Focusing on Life Cycle Cost (LCC) and Life Cycle Assessment (LCA) in GPP Green Public Procurement...

Focusing on Life Cycle Cost (LCC) and Life Cycle 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 15685:5 is:

Life cycle costing … is a methodology for the systematic economic evaluation of the life cycle costs over the period of analysis, as defined in the agreed scope. Note: life cycle costing can address a period of analysis which covers the entire life cycle, or selected stage (s) or periods of interest therein’.

Whole life costing … is a methodology for the systematic economic consideration of all the whole life costs and benefits over the period of analysis, as defined in the agreed scope …

LCC vs. WLC

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

ISO addresses the confusion over terminology – regarding the

difference between whole life cost (WLC) and life cycle cost (LCC)

Why should we use LCC?

The most common misconception about GPP is that green products cost more

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

The higher initial price of the greener product is more than compensated by the much lower usage and disposal costs

Using LCC Use 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:

Usage costs (energy/water consumption, consumables

such as ink or paper)

Maintenance costs

Disposal costs/resale value

Examples of LCC

When the environmental authorities in Hamburg, Germany, substituted two old inefficient lamps with one energy-efficient lamp in 300 public buildings, they reduced the annual electricity consumption by approx. 4.5 million kWh (an equivalent of approx. 2,700 t of CO2 emissions).

Assuming a price of 5 cents per kWh, this equates to an annual saving of €225,000 on Hamburg's electricity bill.

LCC in Construction

Running costs may constitute up to 85% of total costs

On same scale, design costs are likely to be 0.3% to 0.5% of lifetime costs

It is through the design process that the largest impact can be made on the 85% figure

So LCC should be a standard procedure for construction work

Clean Vehicles Directive 2009/33/EC

AimMarket introduction of clean and energy efficient vehicles to improve the environmental performance of transport

ApproachInclusion of life-time impacts in vehicle purchase on energy consumption, CO2, pollutant emissions

ScopeRoad transport vehicles purchased by contracting authorities and entities, and operators under public service obligation for passenger transport

Monetisation of Emissions

CO2 NO2 NMHC Particulatematter

0,03-0,04 €/kg

0,0044 €/g 0,001 €/g 0,087 €/g

Cost for emissions in road transport

How can your organisation use 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 procurement of equipment/construction where LCC award methodology is appropriate

Incorporate a requirement for LCC into your procurement policy – so that it becomes a systematic part of the procurement process

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

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

Benefits of using LCC

There are many benefits for organisations in using Life Cycle Costing on a systematic basis:

Greater transparency of future costs

More effective evaluation of competing options (best value for money)

Better forecasting of future expenditures

In summary, life cycle costing supports your responsibility to the community to use public funds wisely and sustainably

Introducing Life-Cycle Assessment

LCA provides ‘a systematic set of procedures for compiling and

examining the inputs and outputs of materials and energy and

the associated 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 Assessment methodology

Underpins the development of eco-label criteria

Scientific basis - can be complex

Often carried out by specialised firms or by consultants on behalf of companies

LCA is the basis for Product and Service prioritisation which are thereafter incorporated in the NAP taking into consideration, the scope for environmental improvement, the market readiness, the political context, affordability, etc.

ISO Standards

BS EN ISO 14040:2006 Environmental management – Life cycle assessment – Principles and framework

BS EN ISO 14044:2006 Environmental management – Life cycle assessment – Requirements and guidelines

Life-Cycle Assessment

Example:

Life cycle assessment of a detergent

Includes impacts of:

Raw materials Manufacturing Use End-of-life

Thank you for your attention!

http://ec.europa.eu/environment/gpp http://www.itcilo.org/gpp

Please visit:

George Jadoun

Sustainable Development & Governance

ITCILO

g.jadoun@itcilo.org