Most sport and recreation facilities in Western Australia
are built or refurbished with funding from the department.
An important part of the funding process is to make sure
the community can bear the true cost of running and
maintaining a facility well into the future.
These Life Cycle Cost Guidelines provides facility owners,
architects and engineers with the tools they need to
develop life cycle cost reports that will be used by the department as
it considers publicly owned or funded facilities.
The guidelines mean analysis and reporting can be
standardised to ensure a timely and accurate technical
review of your facility or project.
The Department of Sport and Recreation is
committed to pursuing the most desirable
project outcomes that reduce the cost to the
sport and recreation industry and the broader
Developing a life cycle cost approach when
considering your project’s parameters will
provide you with a solid and informed base
from which to make the most effective financial,
economic and operationally sustainable
Life cycle costing is a key asset management tool
that takes into account the whole of life implications of
planning, acquiring, operating, maintaining and disposing
of an asset.
The process is an evaluation method that considers all
ownership and management costs. These include;
One way to express the total life cycle cost is in the form
of a mathematical equation.
Total Life Cycle
Cost (LCC) = Initial asset acquisition /capital
cost (AC) LESS Tax depreciation entitlements
(TD) PLUS Operating and maintenance
costs (OC) PLUS Replacement / disposal /
upgrade costs (RC) LESS Residual / salvage value (RV) = LCC
So a typical life cycle cost for new sport and recreation
facilities could be represented in the following equation: LCC = (AC – TD) + (OC + RC) –RV
You would have to factor in an additional component
– deferred maintenance (DM) – for refurbishment or
LCC = (AC – TD) + (DM)+ (OC + RC) –RV
A key question is “which costs are included within the life
Put simply, the costs to be included within the LCC
equation are those that are directly attributed to the
ownership, management and operation of an asset.
An example would be air conditioning where you have
installation, operation and replacement expenses. Costs
such as annual staff salaries, service provision, training
associated with corporate functions would not be included.
Local governments own or manage the majority of
sporting and recreational facilities in Western Australia, so
management is often exposed to a highly competitive and
localised budgetary process.
With few exceptions, facility management within local
government has not been exposed to the rigour of
consolidated asset management planning processes and
the associated financial systems.
Maintenance competes for funding with other programs
and is often deferred when other projects receive a higher
priority. The cost is the increased risk of components
failing and potentially increased safety hazards, poor
service to the public, higher costs in the future and
In many cases the deferral of routine scheduled
maintenance will mean your asset will deteriorate faster,
making it harder for you to meet the deferred maintenance
In terms of the life cycle cost process, deferred
maintenance is understood to be the cost of maintenance
not committed to maintaining the assets original or desired
level of service.
In this context, deferred maintenance is not considered
Overall, the need to identify deferred maintenance will help
you to establish the funding responsibilities of all parties in
the project proposal.
The process of identifying and quantifying the true cost
of deferred maintenance is detailed in Section 2.3 of this
From DSR’s viewpoint there may be times when it requires
a facility project to include a LCCA in the project criterion.
The LCCA may be required when applying for grant
funding through either the State Sporting Facilities Plan
(SSFP) or the Community Sporting and Recreation
Facilities Fund (CSRFF).
As such, these definitions apply:
It is up to the public agency or sporting organisation to
comply with these requirements.
The timing of a LCCA is crucial to the long–term success
of a facility. In contemporary project management the
concept and design stages are the greatest opportunities
to influence a successful facility structure and operation.
The further a project develops, the further opportunities
For a LCCA to successfully guide decisions about building
design or asset replacement it must be completed before
systems are selected and approved and construction
tenders are awarded.
The image depicted at figure 1.0 demonstrates the
optimum time to positively reduce life cycle and project
costs associated with any project is at the feasibility
study stage. This opportunity greatly diminishes as we
move along the life cycle axis. It can be seen from this
schematic that effort focused at the feasibility and planning
stages can greatly improve the “over the life” performance
of an asset.
The aim of this guide is to reinforce the concept of whole
of life costs for the practitioner to deliver better project
decisions. LCC is a valuable and powerful tool that can be
used to gain support for the preferred project option.
Many people across the sport and recreation industry have
considered the lowest construction cost as being the best
alternative. The LCC approach encourages proponents to
focus decisions on a developed life cycle cost regime to
reduce energy consumption, maintenance requirements
and ongoing operational costs.
The adoption of a life cycle cost approach will be
necessary when applying for public funds to assist in your
project, renovation or construction. An analysis should
conform to the requirements set down in this guide before
a contract is let for an improvement or construction of a
public facility. Should an analysis not be possible, a written
submission should be lodged with DSR outlining the
The minimum measures to be analysed in a life cycle cost
analysis will include;
There are four primary principles to consider when
assessing life cycle costs.
The life cycle cost analysis procedure considers the
option of selecting from a set of alternatives, the building
design or plant with the lowest whole of life cycle cost.
The design and development aspect of the project
analysis procedure recognises that many of the facilities
that will provide future sporting and recreational services
Consideration of funding applications for sport or
recreation facilities will fall into two categories:
A Greenfields project for new facilities provides the
facility owner the greatest opportunity to minimise the
total cost for construction, operation and maintenance
through total asset management strategies.
This can be achieved through the adoption of an
integrated facility asset management program early in
the development stage of a new facility (see figure 1.0).
The issue of deferred maintenance typically does not
encumber Greenfields projects and consequently the
project manager can adopt maintenance and budgetary
projections with a greater level of confidence.
The format for LCCA reports shall be similar to the
format of these guidelines that have been adapted from
Australian Standard for Life Cycle Costing. Information
is to be clearly presented and understandable to all
parties in the process (facility, financial and technical).
LCCA reports are to be stand–alone documents
containing all support documentation and be capable of
The analysis process for either a new or refurbished
facility must factor all of the costs associated with the
concept planning, design, documentation, tendering,
construction/modification, operation, maintenance and
eventual decommissioning of the facility. The Greenfields
application will clearly identify rights and responsibilities
of all parties involved in the project and detail all
estimated cost exposures over the life of the project.
Brownfields projects are those where submissions are
made for existing facilities to be upgraded or refurbished
or a new facility developed on a site currently being used
for other purposes,
Facilities funding processes (both capital and operating)
for existing local government facilities are typically
exposed to the pressures of annual budget bids in a very
competitive financial environment. Exposing existing
facilities to this style of budgetary process may lead to
inadequate maintenance funding that ultimately results in
their premature deterioration.
The dangers of a competitive budgetary process might
include a lowering of priorities being placed on routine and
scheduled maintenance for existing facilities, and as a
result – a “deferred maintenance” debt.
When calculating the deferred maintenance exposure, a
facility manager needs to undertake a facility condition
assessment (refer to the Asset Management Guide for a
This process begins with a multi–disciplined team
conducting a thorough inspection of the facility. If
all systems of the facility are being included in the
facility plan, the team should include an architectural
representative and structural, mechanical and electrical
engineers. Where this is not practical due to budgetary
constraints, qualified staff within your organisation should
conduct the process.
If the scope of the plan is being limited, then a
representative of only those disciplines to be included
is required. In all cases, the inspection team can be the
owner’s personnel, external consultants or a combination
of the two. The scope of the plan can also be expanded
to include room fixtures, fittings and equipment where
knowledgeable personnel are available. Other specialists
such as gas testing specialists or roofing inspectors may
also be added to the team as appropriate. In all cases,
the inspectors must be experienced and knowledgeable
practitioners in their field.
In most cases, the inspection is entirely visual and
therefore the inspectors are called upon to make value
judgements by extrapolation from their observations.
Where necessary, more invasive and preferably non–
destructive methods may be employed to gain better
insight into the condition of the facility.
For ease of inspection, each discipline (i.e. architectural,
mechanical) is divided into a number of individual
components. The mechanical systems for example can be
divided into eight basic components that are;
The data gathered with respect to the deferred
maintenance deficiencies will include building component
and sub–component which includes a sequential reference
number and a deficiency rating, location and description.
A deficiency repair cost will be added later.
The deficiency rating system is flexible and can be
adjusted to meet specific project needs. Typically, a
process would use a rating system from one to five based
upon the relative level of disrepair and the effects on the
overall facility, with one being poor to catastrophic and
five being in a good state of repair. A numeric rating of
one would be for aspects that contravene code, health,
and regulation or Act violations – thus requiring immediate
The costs apportioned for remedial repair (including
regional adjustments) are to be provided by a quality
surveyor or qualified contractor and have the capacity to
be reviewed in accordance with a recognised industry
building estimates publication such as Rawlinsons
Australian Construction Handbook.
The purpose of undertaking this procedure is to identify
the true cost exposure for the various funding bodies and
also gather valuable baseline data for the formulation of a
fully integrated asset management plan.
In each case the analyst has to consider design
alternatives for the domestic/commercial hot water system,
lighting system, combinations of building envelope–HVAC
(heating, ventilation, and air–conditioning) systems, pool
design, pool heating, court surfaces etc.
When applicable, the analyst is to consider design
alternatives for on–site electricity generation. Each
analysis is to be based on a 20–year study period. In order
to be considered as an effective investment, an energy
application project should have a simple payback period of
five years or less.
The analysis methodology must consider the relationship
between energy–using systems. When the amount of
energy consumed by one system impacts the energy
consumed by another, this interaction must be carefully
considered in the analysis. The accepted methodology
is for the analysis to first evaluate independent systems,
followed by those systems that interact. A particularly
useful reference for life cycle costing procedures is the
Australian Standard for Life–Cycle Costing
A key concept of the life cycle analysis equation is that of
the time value of money.
The challenge in determining the best whole of life
financial option is to achieve a position where the various
options under consideration can be fairly evaluated. When
considering various proposals, you will be faced with
comparing capital and operating costs that are expended
at different times. In evaluating the financial impacts of
the various alternatives all costs for each option under
consideration are expressed in “today’s dollar value”.
This provides the basis to accurately judge the costs and
benefits associated with various alternatives.
The definition given: “A concept that
acknowledges that money changes value over a period
of time; that a sum of money today is worth more that
the same sum of money at a future date, because of the
fact that the money received now can be invested to earn
interest” considers the value of money invested in future
In order to better understand the issue, examples have
been provided at page 25. Each option considers the
replacement of an air conditioner and factors the purchase
cost and the life cycle annual maintenance and running
costs. The present values chart at page 36 shows the
future value of a dollar at a nominated discount rate.
The example cites a discount rate of 12% for air
conditioners of varying qualities. Option one considers an
air conditioner of lesser quality that requires replacement
at more frequent intervals and has a higher annual running
and maintenance cost. Conversely, option two considers
a more expensive unit requiring a lesser level of annual
maintenance and running costs. Due to reliability, over
the period considered (30 years) option two requires
replacement once at year 15.
The result demonstrates that the total present value of
installing, operating and maintaining an air conditioner of
the size considered is significant over a thirty–year period.
Option 1 demonstrates that the lesser value investment
system costs at present day values a total life cycle
cost of $468 013. Option 2, whilst being a high initial
cost demonstrates a life cycle cost of $413 689. These
examples shows that option 2 delivers a better whole of
life cost benefit of $54 324.
The aim of these examples demonstrates the time value of
money and how investments may be fairly compared using
an appropriate discount factor at today’s dollar value.
The order of sections and appendices are:
The first form required is the Certificate of Responsibility. The report must be certified by the Project Principal and
notarised by either a registered Architect or a licensed Professional Engineer in Australia.
DSR has adopted the codified version of ASHRAE Standard 90.1–2001 as its energy code for recreational buildings,
so this is the base case for each alternative studied. The analyst is to answer the question at the bottom of the form to
verify that all design options in the report comply with the energy code.
You can find a download link for a sample certificate of responsibility form in the resources sidebar located at the top of this part of the guidelines.
The Executive Summary is to include a brief synopsis of
the purpose of the report, a summary of important findings
of the report, a description of important assumptions and
special design considerations used in the analysis and
system selection recommendations based on lowest life
The Executive Summary must also provide an annual
energy budget for the facility based on the assumptions
outlined in table 3.3. The LCCA Summary Form must
be provided in the Executive Summary (refer to the next
The LCCA Summary Form tabulates the findings of
each system alternative evaluated in the report. The
LCCA Summary Form also provides the derivation for
the annual energy budget for the base case and for the
facility alternatives yielding the lowest life cycle cost. The
derivation of the annual energy budget should not double
count energy consumption data, such as lighting energy
that is often also included in HVAC energy consumption
Specifically with regard to asset renewal, refurbishment
or reconstruction projects the Executive Summary must
identify the deferred maintenance backlog calculations to
establish the baseline funding position.
You can find a download link for the sample life cycle cost analysis summary table in the resources sidebar located at the top of this part of the guidelines.
This section defines the scope of the project (refer to
the following page). The project identification form is
divided into four topic areas including a project summary,
organisation contact information, design professional
contact information and special design considerations.
Information that is provided is to be as complete and
accurate as possible.
The Project Summary section includes general information
about the facility such as the location as well as specific
building design information. Many of the items are self–
explanatory and some only require a yes or no answer,
however, an explanation for a few of the items is provided
The final section provides space to describe special
design considerations requested by the proponent
organisation (local government/Sporting
Organisations). Design constraints that affect system
alternatives selection must be documented here as well as
in the report. This section should also include a statement
of the analysis objective, operating and support scenarios,
assumptions, constraints and alternative courses of action
You can find a download link for the sample project identification table in the resources sidebar located at the top of this part of the guidelines.
The Assumptions Form Table 4.0 provides a central location for
documenting assumptions made in the analysis.
Information that forms the basis for inclusion on the
assumptions form considers the expected recurrent (operating)
cost for the LCC and briefly identifies how the building design
has been managed to reduce these costs or enhance service
provision. Assumptions regarding initial energy rates used in
the analysis are also to be provided. The energy rates should
be entered for both summer and winter as applicable. On–site
electricity generation should also include information about
utility buy back rates.
The next area provides a location to document other
assumptions made in the analysis. Examples of other
assumptions include the quantity of domestic hot water used
annually, maintenance costs, residual value or salvage costs.
The final area on the Assumptions Form provides a location
to document references used. These references include, but
are not limited to, those used to perform calculations and
those used to estimate construction costs. Additional pages
may be added as necessary to list all of the assumptions and
You can find a download link for a sample assumptions form in the right sidebar located at the top of this part of the guidelines.
The analysis of each option must consider all
of the phases associated with the development
and delivery of the project and include costs
An example of the Life Cycle Cost Analysis model is
appended at pages 26 to 35. The LCCA has been formed
on the basis of the following conventions and concepts.
The base convention is that the model provided by DSR
does not incorporate any direct capital costs. The costs
entered into the model that affect the financial result
should only be operating costs and be directly related to
the costs of the management and maintenance of the
facility or asset.
Each of the component cost option sheets has been
developed to reflect the project’s life cycle phases,
including concept and definition, design and development,
manufacturing and installation, maintenance, support
services and gross revenues. Each of these areas has
been further identified into costs areas identified by either
capital costs or operating costs.
The model has been developed on a multi sheet MS
Excel spreadsheet format. Data provided and developed
for the options under consideration are entered under
the individual “Component Cost Option” sheets. The
consolidated LCCA model is a protected work sheet
that serves to reflect the consolidation of each of the
component costs option sheets.
Before we consider the model, we must understand the
concept of Net Present Value (NPV).
Consider the following.
“When you wish to know the value of a used car, you
would look at prices in the second–hand car market.
Similarly, when you wish to know the value of a future
cash flow, you would look at prices quoted in the capital
markets, where claims to future cash flows are traded.
(Just remember that those high profile investment bankers
are just second–hand cash flow dealers. If you can buy
cash flows for your shareholders at a cheaper price than
they would have to pay in the capital market, you have
increased the value of their investment”.
The example provided is that of a typical recreation centre
under consideration by a local government.
The example is based upon the premise that total funding
for the centre will be provided by the local government
The LCCA demonstrates that the cost of a facility
commences at the pre-planning stage with the concept and
definition. The period between the concept stage and the
commencement of operations of the facility is nominally
Option one; provides the base case with initial capital
construction costs of $1 985 000 and a 25% refurbishment
of the facility at year 10.
Option two; provides a 10 percent increase in initial
capital costs ($2,183,000) with a 25% refurbishment at
year 15. The increase in initial capital costs assumes the
use of higher quality components (e.g. air conditioning)
and therefore a reduced requirement for refurbishment
until a later period.
Option three; considers a 10% reduction in initial capital
cost ($1,786,500) with an expanded refurbishment
program. Option three assumes a commitment to lesser
quality components and therefore delivers a requirement
to refurbish at year seven and again at year 17.
Net revenues are entered into each component costs
option, providing an annual figure of cost centre income
less the annual operating costs for that cost centre. For
the example, under consideration the “cost centre” is the
recreation centre. The costs do not include either the
facility management costs or the corporate overheads
as they are a direct facility consequential cost and are
recorded separately in the model.
Each refurbishment delivers additional net revenue
income of $30 000 per annum as this anticipates improved
It will be noted that the model features a series of input
cells that are colour coded green. This denotes that these
costs (typically capital) are not included within the model
Input data is considered for each of the life cycle
phases and entered at each option input sheet. For this
example, the annual costs included in the input data
are kept consistent across the life of the asset. Careful
consideration needs to given to the classification of
the cost being entered into the model. It is considered
fundamental that the cost must be identified as either
capital or operating prior to entry into the model. As this
model is based on the NPV result and does not consider
the direct capital costs (rather the amortised interest
and depreciation costs) it is vital that the operating costs
relate directly to the management of the building without
providing any betterment to the value of the asset. Should
the cost apportioned result in an improvement to the
facility asset or structure, this cost would be considered
The model has provided for the inclusion of interest
charges that is based upon the position that equivalent
opportunity costs for the funds employed for the project
must be recorded. As the NPV does not consider
the initial capital costs, annual interest equivalents
must be included. This is irrespective of the origin of
the capital employed for the project, whether from
reserves, borrowings or investor subscriptions. Similarly,
depreciation charges are apportioned for the replacement
costs associated for both the building fabric and the
consolidated internal asset component that make up
the building fabric. It should be noted that at each
refurbishment event for each option, the interest and
depreciation costs are increased to reflect the additional
investment. An accurate reflection of the depreciation of
any building under consideration may be sourced in the
Rawlinsons Australian Construction Handbook.
The model demonstrates the cash flows associated with
the development, management and refurbishment of the
The cost projections automatically feed into the
consolidated LCC model initially to the consolidated option
values section of the page. At this stage, these figures
remain uninflated. These figures are then exposed to the
inflation component of the model, which in essence are
the operating cost, less net revenues multiplied by the
inflation rate at the value of the period in which the costs
are considered. This process occurs for all of the costs
and revenues for each option over the asset life period
being considered. These figures are then exposed to
the effects of the nominated discount rate, which may
be changed on the consolidated LCC model. This model
also provides for NPV calculations that consider project
sensitivities. Considerations of these sensitivities or risks
are undertaken by the application of higher and lower
The following observations are made of the example
As the NPV provides information about the net increase
in worth provided by the project (exclusive of the capital
costs), the cash flows under support services for each
option includes interest and depreciation costs.
Observations also reveal that major programmed
maintenance is calculated under the Maintenance
category. This operational requirement similarly reduces
net revenues in those periods by $30 000.
The net result of these options recommends that a
commitment to option two would provide the best result
for the council. The option suggests a higher capital cost,
though a reduced requirement for refurbishment until
year 15. The result is that option two at a discount rate
of 12 percent delivers an NPV of –$859 102. This figure
represents the net difference between the inflated and
discounted costs and revenues accumulated over the
period of the life cycle.
The life cycle cost calculations for each
alternative are to be presented in this section of
the report. The analyst has the option of using
the form provided in the Appendices of these
guidelines or providing a printout of computer
analysis for each case.
DSR has developed a multi–layered spreadsheet that
provides the primary shell to create a three–option
comparison of alternatives. The spreadsheet provides
for the development of project costs, delivering the net
present value of each option in addition to two sensitivity
Within the manufacturing and installation segment of
the LCC analysis, the following calculations need to be
factored with respect to water treatment, lighting, building
envelope and HVAC systems and electricity generation.
The analysis of each structure/system (facility, domestic
hot water, lighting, envelope/HVAC, and electricity
generation) should begin with a base case that would be
expected to provide the lowest constructed/installed cost
but, due to lower efficiency, usually result in high operating
and life cycle costs. The other options should provide
a tradeoff of higher constructed/installed cost for lower
operating and (potentially) lower life cycle costs. In each
case, the system with the lowest life cycle cost must be
Select three commercial/domestic hot water systems and
document the rationale used to justify their consideration
for the facility. Systems selection could compare varying
efficiency levels, systems using different fuels, a central
system versus a distributed system, a solar–assisted
versus a non–assisted system, a variety of control
strategies, or large equipment versus a modular
installation, for example.
Choose three lighting systems for the primary use of the
building (offices, courts or gym rooms for example) and
document the rationale used to justify their consideration
for the facility. Include a variety of lamp types, ballast
features, and control strategies.
Choose three building envelope types and three HVAC
systems and document the rationale used to justify their
consideration for the facility. A total of nine building / HVAC
combinations should be studied unless this can be shown
to be impractical. The design alternatives recommended
previously for the domestic hot water system and for
the lighting system should be used in the analysis of the
envelope and HVAC systems.
Building envelope parameters may vary wall and roof
insulation type, thickness and window type. HVAC system
parameters may vary system type, modular equipment,
distribution system type, control strategies, etc.
When applicable, use all of the recommended building
systems to evaluate three design alternatives for on–site
electricity generation. Potential alternatives include
engine generators, micro–turbines, fuel cells, steam
turbines, wind turbines, solar arrays (photovoltaic), etc.
Alternatively, consideration should be given to purchase
electricity from providers that generate green electricity
from alternative technologies such as conversion of landfill
methane gases to electricity.
Briefly note each of the recommended systems, however,
most of this discussion should be provided in the
Executive Summary. The set of combined systems should
be used to find the detailed energy use prediction on the
LCCA form in the Executive Summary.
The report appendix is to include supporting information. The contents of the appendix should include sketches of
the planned building layout, energy use calculations, and any other pertinent information necessary to document the
At the end of this section you can find a download for a sample
spreadsheet which details the suggested economic lifetimes of various
mechanical systems, such as air compressors, centrifugal chillers and
At the end of this section you can find a download for an example air conditioner LCC Analysis Spreadsheet.
At the end of this section you can find a download for a table
representing the present dollar value rate per year and the future
values of $1 over a 30 year period.
American Society of Heating, Refrigerating and Air-Conditioning Engineers. (1989). Energy efficient design of new
buildings except low-rise residential buildings. United States: ASHRAE.
Ballesty, S., Orlovic, M. (2004). Lifecycle costing and facility management. Facility Management 12 (2), 28-32.
Department of Sport and Recreation. (2004). Asset management guide: a guide for sport and recreation facility owners
and managers. Perth, Western Australia: Department of Sport and Recreation.
Rawlinsons Construction Cost Consultants and Quantity Surveyors. (Eds.) (2005). Australian construction handbook
2005. Perth, Western Australia: Rawlhouse Publishing Pty Ltd.
Standards Australia. (1999). Life cycle costing: an application guide. (ANZS 4536:1999). Sydney, New South Wales:
Do not submit enquiries with this form.