How can you use a life-cycle costing approach to budget for Facility Management (FM)?

Here's how you can apply this approach to budgeting for FM: 1. Identify all costs. 2. Estimate future costs. 3. Calculate present value. 4. Consider alternatives. 5. Include risk factors. 6. Monitor and update. 7. Integrate with strategic planning. By adopting a life-cycle costing approach, you can make more informed budgeting decisions for facility management that consider the full costs and benefits of different strategies over the entire life span of the facility. This approach can help optimize resource allocation, minimize life-cycle costs, and maximize the value of facility assets for your organization.

Using a life-cycle costing (LCC) approach for Facility Management (FM) involves evaluating all costs associated with a facility, including initial purchase or construction, ongoing operational costs, maintenance, repairs, replacements, and disposal. By considering these factors, FM professionals can develop a more accurate budget that accounts for the total cost of ownership over the facility's life span, helping to make informed decisions about investments, maintenance strategies, and resource allocation.

Like finance and the business world language, facilities has it own separate jargon but all FM professional shall know the business language as cost center to remain successful at forefront... MAK FM are use to mysterious world of Life Cycle Costing and Total Cost of Ownership. They are always on toes to demonstrate capital budget analysis of payback and return on investment. In terms of FM, every organization biggest fear is to know Capital Budgeting (Investment Plan) against new machinery, replacement machinery, new products, and development projects to pursue. Such investment appraisal is capital budget for major capital, or investment, expenditures in a long term venture for lifetime cash inflows & outflows assessment. MAK

A life-cycle costing approach helps Facility Management (FM) professionals budget effectively. It involves considering the total costs of a facility throughout its entire lifespan. To use this approach, start by defining the facility and estimating its lifespan. Identify cost categories like acquisition, operating, replacement, and disposal costs. Estimate expenses for each category and discount future costs to their present value. Add up all the costs to calculate the facility's total life-cycle costs. Compare different options based on these costs and allocate the budget accordingly. Monitor actual costs and adjust the budget as needed.

Life-cycle costing (LCC) is a method used to estimate the total cost of ownership of an asset over its entire lifespan. It goes beyond the initial purchase price and considers all the expenses you'll incur throughout the asset's life, from acquisition to disposal. Here's a breakdown of the key aspects of LCC: What it includes: 1. Acquisition Cost, 2. Operation and Maintenance Costs, 3. Replacement Costs, 4. Repair and Renovation Costs, 4. Disposal Costs. Benefits of using LCC: 1. Informed Decision Making, 2. Improved Budgeting, 3. Cost Optimization, 4. Sustainability Considerations, Challenges of LCC: 1. Data Availability, 2. Unforeseen Events, 3. Complexity.

1. Assess initial acquisition costs. 2. Analyze ongoing operational expenses. 3. Estimate replacement and renewal costs. 4. Consider potential risks and uncertainties. 5. Account for different lifecycle phases. 6. Calculate return on investment (ROI). 7. Incorporate sustainability initiatives. 8. Monitor performance and benchmark. 9. Plan for alternative scenarios. 10. Utilize life cycle costing models.

Using a Lifecycle Costing Approach for Facility Management involves considering the total costs of owning and operating a facility over its lifespan, including initial investment, operating costs, maintenance, energy efficiency, replacements, and disposal costs. By accurately forecasting these expenses, facility managers can make informed decisions, optimize resource allocation, and ensure long-term sustainability. Regular review and adjustment of budgets are essential for staying aligned with evolving needs and priorities.

In my experience as a facility management consultant we assist clients in applying and implementing life cycle costing (LCC) methodologies in several ways: Assessment & Analysis Based on the analysis results, we provide recommendations and decision support on optimal investment strategies and asset management practices. This includes identifying cost-effective alternatives, prioritising maintenance and replacement activities, and developing long-term capital planning strategies We assist in monitoring and evaluating the performance of life cycle strategies. This involves tracking actual costs and performance metrics v projected estimates, identify discrepancies, and making adjustments as needed to optimise life cycle cost outcomes.

First of all, we must understand that returns generated against life cycle costing should meet a sufficient targeted benchmark as investment appraisal ... MAK The objective of lifecycle costing is to accept or not accept the outcome in terms of capital budget analysis. Such numerical figures compared against prescribed benchmark to calculate risk. I would like to advice that lifecycle costing should be divided into two parts for investment decisions: 1. Investment on long terms on assets (plant, equipment and resources). 2. Investment on replacement of existing assets (changing to new facilities). Such categorization will help to take investment decisions in long terms profitability to ensure that nothing is left out. MAK

Life-cycle costing for Facility Management (FM) provides benefits such as comprehensive cost consideration, informed decision-making, cost optimization, asset longevity, and sustainability, and budget transparency and accountability. It ensures all costs are considered, enables optimal decision-making, promotes long-term cost-effectiveness, extends asset lifespan, and enhances budget planning and communication.

The challenges of life-cycle costing are the unknowns which are usually the costs that are completely unforeseen. You can know the acquisition cost, project maintenance and put various cost variable for the things you know today. The challenges are the unpredictable seismic costs. Examples: 1. Post 911 laws/regulations (at that time) 2. New Covid air handling 3. Major departments opening, consolidation, etc 4. Choosing to be rentor versus owner of assets 5. et al. Facility management is not for the feint of heart. I always tried to immediately show the impact of major decisions from a FM standpoint so the the funding/cost could be attributed to various decisions. Good relationships with stakeholders are vital.

To maximise the benefits of using a life-cycle costing (LCC) approach for Facility Management (FM) budgeting, the responsible teams must assess all existing and impending costs over the entire lifespan of facilities or assets. This includes acquisition, operation, maintenance, and disposal. Additionally, to anticipate and plan for long-term expenses more accurately, future costs for recommended upgrades, replacement costs for discontinued products, support, spares, and inflation must be considered.

Life-cycle costing for Facility Management (FM) presents challenges such as accurate cost estimation, obtaining comprehensive data, expertise and time requirements for analysis, and resistance from stakeholders focused on short-term budgets.

Overcoming these challenges requires robust data management, collaboration, professional development, and effective communication to gain support for life-cycle costing practices in FM decision-making.