LifeCycleCosting

Lifecycle costing, also known as life-cycle costing (LCC), is a systematic approach to estimating and evaluating the total cost of ownership of an asset over its entire life cycle. It extends beyond initial purchase price to include all costs incurred from design and acquisition through operation, maintenance, renewal, and eventual disposal.

Key cost components typically include purchase or construction expense, installation and commissioning, financing costs, operating costs (such as energy, fuel, and consumables), routine and major maintenance, repairs, downtime, replacements or refurbishments, and end-of-life costs like decommissioning and salvage value. Inflation, taxes, and the time value of money are usually accounted for through discounting, yielding present value or net present value for comparisons.

Process commonly involves scoping the study, identifying life-cycle phases and cost drivers, collecting reliable cost data, modeling cash flows, and performing sensitivity or uncertainty analyses. Methods range from deterministic estimates to probabilistic techniques (for example, Monte Carlo simulations) to reflect risk and variability. The objective is to compare alternatives on an equivalent economic basis and inform decisions about design, procurement, operation, or maintenance strategies.

Applications span many sectors, including buildings and infrastructure, manufacturing equipment, information technology, and energy systems. Lifecycle costing is distinct from, but often used alongside, life-cycle assessment, which evaluates environmental impacts; together they support sustainable, value-for-money decisions. Standards such as ISO 15686-5 provide frameworks for applying LCC to built assets. Benefits include more accurate budgeting, longer asset life, reduced total cost of ownership, and improved asset management, while limitations involve data availability, scope definition, and uncertainty in future costs.