ABSTRACT
ABSTRACT Many probabilistic approaches have been proposed to deal with uncertainty in life cycle costing (LCC) analysis. However, most of the approaches are either mathematically complicated or require data that may not be available, and this could discourage people from incorporating uncertainty in LCC. This paper proposes a simplified approach to address uncertainty. It summarizes five commonly used probability distributions describing the LCC variables – cash flow, interest rate, timing of cash flows and asset lifetime - and reviews a range of methods for estimating distribution key parameters. With those parameters, Monte Carlo simulation can be performed to obtain the distribution of present worth. A case study on a building is worked in order to demonstrate the calculations and simulations involved. The proposed approach will help to achieve a wider application of probabilistic LCC analysis to infrastructure. The paper will be of interest to anyone involved with life cycle costing analysis.
