What is Life Cycle Cost?

1. What is Life Cycle Cost? • An economic analysis procedure that uses engineering inputs • Compares competing alternatives considering all significant costs • Expresses results in equivalent dollars (present worth)

2. Present Worth Salvage Costs Initial Cost Rehabilitation Cost Costs Years Cost Considerations Maintenance and Inspection Cost Salvage Value

3. Present Worth Analysis • Discounts all future costs and benefits to the present:t=n PW = FC +  pwf [MC+IC+FRC+UC] + pwf [S] t=0 FC = First (Initial) Cost t = Time Period of Analysis MC = Maintenance Costs IC = Inspection Costs FRC = Future Rehabilitation Costs UC = Users Costs S = Salvage Values or Costs pwf = Present Worth Factor

4. First (Initial) Cost • Initial cost of structure • Incentive/disincentive payments should not be included since they would reflect user benefits or costs prior to structure going into service

5. Time Period of Analysis • Normally equal for all alternatives • Should include at least one major rehabilitation • Needed to capture the true economic benefit of each alternative • Bridge design today is based on a probabilistic model of 100 years

6. Maintenance Costs • Annual cost associated with the upkeep of the structure • Information is difficult to obtain for a given project • Cost varies on the basis of size of the structure (sqft) • Best Guess Values • Frequency - Annual • Concrete 0.05 % of Initial Cost • Structural Steel 0.05 % of Initial Cost

7. Inspection Costs • Requirements set forth in the National Bridge Inspection Standards (23 CFR 650.3) • Occurs for all alternatives every two years • Cost varies on the basis of size of the structure (sqft) and by construction material • Best Guess Values • Frequency - Biannual • Concrete 0.15 % of Initial Cost • Structural Steel 0.20 % of Initial Cost

8. Future Painting Costs • Only applies to structural steel structures but excludes weathering steel • Should occur every 20 years • Cost varies on the basis of size of the structure (sqft) • Best Guess Values • Frequency – every 20 years • Concrete 0.0 % of Initial Cost • Structural Steel 7.0 % of Initial Cost

9. Future Rehabilitation Costs • The frequency is not only a function of time but also the growing traffic volume and the structural beam system • Cost varies on the basis of size of the structure (sqft) and structural beam system • Best Guess Values • Frequency • First occurrence – Concrete 40 years • First occurrence – Structural Steel 35 years • Annual traffic growth rate .75 % (shortens rehab cycles) • Concrete 20.0 % of Initial Cost • Structural Steel 22.0 % of Initial Cost

10. Salvage Value/Costs • Occurs once at end of life of structure • Difference between • Removal cost • Salvage value • Best Guess Values • Removal cost 10 % of Initial Cost • Salvage Value – Concrete - 0 % of Initial Cost • Salvage Value – Structural Steel - 2 % of Initial Cost

11. Users Costs • For early construction completion, maintenance and rehabilitations only • Delay-of-use • Time delay • Fuel consumption • Driver discomfort • Vehicle operating costs • Accidents

12. Users Costs • Pros • Users pay for transportation system • Drives the results • Cons • Owner can not recoup costs • Not in my budget • Drives the results

13. Users Costs • Driver Delay Costs: DDC = (L/Sa-L/Sn) x ADT x N x w L = Length of affected road way Sa = Traffic speed during maintenance activity Sn = Normal traffic speed ADT = Average daily traffic (vehicles per day) N = number of days of maintenance activity w = Hourly time value of drivers

14. Users Costs • Vehicle Operating Costs: VOC = (L/Sa-L/Sn) x ADT x N x r L = Length of affected road way Sa = Traffic speed during maintenance activity Sn = Normal traffic speed ADT = Average daily traffic (vehicles per day) N = number of days of maintenance activity r = weighted-average vehicle cost

15. Users Costs • Accident Costs: AC = L x ADT x N x (Aa-An) x ca L = Length of affected road way ADT = Average daily traffic (vehicles per day) N = number of days of maintenance activity Aa = Accident rate during maintenance activity An = Normal accident rate ca = Cost per accident

16. Present Worth Factor 1 pwf = (1 + i)n pwf = Present Worth Factor for discount rate i and year n i = Discount rate n = Number of years when cost (benefit) will occur

17. Discount Rate Interest - Inflation i = 1 + Inflation Interest – The return of an investment that raises the future value of an invested dollar Inflation – The erosion of a dollar’s value that raises any future expenses Use of a discount rate allows for the use of constant dollars in the analysis

18. Process And Approach Limits • Government does not invest money to gain cash benefits (interest) • Government money is generally invested only in depreciating assets • Anything not bought this year costs more next year (inflation)

19. User Costs Input

20. Discount Rate Inputs

21. Structure Costs Input

22. Structure Costs Input

23. Life Cycle Costs Results

24. Life Cycle Costs Results

25. Life Cycle Costs Comparisons

26. Questions? Thank you for your Attention!