Study note on life cycle costing

Study note on life cycle costing

References with extracted contents

Raymond J Cole & Eva Sterner (2000) Reconciling theory and practice of lifecycle costing, Building Research & Information, 28:5-6, 368-375, DOI: 10.1080/096132100418519.

"Life-Cycle Costing (LCC) has traditionally been  considered as the means by which initial and operating costs are combined into a single economic figure to then be used as the basis for making informed and effective decisions. LCC provides a basis for contrasting initial investments with future costs over a specified period of time. The future costs are discounted back in time to make economic comparisons between different alternatives strategies possible";

"....  life-cycle costing has only found significant application in owner occupied facilities but, as Bordass alludes, in the rapidly changing global marketplace, this is a `diminishing client base’ for new commercial buildings (Bordass, 2000). In the absence of a LCC analysis, the initial cost remains as the sole litmus test dictating the economic acceptability of competing design strategies. The limited adoption of LCC appears to be fairly universal";

"LCC was first developed in the mid-1960s to assist the US Department of Defence in the procurement of military equipment. Later in the 1970s, it was used to assess and compare relative benefits of alternative energy design options in buildings and its principal current building application remains in this role. LCC involves the systematic consideration of all `relevant’ costs and revenues associated with the acquisition and ownership of an asset";

Marcel C. Smit (2012) A North Atlantic Treaty Organisation framework for life cycle costing, International Journal of Computer Integrated Manufacturing, 25:4-5, 44-456, DOI: 10.1080/0951192X.2011.562541.

"LCC [life cycle cost] analysis is recognised as an important part of the acquisition approach. Therefore, a number of nations have derived a national approach to cost analysis. E.g. United States use the Cost Analysis Guidance and Procedures (DoD 5000.4-M, 1992), United Kingdom published the forecasting guidebook (Ministry of Defence, 2009) and the Netherlands have a guideline for application of LCC analysis in defence acquisition projects (Aanwijzing. . ., 1998)";

"LCC is used in different ways, and the LCC approach applied by analysts and decision makers have necessarily an impact on its definition";

"Linked costs are costs that can be associated to the acquisition, operation, support and disposal of the system....  Non-linked costs are costs that cannot be readily associated to the system. Examples of non-linked costs are the costs for medical services, ceremonial units, basic general training (not related to a specific equipment), headquarters and staff, academies, recruiters, etc. Direct costs are costs referring to activities that can easily be allocated to a system or product. ..... Indirect costs are costs referring to activities that can be associated to several systems and cannot easily be distributed between them...... Variable costs are costs that are affected by the existence of the system. They fluctuate with a characteristic of the system. ..... Fixed costs are costs that do not vary because of the existence of the system. ";

M. van den Boomen, R. Schoenmaker & A.R.M. Wolfert (2017): A life cycle costing approach for discounting in age and interval replacement optimisation models for civil infrastructure assets, Structure and Infrastructure Engineering, DOI: 10.1080/15732479.2017.1329843.

"The international standard on infrastructure asset management (ISO, 2014) and the British Institute of Asset Management (IAM, 2015) both stress the importance of life cycle cost optimisation at a desired service level. The application of infrastructure life cycle costing (LCC) in practice is supported worldwide by several standards and guidelines";

"Although, LCC concepts are well-known, LCC analyses are still far from satisfactory in many fields in practice. Korpi and Ala-Risku (2008) only found 55 international LCC cases studies suitable for analysis out of a total of 205 potential articles. The authors concluded an overall unsatisfactory level of the execution of LCC analyses and specifically addressed the deterministic nature of most LCC case studies";

Andrés Navarro-Galera , Rodrigo I. Ortúzar-Maturana & Francisco Muñoz-Leiva (2011) The Application of Life Cycle Costing in Evaluating Military Investments: An Empirical Study at an International Scale, Defence and Peace Economics, 22:5, 509-543, DOI: 10.1080/10242694.2010.508573.

"According to ISO 15288, there are six life cycle phases of any investment in capital goods: concept, development, production, utilization, support and retirement. Nevertheless, the distribution of the total cost of a national defence investment project is concentrated in the utilization and support phases";

"Masiello (2002) held that with LCC analysis it is possible to identify the most significant cost generators and thus obtain the best combination of resources, while Ferrín and Plank (2002) claimed that LCC evaluation provided a long-term view, giving management a more accurate assessment of acquisitions";

Singh, D. and R.K. Tiong. 2005. "Development of life cycle costing framework for highway bridges in  Myanmar" International Journal of Project Management 23, Elsevier: 37-44.

"Life cycle costing is an economic assessment of an item, area, system or facility considering all costs of ownership over an economic life, expressed in terms of equivalent dollars [3]. It takes into account time value of money and reduces a flow of running costs over a period of time to a single current value or present worth (PW)";

"Life cycle costing can be used as a management tool or as a management system [4]. As a management tool it can be used intermittently throughout the economic life of the structure, whenever different options are available, to determine the alternative with the lowest LCC. On the other hand, as a management system in continuous operation it can be used to actively manage the asset throughout its service life";

"The main motivation to use LCCA [life cycle costing analysis] is to increase the possibility of cost reductions during operation and maintenance even if that means spending somewhat more during planning and development";