Based on life cycle costs, it is easier to calculate a responsible and sustainable investment decision. In a series of articles, experts discuss this topic, this time mentioning soft factors such as indoor air quality and environmental performance.
We like to say that we design well-thought-out and realize future-proof buildings. Yet we all know examples of buildings that required extensive renovations within ten years. Or where the indoor climate still left much to be desired years after completion. How do we ensure that we can make a responsible and sustainable investment decision? This starts with insight into the building’s life cycle and life cycle costs. At the right time and via an unambiguous and objective method.
A lifetime cost calculation is essential to making an informed investment or design decision. And yet the method is not always and everywhere used. It is also known. Where is that obstacle? It may be that a calculation is perceived as too complex. Perhaps the costs of preparing it are perceived as high. Or do we still think long-term forecasts are just too exciting? The latter may also be driven by the recent pandemic and geopolitical developments. We assume that the calculation is mainly used as a quantitative instrument, thereby undermining the qualitative value of a concept or design. Waste of design freedom and the contribution to the built environment. In this article we therefore want to consider the assessment of the qualitative aspects or soft factors within the methodology.
The Netherlands and Europe
We start with a tour of Europe. Do we see a similar picture in the countries around us, or are there regions or countries that are really further ahead than we are? We use a recently released Life Levels publication for this. This is a partnership of eight European Green Building Councils recognized for their contribution to promoting sustainable building and promoting environmental protection and energy efficiency values. The Dutch Green Building Council is participating from the Netherlands. The program examined the use of Life Cycle Assessment (LCA), Indoor Air Quality (IAQ) and Life Cycle Costing (LCC) in the tendering process1. In the image below, we have given this our own interpretation of the LCC component.
We see that a number of countries are already quite advanced with regard to the method, but that it is still non-binding in its application. In a number of countries, the method is mandatory, but there is often a lack of good tools and a clear framework to actually achieve the intended effect. In a previous publication, we already concluded that the application in the Netherlands mainly originates from commercial or market initiatives. Laws and regulations are still lacking. An observation that was also shared at the ICEC World Congress organized in mid-June 2022. Less is known about how the soft, less quantifiable aspects of the method are valued abroad. In the Netherlands too, there is often less attention paid to this. This can be one of the obstacles to using the method.
Djordy van Laar on the results of the ICEC:
“In other sectors, a lifetime cost calculation is not only made as a standard for major investments. Any changes in assumptions and factual deviations are also reported periodically. The construction and property sector can learn a lot from that!’
The great thing about the Life Levels program is that multiple indicators are used to promote the improvement of environmental performance within the life cycle of sustainable buildings. For example, not only life cycle costs (LCC), but also internal air quality (IAQ) and building environmental performance (LCA) are taken into account. In this way, you arrive at an integrated, healthy, environmentally friendly and cost-effective building. Let us hope that the combination of these indicators will play a more prominent role in regulation, design and decision-making.
And then the rest?
Connecting multiple indicators is a step in the right direction. Still, something is nagging. In addition to a quantitative assessment of health, environment and costs, you as a customer attach value to qualitative factors that cannot easily be expressed in euros. Examples of this are organizational identity, ecological value or design and experience. These are important factors that you want to take into account in the selection process.
One instrument to use for this is a trade-off matrix. An example of such an assessment framework is included below. We have mentioned a number of soft factors, but of course you are free to make this specific to your project. We have deliberately used colors, numbers and ‘pluses and minuses’ mixed here. The way in which the factors are weighed against each other is immaterial. As long as the assessment method and the mutual weighting are clear and preferably known in advance. This prevents discussion afterwards.
A trade-off matrix can be used in all phases of property development and design. No matter what scale this takes place. Portfolio, project or building element. A collaborative and critical contribution from the various experts at the table is essential to arrive at independent and reliable advice. Ideally, decision making is easy after that.
In the Netherlands, we already have a lot of experience with the method. There is still a lack of clear frameworks and uniform measures. In the countries around us, we see a varied picture. Consideration of soft factors can take a more prominent place in the overall assessment of a concept or design. The Life Levels program monitors the improvement of environmental performance (LCA, IAQ and LCC) within the life cycle of sustainable buildings. Organizational identity, ecological value or design and experience are examples of soft factors on which a concept or design must also be assessed. It is useful to use an integrated trade-off matrix with a predefined mutual weighting. In this way, the concept or design can be assessed quantitatively (LCC) and qualitatively.
Integral calculation of costs, income and value. Now and in the future.
The central state real estate agent, Life Cycle Vision, AT Osborne, IGG Bouweconomie and Brink work together on the theme of life cycle costs in consultation with the Dutch Association of Construction Cost Experts (NVBK) and the Dutch Association of Cost Engineers (DACE). Together they look for definitions and calculation methods. In doing so, they mainly ensure that the same language is spoken.
All publications of the authors below and space to share experiences can be found on LinkedIn:
Erik Weldring, the State’s real estate agent
Bernd Karstenberg, Life cycle vision
Frank Michielen, AT Osborne,
Djordy van Laar, IGG Construction Economics
Gerard van Dijk, Brink
The Dutch Association of Construction Cost Experts (NVBK)
Dutch Association of Cost Engineers (DACE),
1 Levels of Life (2022, March 30). Best Practice Guide to support the incorporation of level indicators in public procurement processes. Living standards.