Life-cycle costing, the methodology that examines the cumulative costs for using a product over its useful life (both to the buyer and to the environment), is a useful approach for ascertaining the economic value of materials and designs used in building.
This analysis can take into account a range of variables including cost, payback period, installation, life span and maintenance, in addition to less tangible factors such as disposal costs as well as all of the prior costs associated with the product before it was purchased by the builder.
The life-cycle costing process can be especially useful for evaluating the overall cost benefits and long-term advantages of using energy-efficient and sustainable materials. Although high-performance products generally have higher initial costs as compared to lower-priced products, they also have much lower maintenance and operating-related expenses over the project life and are generally more durable and longer-lasting. Because of these factors, high-performance designs have the potential to eventually pay back their initial investment in cost savings.
According to Whole Building Design Guide, a Web-based information source from the National Institute of Building Sciences, life-cycle costing analyses can be especially useful when project alternatives that fulfill the same performance requirements, but differ with respect to initial costs and operating costs, have to be compared in order to select the one that maximizes net savings.
Although life-cycle costing is regularly used by many building industry professionals, Michael Strong, president and cofounder of Houston-based GreenHaus Builders, the recipient of the National Association of Home Builder’s 2008 Green Building Advocate of the Year award, says a more quantifiable and accurate life-cycle costing approach for assessing building products in the residential industry is still needed. “An example of this is with solar panel systems,” says Strong. “Determining the life-cycle cost of this technology is dependent on the existing energy costs, which is a constantly changing number. Plus the data is not consistent on what the up-front costs and the payback period are. But even if those figures can be agreed upon, it is still unclear as to how long a unit will last and what the operational, maintenance and service costs over the product lifetime are.”
For Ed Gorman, president of Modus Development, a Phoenix-based developer of innovative and eco-friendly multifamily projects, life-cycle costing is an integral part of a sustainable approach to building and can be used to demonstrate the overall cost-saving benefits of high-performance designs. “Whereas custom builders have the opportunity to interact with their clients and utilize life-cycle costing in choosing the best products, I’m more concerned with using this approach as a selling point,” says Gorman. “If I can help potential buyers understand that sustainable materials and energy-efficient technologies are more economical over the life of the project, despite costing more initially, then that represents a competitive advantage.”
According to Gorman, when examining products based on their life costs, high-performance products are almost always a more attractive option. This can be evident in the overall energy life-savings of utilizing solar technology in the desert or incorporating sustainable designs into the building envelope, which greatly reduces maintenance requirements. From a life-cycle cost perspective, a development that is built with naturally occurring and lifetime materials can be modeled to contain extremely low homeowner association dues, because the upkeep with such a project is virtually nothing, Gorman says.
This approach has been utilized by Gorman with the incorporation of extremely durable and highly resistant materials. “Masonry block is very effective,” says Gorman. “As opposed to stucco, which tends to crack and needs repainting, masonry block requires no maintenance. It also insulates very well, which is good for hot and dry regions because it helps to retain temperatures on the inside, improving a home’s energy efficiency.” Zinc is another material with a high-quality life-cycle rating. “Although it is expensive, zinc more than compensates for its initial cost because it is a lifetime, self-healing material that retains strength and will not break down over time,” says Gorman. “Plus, it is aesthetically beautiful.”
Gorman also likes fiber- reinforced cement panels because they require no sealing and have an extremely long life-cycle. Limestone flooring, another product Gorman uses, is a true lifetime material that has been in use in Europe for over 500 years, he says.
“While these materials represent a great use of resources, high-efficiency equipment and systems also offer a competitive advantage in a life-cycle costing sense because they use less energy or water and the repair requirements tend to be very low,” says Gorman. “Generally, these systems will cost more up front, but they also have the ability to pay back that extra cost in monthly utility savings rather quickly. By being able to show consumers these advantages, you are reaffirming the quality that you are selling,” he said.
Life-cycle COSTING IN CUSTOM BUILDING
“I have used the life-cycle cost approach in almost every home that I’ve built,” says Jeffrey Dinkle, president and founder of Atlanta-based Eco Custom Homes. “It helps me justify using a new product or to determine which technology to install on a certain site.”
Although Green products and technologies typically have higher initial costs, Dinkle says they also have much longer life cycles and lower ongoing maintenance requirements. “A life-cycle costing analysis would be a major factor in showing why it is more economically-viable to spend more money on a high-efficiency system compared to a traditional one, such as the benefits of installing a tankless water heater instead of two 75-gallon tanks,” says Dinkle. Another beneficial life-cycle cost factor for Green products is that they can be relatively easy to install. “BluWood, a product for the exterior trim, is a great example,” says Dinkle. “The installation requirements are the same as traditional wood, but BluWood is also eco-friendly, very resistant to rot and bugs and has a higher life span compared to regular lumber. The same hold true for composite board made of recycled carpet, which is very lightweight and easy to cut.”
While life-cycle costing can help validate the use of Green building materials, they are also very useful for evaluating between Green products. “A life-cycle cost analysis would help me choose between solar panels and a wind turbine,” says Dinkle. “I could weigh out and compare the investment costs with other factors such as durability and maintenance requirements in order to determine what technology would produce the most cost-efficient energy over the life of the project.”
This process is also a highly valuable tool in the context of creating an efficient overall home energy portfolio. “For energy modeling, a life-cycle cost analysis can help give me the most cost-effective energy reductions,” says Dinkle. “For example, I may find out that it is more beneficial, in an overall sense, to specify high-efficient glass only on certain orientations rather than the whole home.”
Utilizing this same reasoning, Dinkle was able to help guide a client in making a decision in regards to choosing the most appropriate roofing material in the design of a Japanese-inspired home. “The client wanted to install a cedar shake roof; however, there was some questions as to the durability of this product in the hot and humid climate of the Southeast,” says Dinkle.
As an alternative to cedar shake, Dinkle suggested clay tiles as well as cement tiles, both of which have life spans exceeding 50 years. In terms of costs—including flashing, materials and labor—cedar shake and clay tiles were priced at $650 per square foot and cement tiles at $550 a square foot. When wind durability and fire resistance were factored in, clay and cement tiles were determined to be more favorable. However, these materials were also heavier and would require a more robust roof rafter load rating, which resulted in slightly higher costs. The transportation costs of the materials were another consideration. “The cement tiles are manufactured within a 500-mile radius of the project and could receive a local products credit,” says Dinkle. “Plus, with a solar reflective index rating of .29, cement tiles are classified as a ‘cool roof’ and add considerable cooling benefits to the building envelope. By comparing these factors, it was determined that the cement tiles were the most beneficial option, based mostly on price, durability and energy-efficiency.”
According to Milos Jovanovic, co-owner of Portland, Ore.-based Root Design Build, an architectural design and building company that built the first LEED Platinum-certified home in Portland, life-cycle costing is an essential part of building Green and identifying the most sustainable, cost-effective and healthy materials that also offer maximum efficiency. “This approach should also include the costs that went into the product before it reached the market—how much embodied energy the material has. Was it made locally? It is a recycled material? What about all the costs to manufacture and deliver it?”
Regular materials that just meet code are generally priced lower, but they also tend to have high life-cycle costs as compared to sustainable products, which are longer lasting, low on energy use and much easier to maintain, says Jovanovic. “Sustainable materials can also be used in way to offset the need for more materials,” says Jovanovic. “This is where life-cycle costing can be employed as a strategy. The best way we can get our clients to choose Green products is if we can find multiple reasons for that decision.”
An example of this is a home with a slab-on grade foundation. “With this scenario, it makes sense to insulate the slab underneath and use the concrete as a finished floor,” says Jovanovic. “The concrete can be stained or polished; the result is a beautiful floor finish that is low maintenance and long lasting, but we also eliminate the need for extra material that would be necessary for traditional flooring.” The use of a tankless water heater is another example. “These units are more expensive than typical water heaters, but in addition to being more efficient and saving money in the long run, they are also much smaller and can even be mounted on the exterior, saving useful square footage in a building.”