Total cost considerations for governmental procurement

Total Cost Considerations

Are you relying on purchase price alone to make decisions? Consider life cycle cost instead. It takes maintenance, repair and fuel expenses into consideration, as well as trade-in and resale value. Endorsed by the National Institute of Governmental Purchasing (NIGP), the National Association of State Procurement Officials (NASPO) and other associations, it’s a simple calculation that lets you compare options from a total cost perspective.

To estimate life cycle costs:

  1. Begin with the initial purchase price (less trade-in value for old equipment).
  2. Add scheduled maintenance costs. Find information in the Operation and Maintenance Manual.
  3. Add expected repair costs. Information comes in the form of a quote for warranty or extended warranty.
  4. Add fuel costs. To improve data accuracy, share application information with all bidders and request fuel consumption data from historical records or on-board technologies.
  5. Subtract trade-in/resale value. Be cautious with guaranteed buy-backs as they are only exercised if you buy your next piece of equipment from the same vendor.

Initial Purchase Price + Maintenance + Repairs + Fuel - Trade-In/Resale Value = Life Cycle Costs


This calculation can be customized to include other factors such as productivity, uptime and downtime. The more factors you include, the more confident you can be in the evaluation process.

Life cycle cost calculator

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Life cycle cost calculator

Life Cycle Cost Resources

Get the details on how to bring a total cost procurement approach to your agency.

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