The Harvard Life Cycle Costing policy and calculator was designed to aid Harvard decision makers in considering all present and future costs related to new construction, renovation, equipment replacement, or any other project that involves upfront and ongoing expenditures.
The methods used in the calculator correspond to ASTM Life Cycle Cost Analysis standards. Assumptions are Harvard-specific: utility rates are forecasted by Campus Services, and the discount rate used is Harvard’s internal interest rate (currently 8%). By using standard methodologies and assumptions, individuals and organizations across Harvard will be able to compare results and build confidence in their interpretations.
Life Cycle Cost Criteria
- Use a 20-year project lifetime
- Use a discount rate of 8% as recommended by the Finance Working Group and approved by the GHG Executive Committee (To be reviewed on an ongoing basis with quadrennial GHG Reduction Goal Review)
- Use total project costs net of incentives (e.g. utility rebates)
- Include maintenance and equipment replacement costs incurred during the 20-year lifetime
- Use Harvard-specific utility rates and utility escalation rates
- Use the expected inflation rate from the U.S. Energy Information Administration to escalate maintenance and other one-time costs
- Use Harvard-specific GHG emission conversion factors
- Use the Net Present Value and the Savings-to-Investment ratio to determine if a project is financially viable
- Rank financially viable projects by the 20-year GHG savings (avoided GHG emissions)
The correct use of this calculator, and accurate interpretation of the results, are critical to the proper implementation of Life Cycle Costing in the decision-making process. The Harvard Green Building Services Team provides training on how to properly use the Life Cycle Costing calculator developed as part of this policy.
(You can also view a PDF of the informational overview and training provided by GBS)
The Life Cycle Cost Calculator, and associated criteria and assumptions, were developed by the GHG Reduction Goal Finance Working Group convened in 2008 and was agreed upon and signed off on by the Financial Deans in each School.