begin. The comparison could be used to manage the construction-related operational costs
of the building. Additionally, LCC can suggest sites where operating costs can be decreased.
The money saved can be put toward paying for additional building project expenses.

Moreover, life cycle costing (LCC) is suggested as a tool for identifying the most
economical product design options. The usage of life cycle costing as a technique in
construction design is generally increasing. Life cycle costing is the best method for
selecting the most cost-effective alternative when numerous competing options for buying,
owning, running, maintaining, and finally disposing of an object or process are equally
appropriate to implement on a technical level. It helps the business decide whether to keep
or sell the asset.

8
References
Corrosionpedia. (2017, September 18). Retrieved from Corrosionpedia:
https://www.corrosionpedia.com/definition/724/life-cycle-costing-lcc

Wikipedia. (2022, May 16). Retrieved from Wikipedia:

https://en.wikipedia.org/wiki/Feasibility_study

Langdon, D. (2006). Literature review oflife cycle costing(LCC) and life cycleassessment
(LCA). Retrieved from www.academia.edu:
https://www.academia.edu/24163248/Literature_review_of_life_cycle_costing_LCC_
and_life_cycle_assessment_LCA
Maria Saridaki, K. H. (2019, may 1). Identifying Contradictions of Integrating Life-Cycle
Costing in Design Practices. Retrieved from www.emerald.com:
https://www.emerald.com/insight/content/doi/10.1108/S2516-285320190000002038/
full/html
Norhanim Zakaria, A. S. (2020). The Implementation of Life Cycle Costing towards Private
Client’s Investment: The Case of Malaysian Construction Projects. Retrieved from
spaj.ukm.my: https://spaj.ukm.my/jsb/index.php/jbp/article/view/429
Rashid, M. F. (2013). STRATEGIES TO ENHANCE QUALITY DATA INPUT
REQUIREMENTS OF LIFE CYCLE COST (LCC). Retrieved from
file:///C:/Users/ASUS%20TUF/Downloads/530-Article%20Text-564-1159-10-
20201020.pdf
Zaki, Z. A. (2019, April 24). Barriers of Life Cycle Costing on Construction Consultant
Practice in Malaysia. Retrieved from iopscience.iop.org:
https://iopscience.iop.org/article/10.1088/1755-1315/385/1/012061