What Is a Lifecycle Cost Analysis for Infrastructure?

Picture an iceberg. Only the tip, construction cost, is visible. Beneath the waterline lurks decades of maintenance, energy, rehab, user delays, and end-of-life disposal. Life-Cycle Cost Analysis (LCCA) is the flashlight that lets planners see below the surface and pick the most cost-effective design before the first shovel hits the ground.

The American Society of Civil Engineers (ASCE) 2024 economic study associates infrastructure investment with large economic benefits (trillions) over time. They also advocate for life-cycle cost analysis as a planning tool for infrastructure. In our work with state DOTs, ports, and utilities, Camali Corp has helped clients uncover 10-40% total-life savings simply by evaluating costs over time.

Quick Definition & Why It Matters

Life-Cycle Cost Analysis is a systematic process for evaluating the total economic worth of a road, bridge, water, or power asset by analyzing initial and future costs, discounted to present value, over a defined period (typically 20–50 years).

Why planners care:

• Cuts total ownership cost, not just bid price
• Compares competing design options on equal footing
• Builds a data-driven case for resilient materials such as corrosion-resistant rebar
• Demonstrates fiscal stewardship to taxpayers & bondholders
• Meets emerging legal mandates (e.g., FHWA supports and provides guidance on LCCA for pavement and other infrastructure decisions)

The Hidden Cost Iceberg

Camali’s project database shows operations & maintenance (O&M) can reach 4× construction cost for buried water assets. Skip the math and you risk chronic budget overruns, emergency repairs, and premature replacement.

The 6-Step Lifecycle Cost Analysis Methodology

Step 1 – Define the Analysis Period

Choose a timeframe long enough to capture at least one major rehab cycle. Example: 30 years for arterial asphalt pavement or 50 years for bridge decks.

Step 2 – Identify Mutually Exclusive Alternatives

Example roadway set:

• Alt A: 5-in standard HMA asphalt
• Alt B: 7-in polymer-modified asphalt
• Alt C: 9-in continuously reinforced concrete pavement (CRCP)

Step 3 – Estimate Agency & User Costs

You estimate both agency costs and user costs for each alternative. Agency costs include everything the agency will spend over the life of the project, such as design, construction, maintenance, rehabilitation, and even the residual or salvage value at the end of the analysis period. You also estimate user costs, which are the costs to drivers and travelers caused by things like higher vehicle operating expenses, travel delays from work zones, and the risk of crashes during maintenance activities. Work-zone crash costs are sometimes overlooked, but can be significant on busy corridors like interstates or high-traffic arterial roads.

Step 4 – Discount to Present Value

Convert all future cash flows to what they are worth in today’s dollars. This process is called discounting to present value and it uses a real discount rate (national average ≈ 3%) to account for the fact that money in the future is worth less than money today because of the time value of money. A discount rate is usually based on prevailing interest rates minus expected inflation, and real rates for public projects often fall in the low single digits. For each future cost, you divide that amount by one plus the discount rate raised to the power of the number of years until the cost happens. This tells you what those future costs are worth right now, which makes it possible to compare different design or maintenance alternatives on the same basis.

PV = Future Cost / (1 + r)^n

Step 5 – Compare Metrics

Compare the economic results of your alternatives. The main measure most analysts use is net present value (NPV), where all costs and benefits over the life of the option are converted into today’s dollars and then compared. If one alternative shows a higher net present value than another, it generally means it provides better long-term value. Analysts also often look at the benefit-cost ratio, which compares the present value of benefits to the present value of costs, and they may use an equivalent uniform annual cost (EUAC) to turn total costs into a consistent yearly figure that is easier to compare across options. These measures help you understand not just the raw costs but the relative value each choice offers over time.

Step 6 – Perform Sensitivity & Risk Analysis

Vary fuel prices, traffic growth, material escalation, and discount rates. A Monte Carlo simulation tests 5,000 scenarios to see which design is most likely the cheapest.

Case in point: For a Midwestern freeway, Camali found polymer-modified asphalt (Alt B) cut NPV 14% vs. standard asphalt, even though bid price was 9% higher.

Real-World Examples Across Sectors

ROI & Benefits for Owners, Engineers & Taxpayers

• 10–40% total cost savings observed across Camali’s 2020-24 portfolio
• Aligns with ESG goals, lower energy and carbon footprints
• Builds credibility with rating agencies and private financiers
• FHWA: Every $1 spent on pavement preservation saves $6–10 in future rehab.

Common Pitfalls & How Camali Helps You Avoid Them

Next Step: Talk to Our Team

Need help on a complex corridor, port, or microgrid? Book a 30-min strategy call with our Infrastructure Economics team.

Over the past decade, Camali Corp’s work with state transportation agencies, ports, and utilities has shown how applying life-cycle cost analysis can uncover meaningful long-term value and guide smarter investment decisions that save money and improve infrastructure outcomes. Learn how our Infrastructure Economics team uses lifecycle principles. This includes UPS systems with easy UPS Maintenance Services that have saved clients money.