The impact of life‐cycle cost management on portfolio strategies

The US National Park Service (NPS) is responsible for the management of some of the most recognisable and notable natural and cultural resources in the USA. To make the case for additional maintenance funding, NPS is instituting life‐cycle cost management practices. Over the 50‐year life cycle of the Redwood Information Center at Redwood National and State Parks in Crescent City, California, custodial costs alone will sum to more than the total replacement construction cost for the entire facility. This point illustrates an important aspect regarding the true cost of operating and sustaining physical infrastructure over its life cycle. It also suggests that understanding life‐cycle costs is a critical element of effective, long‐term portfolio and asset management. Often, institutional owners of physical assets inadequately assess the true cost of building and owning facilities, typically overemphasising initial construction costs. Life‐cycle operations and maintenance (O&M) and capital renewal costs, however, almost always comprise a far greater percentage of total life‐cycle building costs. Using actual life‐cycle costs for an asset that is owned and managed by NPS, this paper explores the development of full life‐cycle costing, highlighting key life‐cycle cost drivers, of an information centre at the Redwood National and State Parks.