Life Cycle Costing Guideline

1. Purpose

This guideline directs campus action and decision-making such that acquisition of major utility-consuming products, assets, and infrastructure at the University of Waterloo optimize and account for the long-term management of costs and impacts. It supports:

  • Transparency in purchasing decisions and their impact on operational expenses
  • Long-term cost effectiveness to ensure the greatest value in University of Waterloo’s assets over their lifetime
  • Increased prioritization of efficiency, durability, reparability, and quality of assets
  • Reduction of environmental impact from utility and consumable budgets managed by the University of Waterloo

2. Related Policies, Procedures, and Guidelines

  • Policy 17: Quotations and Tenders
  • Policy 31: University Expenses
  • Policy 34: Health, Safety and Environment
  • Policy 53: Environmental Sustainability
  • Policy 74: Capital and Non-Capital Assets
  • Net Neutral Building Design Guideline

3. Scope

Life cycle costing effort is required for the following types of purchases on campus, based on their anticipated cost, asset lifespan, and potential impact:

  • New buildings
  • Major building systems, including mechanical, electrical, roofing, and envelope systems
  • Central energy distribution systems
  • Vehicles

In addition, the following types of purchases should consider utilizing life cycle costing approaches and tools whenever possible and where the scale of a purchase justifies the process (i.e. a bulk purchasing contract):

  • Assets that have a 10-year lifespan or longer
  • Assets which use large quantities of electricity, natural gas, water, or fuel (eg. lab equipment, computing equipment, appliances)
  • Assets with high consumable or maintenance requirements (eg. printers, lab equipment, flooring/finishes)

 For clarity, it is not recommended that, from a materiality perspective, a full LCC be completed for small. Individual purchases in suggested scope areas. Rather, an LCC should be considered at the centralized contract or bulk purchase stage, which would influence those individual choices.

4. Accountability

Procurement – ensure completion of worksheet for required purchases; encourage procurement leads for suggested purchases; keep records of worksheets

Plant Operations – ensure completion of worksheet for required purchases; keep records of worksheets; support data input updates; audit findings

Sustainability Office – update worksheet for continuous improvement; maintain database of submitted LCC projects; report in aggregate on implementation

Purchasing Units – complete worksheet or utilize comparable calculation methodology as applicable to the project scope

5. General Principles

1. Transparency – This process adds transparency by documenting assumptions, clarification of generalities, and integrating stakeholders as appropriate.

2. Credibility – This process shadows appropriate external standards as applicable, for example ISO 15686-5, APPA/ANSI TCO 1000-1.

3. Comparability – This process helps standardize common cost schedules, such as energy, maintenance, discount rates, etc.

4. Operating Lifespan – This process ensures long-term thinking reflective of the full lifespan of an asset. For infrastructure projects, this will be a minimum of 20 years, and for all others a minimum of 10 years depending on the specific product or service. Shorter times can be included with justification.

5. Continuous improvement – Projects which have completed an LCC will be evaluated on a regular basis to help refine the assumptions and process of the Life Cycle Costing Calculator.

6. Holism – Using reasonable judgement, the process includes all appropriate costs over the lifetime of the asset, including operating, maintenance, and disposal costs.

6. Requirements

The following are specific requirements that need to be completed:

  1. Complete assessment framework for at least 1 option other than a business as usual or baseline option
  2. Fill out all values for life cycle costing categories relevant to the project, using the following formula imbedded within the Life Cycle Costing Calculator tool:

    TCO=(Capital Costs+Financing Costs+Lifetime Operating Cost+Lifetime Maintenance Costs+Disposal Costs)-Residual Value
  3. Submission of worksheet to appropriate procurement/construction partner (Plant Ops or Procurement)

Where the complexity of a project is not conducive to the formulas and/or methods imbedded within the Excel-based Life Cycle Costing Calculator, the project proponent can select an alternative tool or methodology, provided it follows the principles here and the process and assumptions outlined in the calculator.

7. Terms & Definitions

LCC/TCO – “Life cycle costing”, otherwise referred to as “Total Cost of Ownership”, is the full realized sum of relevant expenses to the University of Waterloo over the lifespan of an asset.

ISO 15686-5 – ISO Standard “Building and constructed assets – Service Life Planning, part 5: Lifecycle Costing” is an international standard outlining and defining approach to lifecycle costing, with particular focus on large infrastructure projects

APPA/ANSI TCO 1000 – 1/2 – Are standards developed by APPA developing key principles and approaches for calculation of total cost of ownership.