CONSIDER YOUR TOTAL COSTS

Total Cost Consideration

Are you relying on purchase price alone to make decisions? Consider life-cycle costing 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 Operation and Maintenance Manual.
  3. Add expected repair costs.
    Information comes in form of 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 residual value.
    Be cautious with guaranteed buy-backs as they are only exercised if you buy your next piece of equipment from the vendor offering it.

 

Initial Purchase Price - Trade-in + Maintenance + Repairs + Fuel - Resale Value = Life Cycle Cost

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 Costing Resources

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


How to build Agency Support for total cost procurement

build Agency Support

Life Cycle Costing Formulas Calculator

Life Cycle Costing Formula

POINTS AWARD SYSTEM - SAMPLE POINT DISTRIBUTION FOR RFP SCORING

POINTS AWARD SYSTEM

HOW TO IMPLEMENT THE POINTS AWARD SYSTEM FOR YOUR AGENCY'S RFPS

IMPLEMENTING THE POINTS AWARD SYSTEM

HOW TO PURCHASE EQUIPMENT USING A LIFE CYCLE COSTING APPROACH

LIFE CYCLE COSTING

TOTAL COST OF OWNERSHIP: REALIZING PROCUREMENT'S FULL POTENTIAL IN VALUE CREATION

TOTAL COST OF OWNERSHIP

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