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Life Cycle Cost

Overview.

Life Cycle Cost (LCC) is also known as Total Cost of Ownership (TCO), Through Life Cost (TLC), Total Life Cycle Systems Management (TLSCM), and Economic Analysis (EA). These are the main terms that most people are familiar with; but, you will occassionally come across lesser used terms.

We have a long background in life cycle cost matters. This includes experience with software tools and development of spreadsheet models. More importantly, we have the right intellectual skills to deal with life cycle cost models. The most important skill is to be able to think about what needs to be modelled and how to model it before modelling. One of the critical tasks is to select a model to suit the problem rather than define the problem to suit the model.

Life cycle cost is just that: the estimated cost over the life cycle of the project or equipment. This is often at odds with the short term accounting timeframe. Life cycle cost is more long term. It is counter intuitive to consider the 50 year costs of a project in terms of the current 90 day accounting cycle. The accounting is important; but, it must have the life cycle focus and not just the immediate timeframe.

Modelling Phases

There are three separate types of life cycle cost modelling, and they are all used at different phase of a project.

• Parametric Cost Estimation
• Analogous Cost Estimation
• Direct Cost Estimation

The main mistake made in life cycle cost modelling is to try and make one model fit all situations. Rarely will that work. These modelling levels can align to the three types of plans with which we are all familiar.

• Strategic Plans
• Operational Plans
• Tactical Plans

Just as there are different skills to develop these plans, so different skills must be applied for the life cycle cost assessment.

Our Life Cycle Cost Services

• Predictive costing
• Through life concept development
• Modelling philosophy
• Model development or selection
• LCC process review
• Alignment with relevant standards
• LCC plans
• LCC analysis
• Cost driver studies and analysis (e.g. FMECA, LORA, RCM, energy, etc)

For more information about these life cycle cost services, please contact me.