Benchmarking Life Cycle Costs, Embodied and Operational Carbon of Constructed Assets-Case Of International Standards
By Anil Sawhney, Director of the Infrastructure Sector, RICS
Anil Sawhney, Director of the Infrastructure Sector, RICS
Constructed assets account for nearly 40% of the global energy-related carbon dioxide emissions. Upfront embodied and operational carbon that contributes equally to these emissions must be reduced to address the rising climate change. Most governments, asset owners, and members of the construction supply chain have now announced lofty emission reduction targets, including in some instances setting net-zero targets. Due to this, the market is responding to an increase in demand for more sustainable buildings and infrastructure, and project owners see value in considering a whole-of-life view of their assets. However, two main obstacles remain in achieving these targets. First, the lowest first-cost procurement regime gives limited credence to the whole-of-life approach and total cost of ownership of the asset. The second challenge is the lack of consistent internationally agreed standards that allow a uniform method for classifying, defining, measuring, recording, analyzing, presenting, and comparing upfront embodied and operational carbon for constructed assets. So, what is needed? The industry requires a high-level classification system for life cycle costs and carbon reporting.
Numerous studies have recommended that unifying international standards are required within organizations and markets, and across markets, to provide consistent, comparable reporting and data. ICMS – international construction reporting standards – were initially developed by a 50 strong coalition of professional bodies and published in July 2017 (https://icms-coalition.org/). Following strong global adoption of the standards, the coalition decided to extend ICMS to cover life cycle costs.
Hence, ICMS 2nd edition, covering the whole project life cycle, presents a globally standardized way of cost reporting for portfolios, programs, and projects worldwide. The lifecycle costs (LCC) are (figure 1):
• Construction costs (CC): costs incurred by the construction works
• Renewal costs (RC): costs of renewals included in the capital rather than the revenue budget
• Operation costs (OC): costs incurred in the day-to-day operation of a built asset
• Maintenance costs (MC): costs of keeping a built asset in good condition
• End-of-life costs (EC): costs incurred when planning and managing the next step for a building when it is no longer in use
Figure 1: ICMS 2nd edition taxonomy
Lifecycle costs play a crucial role in the financial management of construction projects. They allow critical decisions to be made relating to longer-term and capital costs that ultimately affect asset performance, longevity, disaster resilience, and sustainability. ICMS is a high-level cost model for recording the lifecycle costs of a project and the constructed asset.
ICMS is to be used by designers, constructors, and facilities management experts, with the guidance of cost management professionals (see Figure 2).The current business model is highly transactional, with little motivation for the hundreds of designers, contractors, and suppliers to engage with each other at the early stages of a project or stay attached to and learn from the asset once it’s in use. This model can be changed by adopting a streamlined, high-level classification system that sets the whole-of-life worldview from the outset.
Figure 2: Life-cycle costs require interaction between the designer, constructor, and facilities management (FM) expert
The ICMS Standard Setting Committee has now embarked upon developing a third edition to incorporate carbon metrics reporting on construction projects. This edition of ICMS will be launched in the last quarter of 2021. The new edition of ICMS aims to provide a consistent whole-life carbon assessment and reporting structure for constructed assets, thereby promoting the reliability of whole life carbon assessments.
Combining the carbon reporting structure with the life cycle cost classification provides a unique benefit to evaluating trade-offs from the design stage until the end of life stage. This allows bringing people, processes, and technology together – particularly during the initial phase of a project when all stakeholders can come together to set expectations and prudently review all alternatives, including the lowest first-cost, carbon reduction, and best value over the life of the asset. Everyone benefits when, at the outset, the stakeholders meet to engage in the project’s key expectations and requirements. For example, assessing broader metrics for business cases across whole life outcomes, design quality, program, capital cost, and embodied and operational carbon at the briefing will allow clarity for a value-based lens through which to make decisions .
For stakeholders to apply a value-based lens on a project, we need standards to set benchmarks for comparison, the process to weigh and apply learnings, and technology to gather the required data according to the benchmarks (many of the measures already exist).
The construction sector is engaged in building assets of immense value as trillions of dollars are being spent each year. In the planning phase, in the construction phase, and throughout the asset’s lifecycle, listening and learning to project stakeholders, experienced professionals, and the public is an important way to ensure the asset is a positive addition to the built environment and these additions are in congruence with the Sustainable Development Goals and in line with initiatives such as the circular economy and digital transformation of the construction sector. We have great expectations for the construction and infrastructure sector to build smarter and leverage technology in the post-pandemic recovery to address social, environmental, and economic challenges. With new ways to use data to manage projects, we can benchmark life cycle costs, carbon, and social value while driving operational efficiencies.