Personal Property Life Cycle Costs,
BY LYLE HESTERMANN, CPPM, CF, HOOSIERS CHAPTER
What is the BIG DEAL about life cycle cost? Why do we need a Standard? Oh, and by the way, what is “life cycle cost?”
T he last time you purchased a major appliance such as a water heater or a refrigerator, did you examine the Energy Con- sumption sticker thereon to get an idea how much this new appliance might cost on an annual basis? If so, you were con- sidering a portion of the Life Cycle Cost of that item. The last time you were at a car dealership, did you notice the Esti- mated Annual Fuel Costs as well as the Manufacturer’s Suggested Retail Price? If so, you were considering portions of the Life Cycle Cost of that automobile.
Life Cycle Cost (LCC) is a term much bandied about. It is the subject of much research and more than a little vigorous discussion. Type “life cycle cost” into your favorite Internet search engine and you will be rewarded with, literally, hundreds of thousands of responses.
There is already an existing ASTM International standard1 for the life cycle cost of buildings. There already are many existing formulas for calculating life cycle costs,
A relatively recent executive order2 establishes agency Senior Real Property Officers and a Federal Real Property Council. One of the chief considera- tions for the Senior Real Property Offi- cers and the council is: “life-cycle cost estimations associated with the agency's prioritized actions.”
Let’s attempt to define LCC and then compare and contrast life cycle cost with the term Total Cost of Own- ership or TCO. Both terms are often used interchangeably.
It is difficult to find an agreed upon definition of the phrase Life Cycle Cost; however, variations of the phrase are everywhere, so let’s start there.
Webster’s Online Dictionary defines LCC as “The sum of all the costs both recurring and nonrecurring, related to a product, structure, system, or service during its life span or specified time period.”3
Another example comes from the Office of Government Compliance (OGC) United Kingdom’s (UK) “Suc- cessful Delivery Kit” website, which states: “Life Cycle Costing (LCC) also called Whole Life Costing is a tech-
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nique to establish the total cost of own- ership. It is a structured approach that addresses all the elements of this cost and can be used to produce a spend profile of the product or service over its anticipated life-span.”4
We can probably agree that “Life Cycle Costing” is more or less equal to “Life Cycle Cost Analysis.” However, we still haven’t defined “Life Cycle Cost.”
I define LCC as: “The sum of all costs associated with an item or group of items. These costs include not only the acquisition value, but also all activi- ties related to an item, from acquisition through utilization and disposition.”
How does this compare with TCO? The Gartner Group, credited with coining the term, defines it thusly: