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Focusing on Life Cycle Cost (LCC) and LifeCycle Assessment (LCA) in GPP

Green Public Procurement (GPP) - Lead the changeNational Conference

George Jadoun, 02 July 2010Valletta, Malta



Outline

LCC (Life Cycle Cost) and WLC (Whole Life Cost)

LCA (Life Cycle Assessment)



What is Life Cycle Costing?Definitions in the BS ISO 15685:5is:

Life cycle costing « is a methodology for the systematic economic

evaluation of the life cycle costs over the period of analysis, as defined inthe agreed scope. Note: life cycle costing can address a period of analysiswhich covers the entire life cycle, or selected stage (s) or periods of interesttherein·.

Whole life costing « is a methodology for the systematic economicconsideration of all the whole life costs and benefits over the period ofanalysis, as defined in the agreed scope «



LCC vs. WLC

Note ² Occupancy costs included in non construction costs in BS ISO 15686-5

ISO addresses the confusion over terminology ² regarding the differencebetween whole life cost (WLC) and life cycle cost (LCC)



Why should we use LCC?The most common misconceptionabout GPP is that green productscost more

However, upon closer inspection,this may not necessarily hold true

The higher initial price of thegreener product is more thancompensated by the much lowerusage and disposal costs



Using LCC

U se of LCC is not mandatory under the EC procurement Directives,however if contracting authorities wish to ascertain which product,among alternatives, is the most cost effective then they need to apply

LCC approaches in their procurement award decisions.

This means comparing not just the initial purchase price of a product,but also the future costs:

U sage costs (energy/water consumption, consumables such as ink

or paper)

Maintenance costs

Disposal costs/resale value



Examples of LCCWhen the environmental authorities inHamburg , Germany, substituted two oldinefficient lamps with one energy-efficient lamp in 300 public buildings,they reduced the annual electricityconsumption by approx. 4.5 million kWh(an equivalent of approx. 2,700 t of C O 2emissions).

Assuming a price of 5 cents per kWh, thisequates to an annual saving of ½225,000on Hamburg's electricity bill.



LCC in ConstructionRunning costs may constitute up to 85% of total costs

O n same scale, design costs are likely to be 0.3% to 0.5% oflifetime costs

It is through the designprocess that the largestimpact can be made on the85% figure

So LCC should be astandard procedure forconstruction work



Clean Vehicles Directive2009/33/EC

AimMarket introduction of clean and energy efficientvehicles to improve the environmental performanceof transport

ApproachInclusion of life-time impacts in vehicle purchase onenergy consumption, C O 2, pollutant emissions

ScopeRoad transport vehicles purchased bycontracting authorities and entities, andoperators under public service obligation

for passenger transport



Monetisation of Emissions

C O2 NO2 NMH C P articulatematter

0,03-0,04 ½/kg 0,0044 ½/g 0,001 ½/g 0,087 ½/g

C ost for emissions in road transport



How can your organisationuse LCC?

Identify types of procurement for which LCC is appropriate (e.g. buildings,energy and water consuming equipment)

Create a nucleus of specialist staff who will be responsible for procurementof equipment/construction where LCC award methodology is appropriate

Incorporate a requirement for LCC into your procurement policy ² so that itbecomes a systematic part of the procurement process

Provide training in the use and advantage of Life Cycle Costing as a tenderevaluation method

Gain experience in using LCC, and adapt it for your needs



Benefits of using LCCThere are many benefits fororganisations in using Life Cycle Costingon a sys tematic basis:

Greater transparency of future costsMore effective evaluation ofcompeting options ( bes t value for money )Better forecasting of future

expendituresIn summary, life cycle costing supportsyour responsibility to the community touse public funds wisely and sustainably



Introducing Life-CycleAssessment

LCA provides ¶a systematic set of procedures for compiling and

examining the inputs and outputs of materials and energy and theassociated environmental impacts directly attributable to the functioning

of a product or service system throughout its life cycle.

(adapted from BS EN ISO

14040, 3.2)



Life-Cycle Assessmentmethodology

U nderpins the development ofeco-label criteria

Scientific basis - can be complexO ften carried out by specialisedfirms or by consultants on behalfof companies

LCA is the basis for P roduct andService prioritisation which arethereafter incorporated in theNAP taking into consideration, thescope for environmentalimprovement, the marketreadiness, the political context,affordability, etc.

ISO Standards

BS EN ISO 14040:2006 Environmentalmanagement ² Life cycle assessment ²

Principles and framework

BS EN ISO 14044:2006 Environmentalmanagement ² Life cycle assessment ²

Requirements and guidelines



Life-Cycle AssessmentEx ample :

Life cycle assessment of adetergent

Includes impacts of:

Raw materialsManufacturingU seEnd-of-life



Thank you for your attention!

http://ec.europa.eu/environment/gpphttp://www.itcilo.org/gppPlease visit:

George JadounSustainable Development & [email protected]

2_ lcc and lca - gjadoun 02-07-2010

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