Using Life Cycle Cost Analysis to control costs and inform project selection and development

by Mary Ebeling

A new report examining if and how state DOTs use Life Cycle Cost Analysis (LCCA) in project development and planning revealed that these types of tools see limited use by transportation agencies. New emphasis on performance-based planning and decision making is pushing more DOTs toward using LCCA, but national adoption remains limited—fewer than half the agencies surveyed for the report used this type of analysis. Additionally, while MAP-21 requires agencies to engage in LCCA, this effort is not tied to funding, possibly removing a sense of urgency for completing LCCA.

LCCA is an engineering economic analysis tool that allows transportation officials to quantify the differential costs of alternative investment options for a given project. LCCA can be used to study new construction projects and to examine preservation strategies for existing transportation assets. LCCA considers all agency expenditures and user costs throughout the life of an alternative, not only initial investments. More than a simple cost comparison, LCCA offers sophisticated methods to determine and demonstrate the economic merits of the selected alternative in an analytical and fact-based manner.

While many DOTs use this methodology for bridges and pavement analysis, LCCA is not commonly used at the project level. In-house capacity to develop project-based LCCA tools may be a factor, as most DOTs have experienced staffing reductions that affect their ability to devote time to developing new tools. LCCA can take its place alongside scenario analysis and other tools to help agencies better match investments to long-term goals and manage existing assets.

Mary Ebeling is a Transportation Policy Analyst at SSTI.