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Life Cycle Costing

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This presentation introduces the reader to the concept of life cycle costing (LCC) and its current status and latest developments.

Presented by Christine Storry - PIPEN Project Manager

Published in: Government & Nonprofit
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Life Cycle Costing

  1. 1. Life Cycle Costing Presented by Christine Storry – PIPEN Project Manager South West England
  2. 2. Sustainable Procurement – to recap Social Workers’ rights Ethical issues Fair pay Economic Local economy Life cycle costs Employment Environmental Air quality Water use Energy
  3. 3. Direct LCC Commonest LCC includes • (a) costs, borne by the contracting authority or other users, such as:  (i) costs relating to acquisition,  (ii) costs of use, such as consumption of energy and other resources,  (iii) maintenance costs,  (iv) end of life costs, such as collection and recycling costs (Article 68 EU Procurement Directive 2014)
  4. 4. Example of costs Examples of costs: • Purchase price, leasing costs • Staff to operate machinery • Training required • For MFDs – inclusion of toners and disposal of old cartridges • Maintenance costs and requirements can increase as a product gets older • Spare parts – cost and availability • End of life costs can also be positive if there is a re-sale value
  5. 5. LCC Direct + Externalities Clause (a) (as before) + (b) costs imputed to environmental externalities linked to the product, service or works during its life cycle, provided their monetary value can be determined and verified; such costs may include the cost of emissions of greenhouse gases and of other pollutant emissions and other climate change mitigation (Article 68 EU Procurement Directive 2014)
  6. 6. Mandatory common method • Whenever a common method for the calculation of life-cycle costs has been made mandatory by a legislative act of the Union, that common method shall be applied for the assessment of life- cycle costs. • Clean Vehicles Directive – currently only mandated method (Article 68 EU Procurement Directive 2014)
  7. 7. Why is LCC important? Encouraging analysis of business requirements Making better informed decisions Resulting in more robust contracts Specifically allowed for in the 2014 Directive Good financial and procurement sense to do so
  8. 8. LCC in the tender process • Assess real cost of alternative options • Determining the scope of the tender • Needs assessment • Market engagement – what’s on offer • Best options for your organisation against priorities Tender Planning • Comparing life cycle costs on bids • Comparing like-for- like Tender Evaluation
  9. 9. LCC in tendering Various conditions are mandatory if using LCC: In tender documents, state the LCC methodology being used. MUST include: – (a) be based on objectively verifiable and non-discriminatory criteria; – (b) be accessible to all interested parties; – (c) not require more than a reasonable effort from bidders in terms of data submission; and – (d) follow any common, mandatory EU method for calculating LCC which applies in the sector
  10. 10. Choosing LCC methodology • No methodology mandated (except Clean Vehicles Directive) • Various ones exist and publicly available • Can devise own methodology but must ensure that:  It is transparent  All bidders can provide the requested information  The public body has the ability to assess and verify the information requested and received
  11. 11. Barriers Lack of expertise Lack of awareness Too many tools Don’t care Not enough time planned in the process “takes too long to do”
  12. 12. Mitigation  Don’t reinvent the wheel Peer learning Experience Engage other teams Early supply market engagement
  13. 13. South West England © 2017, UWE Bristol www.uwe.ac.uk

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