Life-Cycle Cost

Definition

A cost that takes into account both the first cost of a project element and other associated costs, such as costs of maintenance, replacement, fuel consumed, monetary inflation, and interest over the life of the object being evaluated. The cost is often identified in the course of a Value Analysis (often referred to as Value Engineering) review of a project.

Purpose

Life-cycle cost (LCC) considers the comprehensive costs associated with a project element over its entire lifespan. This approach ensures that all expenses, including maintenance and replacement, are factored into the financial planning and decision-making process.

Examples of Use

• Equipment purchasing: Evaluating the long-term costs of different machinery options, including maintenance and energy use.
• Building materials: Comparing the life-cycle costs of various roofing materials to select the most cost-effective option.
• Energy systems: Assessing the total cost of renewable energy installations versus conventional energy systems over time.

Related Terms

• First Cost: The initial expense of acquiring or constructing a project element.
• Maintenance Cost: The expense of keeping a system or facility in working order over its life.
• Replacement Cost: The cost of replacing a project element when it reaches the end of its useful life.

Notes

• LCC is crucial for budgeting and financial planning in long-term projects.
• It helps in identifying cost-saving opportunities and optimizing resource allocation.
• Regular review and adjustment of LCC estimates are necessary to account for changes in costs and economic conditions.