InfoAsset Planner's fundamental analysis excels at prioritizing assets for intervention, and then systematically assigning interventions and detailed costs via a logic-based decision tree. Virtually any data that you have available can be used in this process. But what about forecasting forward in time?
The LCCA add-on in InfoAsset Planner Tier 3 and above expands on all the core analysis that has already been performed in InfoAsset Planner by monetizing Risk and forecasting costs into the future. LCCA evaluates the cost to operate, maintain, repair and replace pipes – these are the Total Ownership Costs for a pipe. By doing so, users have the ability to strategically evaluate the optimal time for intervention, from an economic standpoint.
Note: This is a long helpfile page. We suggest using the links on the right to navigate.
Requirements for a Successful LCCA Model
InfoAsset Planner Project
Sense of the Time-Value-Of-Money (TVOM) for you organization. Discount Rate vs. Inflation rate
InfoAsset Planner Rehab Actions (Renewals and/or Replacement)
InfoAsset Planner Rehab Costs (Renewals and/or Replacement)
Consequence of Failure (COFs) that correlate to unexpected failure
User-defined Operations and/or Maintenance Costs as a function of age vs. Cost (per diameter per unit length)
- Deterioration Results from InfoAsset Planner, or,
- User-defined curve as a function of Age vs. Failure Rate (failure times per year), per group of pipes (user-defined)
Each new LCCA model run may be referred to as a ‘Study,’ and each new Study may have alternative parameters (like different scenarios). An example workflow is as follows:
- Create and name a new study
- Define your project scope (for example, you may run a study on newer pipe only, as you know a population of pipes may already be past their optimal replacement age)
- Define you planning settings, such as how long into the future do you wish to analyze, will the discount rate and inflation rate be equal (as an example, this would represent the scenario where a utility must spend available funds and cannot examine the benefits of investing those funds to optimize replacement schedules). Also, what the ‘added life,’ that may be recognized as a result of …
- Choose which costs you wish to employ as the Marginal Costs portion of the Total Ownership Cost (Marginal Cost = Operations, Maintenance, Risk Costs)
- Define what the costs would be to Replace or Repair the pipes, absent of the Risk costs (these are the costs for intervention that’s would be planned, and omits the additional costs seen with unexpected failures)
- Run your analysis, and view results for individual pipes, or system wide
A new LCCA study includes both Present Value (PV) and Equivalent Uniform Annual Cost (EUAC) analyses. Both of these analyses perform nearly the same set of calculations, but present the information in different forms. PV studies total the costs and add them up over the course of the number of planning years, while EUAC studies divide theses same costs by the age of the pipe. PV graphs relate all cost data to total present value dollars; EUAC graphs report this same standardized costs, but on a yearly basis. Both studies are referred to as LCCA studies since the inputs and calculations are nearly identical. Both studies follow the steps described below.
Step 1 of 4: Defining the Study
Step 1 is the most self-explanatory of all. Here, users simply choose the ID for the study, write a Description, and choose the facility scope to be evaluated in the study.
Step 2 of 4: Planning Settings
Define you planning settings, such as how long into the future do you wish to run the analysis or if the discount rate and inflation rate should be equal (as an example, this would represent the scenario where a utility must spend available funds and cannot examine the benefits of investing those funds to optimize replacement schedules). In addition, here the user may specify the “Added Life,” that a pipe may obtain as a result of a renewal (intervention).
Current Year - The current year is used to calculate the “Current Age,” and will serve as the benchmark for budget planning and so forth into the future. The current year is the default, however, as you have the option of changing the ‘current year,’ (for example, you have very good historical data, and wish to ‘turn back the clock,’ and compare the results to that of actual expenditures).
Planning Years - The ownership cost will be calculated over the span of the planning years defined, however, only one single intervention will be calculated per LCCA Study. Various results may be viewed in “Present Value,” based on the Discount and Inflation rates inputted by you, and calculated over the entire planning period.
Discount Rate (%) - Refers to the interest rate used to determine the present value of future cash flows. The discount rate controls the increase in purchasing power based on saving money. Discount rate helps to balance out the inflation rate and determines how capital and marginal costs may increase or decrease over time. The discount rate is specified as dr in the equation below.
= Initial Cost
= Interest Rate
= Discount Rate
= Number of Years
Inflation Rate (%) - The approximate rate of decrease in the purchasing power of money.The rate at which costs will be expected to rise as a result of rising prices. In many ways, this is the opposite of the discount rate. Its use may also be seen in the equation above.
*Note: Inflation and Discount Rate are directly related. If Inflation is greater than the Discount Rate, the present value for the capital cost to replace or renew a pipe will increase as time passes. If the Discount Rate exceeds Inflation, this means that money saved and invested today will be worth more later. So the relative capital cost will decrease over time. If Inflation = Discount Rate, the the capital cost will not change over time.
Replacement / Renewal Option - (Only in Present Value Studies) Users can decide whether to run the analysis with only replacement as an option, only pipe renewals, or both. If both is selected, LCCA will determine if Renewal or Replacement is the optimal option for the specified time frame.
Renewal Added Years - (Only in PV Studies) Certain pipe interventions (repairs) restore the reliability of a pipe. There are two ways one might think of the effect of these interventions: either the intervention restores the pipe to a previous state (“turning back the clock”), or, the intervention adds life to the pipe (“added life”). Either way, the effect is the same in that a pipe’s reliability/condition has been restored. The “Renewal Added Years” allows you to specify exactly how big of an effect the renewal option is allowed to have. A renewal of 50 years is much closer to an entire pipe replacement than a renewal of 10 years.
*Renewal is only an option in PV studies as EUAC studies do not consider renewal. Instead, EUAC studies only compare replacement to continued maintenance costs.
Step 3 of 4: Marginal Costs
Marginal costs are costs that will be incurred simply as a function of ownership of the asset (maintenance costs, and possibly operating costs) + unexpected failure costs. Simplistically, the Marginal Costs = Operations Costs + Maintenance Costs + Risk Costs
Operation Cost and Maintenance Cost
The Operations and Maintenance costs are user-defined, and furthermore, you may decide if either or (one, both, or neither) are applied.
- To choose to apply either cost to the overall Marginal Cost simply check or uncheck the applicable box.
- To edit the costs themselves, simply select the Operations… or Maintenance Cost Setting… Box.
The Operations and Maintenance Cost tables are simple, user-defined, cost tables. The cost tables function as follows:
- Select a Cost Unit. Note that the same six cost unit options available in the Rehab Actions and Cost window are available here.
- Select a Grouping Field (if you wish to differentiate different costs per different groups of pipes). This function is optional.
- IF you have selected a Grouping Field, THEN select individual groups (distinct values from the specific field you selected in Step 1) from the drop-down menu. You can now set individual curves for each of the groups.
- Lastly, the Age vs. Cost Table
- The table requires at least three (3) entries
- Pipe ages between the entries will be linearly interpolated
- Costs are calculated based on age and the cost unit the user specified.
The default table in LCCA specifies that a pipe costs $0.01 per year per diameter unit until year 50. Then it increases to $50 by year 70 and then $1.00 by year 120. Using this default table as an example, a 6”, 70-year-old pipe would yield an annual operations cost of $3 (and obviously this cost will increase every year as a function of the age of the pipe). Innovyze does not claim that this is an accurate (or inaccurate) estimate, this is merely a default value so that the tool has non-nulls. It is the user’s responsibility to populate the table and values as they see fit.
Beyond the more apparent economic costs associated with maintenance and operation, users may wish to apply additional risk costs. The Risk Cost option of the Marginal Cost allows users to specify this additional, user-defined cost. This Risk Cost will be equal to the Rehab. Action for Repair (1) multiplied by the Failure Rate (2). Essentially this risk cost is the user-defined emergency repair cost of a broken pipe multiplied by the chance off actual occurrence.
Rehab. Action for Repair costs could include the following components:
Consequence of Failure Cost
Emergency Repair Cost
Social Cost of Repair
Loss of Service Cost
The costs referenced by the Risk Cost setting can be manipulated in the Rehab Actions and Costs window. Simply use the dropdown to select a Rehab Action to account for this Repair Cost or click the ellipsis button to go directly to the Rehab Actions and Costs window.
In the Rehab Actions and Costs window, users can add whatever components they wish to set the Rehab. Action for Repair Cost. Look at the example below. In this example, the Replace_LCCA cost has been applied as the Rehab. Action for Repair. This Rehab Action has two associated Rehab Methods/Cost Components: REPLACEMENT and Critical_Facility_Hospital. This means that both Cost Components have been included as part of this Risk Cost.
In the Rehab Method/Cost Component tab, the user can see and edit the REPLACEMENT and Critical_Facility_Hospital cost components. Below is the Critical_Facility_Hospital cost component.
Notice that the cost changes depending on the score received from the Proximity to Hospitals CoF. A pipe receiving a score of 0 from the Proximity to Hospitals CoF may only have a risk cost of $10 per foot, while a pipe receiving a score of 8 from the same CoF may have its risk cost increase to $20 per foot. In this way, users can increase the Risk Cost for pipe failures closer to hospitals. This same principal can be applied to any number of parameters users may wish to incorporate into their LCCA models.
Once the Rehab. Action for Repair is set, users can specify the Failure Rate to complete the Risk Cost calculation. Users have three options here:
Set the failure rate curve based on a Deterioration model already created within InfoAsset Planner.
Set or create new custom defined, user input failure curves for specific groups of pipes
Import already created curves for each pipe in the network. With this option, each individual pipe may have a unique failure curve
With the first option, users can simply select a previously generated Deterioration model as the Failure Rate. Both Cohort and Regression analyses generate Failure Rate curves so either are available in this dropdown. The difference is cohort models will be grouped by whatever grouping field was used in the cohort, while regression analyses will calculated different failure rate curves for each individual pipe based on the variables specified in the sensitivity analysis.
Using the second option, Failure Rate by Group, users can define failure rates either for the entire system or based on attribute data such as material or diameter. After clicking the following window will open.
In this default graph, users can see that the starting failure rate is 0 for a pipe age of 0, 0.01 for a pipe age of 20, and so on. This Failure Rate and its interpolation points is what will be multiplied by the Rehab. Action for Repair cost to calculate total Risk Cost. This Failure Rate window also has options to add or remove rows , export or import a failure relationship from a .csv file , save , and set the currently selected failure relationship as the default for all grouping types .
Finally, some users may already have a table from another outside statistical analysis which provides failure curves for individual pipes. Users can leverage this information with this final option. Users need to simply specify the table and the unique ID from that table which relates to the unique pipe IDs in InfoAsset Planner. Then users can select the fields from within the table which relate to Pipe Age and the Failure Rate for that pipe age. So if there were three data points a user wanted to bring in, there might be three rows in this table, a row for Year 2025 and its failure rate field for all pipes, a row for 2035 and its failure rate field, and a final one for 2050 and its failure rate for example.
Step 4 of 4: Capital Costs
Capital Costs are the replacement or renewal costs which are compared to the marginal costs. Generally, capital costs, either for pipe replacement or renewal, should decrease over time. This is because the cost managers are saving the money and allowing it to accumulate interest if they put off capital expenses. Step 4 allows users to set the Replacement and/or Renewal Costs depending on the settings set by the user in Step 2.
Like in Step 3, these costs are bundled into selected Rehab Actions within the Rehab Actions and Costs window. These costs can very simple or complicated depending on the user preferences in the Rehab Actions and Costs window.
Unlike in Step 3, these costs are not multiplied by a Failure Rate curve. After clicking ‘Run’ in this last window, the LCCA solution graph should be generated.
Once users have completed an LCCA study, a Life Cycle Budget Study can also be created and saved in the LCCA tab. Life Cycle Budget Studies allow users to look at their pipes in the aggregate instead of separating them out individually. These budget studies are based off all the data already included in a standard LCCA study, but also include budgeting information as well. When users right-click and select New, the following window will appear.
In this window, users can select variables related to the overall capital and planning budget. Users can specify:
- The time window they want to evaluate (Budget Period),
- The initial annual budget (Initial Annual Budget),
- How it should grow (Budget Increasing Interval, Budget Increasing Rate), and
- What amount of flexibility the study should be given in reconciling the fixed budget with the suggested rehab years for pipe maintenance (Plan Forward Tolerance). This flexibility allows LCCA to try to schedule pipe replacement or renewal before the optimal time period if there is existing budget available.
Pipes will ideally all be replaced or renewed in the optimal year based on the LCCA study, but given budget constraints, the budget planning tool sometimes will need to choose a second best year.
Note also that the Budget Period may be different than the Planning Period within the original LCCA or EUAC analysis which the Budget Plan is based on. This could lead to more Repair Only suggestions if the Budget Period is shorter.
After running an LCCA analysis, there are many reporting options available for the user to analyze. Some graphs look at each individual pipe, while others can look at all the pipes in an analysis, while still others can group pipes via diameter or material. Results can be viewed as customizable graphs and exported as pictures, or as tabular results which can be queried and brought into Excel. These output options are available by right-clicking and selecting 'Reports' after producing a Present Value, Equivalent Uniform Annual Cost, or Life Cycle Budget Study.
Chart Options/Cost Value Base
Many graphs from the LCCA output will have options for displaying breaks in the charts, as well as the option to choose how costs are displayed.
- Real Dollars/Constant Value Dollar/Present Value Dollars: same or constant purchasing power over time.
- If current cost of pipe replacement $100,000, future cost of pipe replacement is also $100,000, in terms of real dollar.
- Nominal Dollars/Actual Dollars: reducing purchasing power over time due to inflation.
- If current cost of pipe replacement is $100,000, next year’s cost of pipe replacement is $104,000, in terms of nominal dollar if inflation rate (i) is 4%.
LCCA Solution Graph
The LCCA Solution Graph displays the fundamental results of LCCA. This single ‘graph,’ has three (3) panels:
- The table. This displays each pipe that was analyzed. Each field may be sorted in this table.
HINT: Sorting the “Optimal Year” field by descending values, will reveal pipes with economic life remaining, from most life to least life remaining. These pipes, if their “Optimal Year” is still in the future, have not yet hit the ‘crossover point’ where it is more economical to replace the pipe rather than maintain it. The “Optimal Year” reflects the year where all costs (replacement, operating, maintenance, and risk costs) are minimized in terms of present value dollars.
- Selecting a single pipe from the report (on the LEFT) will reveal results for that individual pipe to the RIGHT. The graph in the top-right corner displays the three (3) fundamental aspects of LCCA:
- Marginal Costs (Operation, Maintenance, and Risk Cost)
- Capital Costs (Replacement or Renewal)
- Total Ownership Cost (the sum of all costs). The Optimal Renewal or Replacement time is when Total Ownership Cost is at its minimum.
Note that each year in this graph displays an alternative cost/method for Total Ownership Costs over the Planning Period. Costs are not annualized in this graph, they are summed. The Optimal Replacement or Renewal age as defined by LCCA will always be at the minimum point on the curve. If no minimum inflection point is found, Repair Only may be suggested as the Optimal Option because Capital Costs do not make sense in the set Planning Period.
- The vertical line in the top-right graph shows the optimal year of pipe replacement. Users can add their year of replacement to compare the optimal year to their specified year. This vertical line corresponds with the bottom graph as well. The bottom graph compares repair only costs with the ownership costs. If users select a custom replacement year, they will see the addition of a third set of columns. Generally, when looking at this graph, users should see that although replacement costs a lot for one year and creates a spike, it saves money in the long term in the form of reduced annual repair/marginal costs.
Present Value Graph Types
LCCA Detail Report
This report concisely displays all costs and multipliers that are reflected in the graphs, for each pipe that was analyzed in a given LCCA Study. This report can easily be exported to Excel or as a PDF if desired.
Optimal vs. Repair Only Expenditure Graph
Instead of displaying costs on a pipe-by-pipe basis, this graph sums the total cost, on an annual basis, of all the interventions per year. Here, we see spikes of potential investment needs. While these spikes occasionally exceed repair only costs, over the long term they should show the benefit of replacing pipes at optimal times.
Cumulative Optimal vs. Repair Only Expenditure Graph
This graph is similar to the Optimal vs. Repair Only Expenditure Graph, but instead of showing costs on a year-by-year basis it adds costs over time to show the potential benefits of the optimal replacement plan.
Optimal Expenditure by Diameter or Material Graphs
These two graphs show the cost per diameter/material within each year. Graphs identify the different diameters or types of materials based on the pipe attribute table.
Optimal Expenditure by Marginal / Capital Cost
This graph compares the yearly marginal (Marginal = Operating + Maintenance + Risk costs) cost expenses to the yearly capital cost expenses.
Optimal Marginal and Optimal Capital Expenditure Detail Graphs
The Optimal Marginal graph compares the yearly costs associated with risk, operations, and maintenance. The Optimal Capital graph compares the yearly costs associated with either replacing or renewing pipes.
Optimal Replacement and Optimal Renewal Expenditure Detail Graphs
These two graphs detail the sources of the replacement and renewal costs.
Total Length to be Replaced/Renewed
Shows the length of pipe to be replaced over the length to be renewed. This is a way to relate how much replacement vs. renewal pipe your study is suggesting.
EUAC (LCCA) Solution Graph
The EUAC graph looks very similar to the LCCA Solution Graph. In general, it uses the same exact data and is a pipe-by-pipe analysis like the LCCA Solution Graph. The difference is that the EUAC graph divides the ownership cost by age of the pipe.
The EUAC Solution Graph also shows three vertical lines: Current Age, New Pipe Economic Life, and Optimal Replacement Age. Current Age and Optimal Replacement Age show the current age of the original pipe and the optimal age to replace or renew this first pipe. New Pipe Economic Life shows the expected economic life expectancy until the replacement pipe should itself be replaced. This New Pipe Economic Life result allows for the same pipe to be replaced multiple times in an EUAC simulation. This is different than the Present Value or LCCA Solution Graph which will only show one replacement per pipe over the time period.
LCCA analysis focus on present value and finding the lowest ownership cost over a set time period, while EUAC analyses focus on finding the lowest ownership cost on an annual basis. Optimal Cost vs. Repair Only costs do not dictate pipe replacement in EUAC, as opposed to LCCA. In EUAC, the Optimal Cost may be greater than Repair Only costs over a set time period, however, it is the annualized replacement (Replacement EUAC) and annualized marginal costs (Marginal EUAC) which dictate the New Pipe Life and Optimal Age for replacement.
Life Cycle Budget Study Graphs
Life Cycle Budget Study Graphs look at pipe costs in an aggregate form. Users can look at marginal costs, compared to capital costs, compared to the overall budget and surplus all in one graph. These graphs are great ‘big picture’ tools users can leverage to make long-term budgeting decisions.
Budget Detail Report
This report concisely displays LCCA suggested capital costs and timing compared to when these life cycle replacements and renewals should best fit in the given budget. Original solutions from the LCCA or EUAC analysis are compared to the Suggested solutions when taking the budget constraints and time period into consideration. This report can easily be exported to Excel or as a PDF if desired.
Budget Study Graph
The main output from the Life Cycle Budget tool, this graph shows the expenses against the budget the user set for the defined planning years. Surplus is represented by the blue line and is simply the different between total expenses and the total budget. Surplus can be negative.
Budget Expenditure Graph
The Budget Expenditure Graph shows the costs per year of the Budget Study. This graph can be customized to look at pipes by diameter, material, or other criteria. Note that this graph will not work if surplus is negative or expenditure is zero.
Cumulative Budget Expenditure vs. Optimal Expenditure Graph
This graph is two graphs which shows two things: the top graph compares the optimal expenditure to the expenditure possible given the budget restraints, while the bottom graph shows what percentage of pipes exceed a certain age with each budget. Users can adjust the pipe age cutoff and adjust what type of dollars are evaluated with the Cost Value Base... option.
Surplus Comparison Graph
The final graph is a comparison graph users can apply to compare Life Cycle Budget Studies. With this graph, users can compare surpluses calculated by each Life Cycle Budget Study. If only one study is selected, the entire Life Cycle Budget Study will be shown. This graph can be accessed by right-clicking the icon.