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The Impact of Life Cycle Cost on Procurement Decisions
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English
Abstract
Historically, major procurement decisions were made solely on the basis of performance and acquisition cost comparisons. Recently, due to budgetary constraints, economic issues and the escalation of acquisition and ownership costs, there has been increasing awareness in the importance of ownership costs and their contribution to overall Life Cycle Costs (LCC). This paper, supporting Air Recommended Practice 4293 Life Cycle Cost - Techniques and Applications (Reference 1), a development of AIR 1939 (Reference 2), examines the various elements of LCC and their respective roles in decision making. It distinguishes between the historical identification of “cost drivers”, budgeting and planning, project selection and investment appraisal. Differences between Commercial and Public Sector practices are discussed, and the implications of these differences on “spend to save” measures such as reliability modifications. Examples are given illustrating the different applications of LCC, the role of prediction techniques, and presentation of uncertainty in cost estimates, designed to postpone the choice between inadequate defence and unacceptable costs.
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Citation
Gregory, R., "The Impact of Life Cycle Cost on Procurement Decisions," SAE Technical Paper 920969, 1992, https://doi.org/10.4271/920969.Also In
References
- SAE Air Recommended Practice, ARP 4293 “Life Cycle Cost - Techniques and Applications”
- SAE Aerospace Information Report, AIR 1939 “Aircraft Engine Life Cycle Cost Guide” 12 86
- Kennedy P. “ The Rise and Fall of the Great Powers ” Fontana Press London 1989 565 548 570 573
- Kirkpatrick D.L.I. Pugh P.G. “Toward the Starship Enterprise - Are the current trends in defence unit costs inexorable” Aerospace May 1983 16
- HMSO National Audit Office Report Ministry of Defence: Reliability and Maintainability of Defence Equipment February 1989
- HMSO, House of Commons Defence Committee Fifth Reort - The Procurement of Major Defence Equipment June 1988
- Defence Scientific Advisory Council “ Report of the Working Party on the technical risk assessment of advanced technology on large projects ” April 1988
- HMSO, Committee of Public Accounts Thirty first report, “ Reliability and Maintainability of Defence Equipment ” July 1989
- Cooper F. “Affordable Defence - In Search of a Strategy” Journal of the Royal United Services Institute for Defence Studies 130 4 December 1985 4