Uncertainty in life cycle costing for long-range infrastructure. Part I: leveling the playing field to address uncertainties

Abstract

Purpose Life cycle costing (LCC) is a state-of-the-art method to analyze investment decisions in infrastructure projects. However, uncertainties inherent in long-term planning question the credibility of LCC results. Previous research has not systematically linked sources and methods to address this uncertainty. Part I of this series develops a framework to collect and categorize different sources of uncertainty and addressing methods. This systematization is a prerequisite to further analyze the suitability of methods and levels the playing field for part II. Methods Past reviews have dealt with selected issues of uncertainty in LCC. However, none has systematically collected uncertainties and linked methods to address them. No comprehensive categorization has been published to date. Part I addresses these two research gaps by conducting a systematic literature review. In a rigorous four-step approach, we first scrutinized major databases. Second, we performed a practical and methodological screening to identify in total 115 relevant publications, mostly case studies. Third, we applied content analysis using MAXQDA. Fourth, we illustrated results and concluded upon the research gaps. Results and discussion We identified 33 sources of uncertainty and 24 addressing methods. Sources of uncertainties were categorized according to (i) its origin, i.e., parameter, model, and scenario uncertainty and (ii) the nature of uncertainty, i.e., aleatoric or epistemic uncertainty. The methods to address uncertainties were classified into deterministic, probabilistic, possibilistic, and other methods. With regard to sources of uncertainties, lack of data and data quality was analyzed most often. Most uncertainties having been discussed were located in the use stage. With regard to methods, sensitivity analyses were applied most widely, while more complex methods such as Bayesian models were used less frequently. Data availability and the individual expertise of LCC practitioner foremost influence the selection of methods. Conclusions This article complements existing research by providing a thorough systematization of uncertainties in LCC. However, an unambiguous categorization of uncertainties is difficult and overlapping occurs. Such a systemizing approach is nevertheless necessary for further analyses and levels the playing field for readers not yet familiar with the topic. Part I concludes the following: First, an investigation about which methods are best suited to address a certain type of uncertainty is still outstanding. Second, an analysis of types of uncertainty that have been insufficiently addressed in previous LCC cases is still missing. Part II will focus on these research gaps.

Infrastructure maintenance and replacement optimization under multiple uncertainties and managerial flexibility

“…The inclusion of uncertainty in maintenance and replacement optimization is an area under investigation. Frangopol (2011), Ilg et al (2017, and Scope et al (2016) classify core challenges as identifying the right sources of uncertainty and selecting appropriate methods to incorporate uncertainties. These authors also conclude that uncertainty modeling remains casespecific depending on type of data and quality of data.…”

“…The current study deals with infrastructure for which condition data are not available and failure data are scarce. Therefore, the current research proposes a deterministic approach to address asset deterioration related uncertainty (Scope et al 2016, Ilg et al 2017 combined with the probabilistic approach to model price uncertainties. An interesting direction for future research is the inclusion of a probabilistic uncertainty modeling of the failure rate.…”

“…Such optimization modeling is challenging for several reasons. First, acknowledging that uncertainties exist, the identification of the main uncertainty drivers is difficult given that such drivers can be related to the infrastructure integrity, the environment surrounding the infrastructure, and the costs associated with preserving the functions of the infrastructure (Ilg et al 2017, Sinha et al 2017, Lange 2018.…”

Model Estimation of the Whole Life Cost of a Building With Respect to Risk Factors

“…Division of risk factors by category and the entity directly related to them for residential buildings and service facilities (source: own study based on Zhi, 1995;N. A. Kartam & S. A. Kartam, 2001;Wiguna & Scott, 2006;Shevchenko, Ustinovichius, & Andruškevičius, 2008;Ilg, Scope, Muench, & Guenther, 2017;Oduyemi, Okoroh, & Fajana, 2016;Yuting & Carmichael, 2018) Building, implementation unfavorable weather conditions X X X X delays in the execution of construction works X X X X use of unsuitable building materials X X X X Financial absence (or delay) of payment for the works performed X X X X X X X loss of financial liquidity of the entity X X X X X X X rise in prices of building materials X X X X Political volatility in tax systems X X X X X X X volatility in the legislative system X X X X X X X instability of economic development X X X X X X X Ecological wrong design assumptions on environmental issues X X X X X lack of legislative system on environmental issues X X X X X X X variation of state position on environmental issues X X X X X X X Legal difficulty in obtaining permits X X X X X incompatibility with legal acts X X X X X X X discrepancies in documentation X X X X X Entity: IN -investor, D -designer, C -contractor; Life cycle phases: P -programming phase, I -implementation ph., O -operation ph., W -withdrawal ph.…”

Analysis of the Distribution Influence of the Density of Cost-forming Factors on Results of the LCCA Calculations

“…It covers the total cost of ownership, operation, and maintenance for a given building during a specific life span. The papers [6,9,10,11,12,13] presents LCCA analyses that account for risk and apply fuzzy logic. The calculation requirements are defined in the ISO 15686-5 standard "Buildings and constructed assets -Service life planning -Part 5: Life-cycle costing" [7].…”