Focusing on Life Cycle Cost (LCC) and Life Cycle Assessment (LCA) in GPP Green Public Procurement (GPP) - Lead the change National Conference George Jadoun, 02 July 2010 Valletta, Malta

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Focusing on Life Cycle Cost (LCC) and Life Cycle
Assessment (LCA) in GPPGreen Public Procurement
(GPP) - Lead the changeNational
ConferenceGeorge Jadoun, 02 July 2010Valletta,
Malta


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Outline

• LCC (Life Cycle Cost) and WLC (Whole Life Cost)
• LCA (Life Cycle Assessment)

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What is Life Cycle Costing?

• Definitions in the BS ISO 156855 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

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LCC vs. WLC
ISO addresses the confusion over terminology
regarding the difference between whole life cost
(WLC) and life cycle cost (LCC)
Note Occupancy costs included in non
construction costs in BS ISO 15686-5
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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

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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

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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.

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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

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Clean Vehicles Directive 2009/33/EC

• Aim
• Market introduction of clean and energy
  efficient vehicles to improve the environmental
  performance of transport
• Approach
• Inclusion of life-time impacts in vehicle
  purchase on energy consumption, CO2, pollutant
  emissions

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

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Monetisation of Emissions
Cost for emissions in road transport
CO2 NO2 NMHC Particulate matter
0,03-0,04 /kg 0,0044 /g 0,001 /g 0,087 /g
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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/construct
  ion 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

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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

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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)

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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 140402006 Environmental management
  Life cycle assessment Principles and framework
• BS EN ISO 140442006 Environmental management
  Life cycle assessment Requirements and
  guidelines

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Life-Cycle Assessment

• Example
• Life cycle assessment of a detergent
• Includes impacts of
• Raw materials
• Manufacturing
• Use
• End-of-life

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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_at_itcilo.org