NCJ Number
65467
Date Published
Unknown
Length
209 pages
Annotation
LIFE CYCLE COSTING (LCC), ITS RATIONALE AND CORRECT USAGE, IS EXPLAINED IN THIS GUIDE FOR STATE AND LOCAL GOVERNMENT OFFICIALS RESPONSIBLE FOR PURCHASING.
Abstract
THE LCC OF AN ITEM IS THE TOTAL COST INCURRED IN THE RESEARCH, DEVELOPMENT, PRODUCTION, OPERATION, AND DISPOSAL OF AN ITEM. THE TOTAL COST OF OWNERSHIP IS THAT PORTION OF THE LCC WHICH IS INCURRED BY A USING AGENCY OR ORGANIZATION. HOWEVER, RESEARCH AND DEVELOPMENT COSTS ARE USUALLY IN THE SELLING PRICE OF AN ITEM SO THAT THE USER, IN EFFECT, INCURS SOME PORTION OF THOSE COSTS. USE OF LCC SHOULD HELP OBTAIN THE BEST PERFORMANCE FOR THE LOWEST TOTAL COST OF OWNERSHIP. THIS IMPLIES THAT COST/BENEFIT TRADE-OFFS MAY RESULT IN AN OPTIMUM RATHER THAN A MINIMUM LIFE CYCLE COST. A REVIEW OF A NUMBER OF COMPANIES FOUND THAT ALL OF THE COMPANIES USED LCC AND APPLIED IT TO THE EQUIPMENT ACQUISITION ANALYSIS PROCESS, THE RELATED LEASE VS. BUY DECISIONS, BID EVALUATION WHEN CONSIDERING POTENTIAL 4UPPLIERS, AND PRICING THE COST OF WARRANTIES ON A COMPANY'S OWN PRODUCT. ANSWERS TO FREQUENT QUESTIONS ON LCC ARE PROVIDED, EXPLANATIONS OF LCC FOR EQUIPMENT PROCUREMENTS ARE GIVEN, AND USE OF WARANTIES IN LCC IS DISCUSSED. ALSO CONSIDERED ARE COST MODELING FOR LCC, STRUCTURING LCC PROCUREMENTS, AND LCC IN SYSTEMS ACQUISITION. SELECTED STUDIES IN EQUIPMENT PROCUREMENT AND EXAMPLES OF APPROPRIATE CONTRACT CLAUSES ARE APPENDED. (PRG)