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EThICSENGINEERING            CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07                       APP...
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EngineeringEThICS                Technology, IntelligenceENGINEERING                      Consulting & SystemsEThICS 039.B...
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Concepts and Principles of Life Cycle Cost (LCC) and Effectiveness

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Module: EThICS 039.BC02E.07_LCPP_Conc & Princ_LCC & Effectiv
Topic: LIFE CYCLE OF PROJECTS AND PRODUCTS
Subject: Concepts and Principles of Life Cycle Cost (LCC) and Effectiveness
Scope:

PURPOSES OF THE MODULE

INTRODUCTION
Acronyms
Motivations for LCC and Effectiveness
Standards for LCC

BASIC CONCEPTS OF LCC
Elements of Life Cycle:
Life Cycle
Fig. 1: Model of Life Cycle of Projects and Products
Fig. 2: Initial Steps of RDI of Systems and Products
Acronyms of RDI
Elements of Life Cycle Cost:
Cost Driver
Cost Profile
CBS – Cost Breakdown Structure
Recurrent Costs
Non-Recurrent Costs
Fig. 3: Elements of Life Cycle Costs
LCC – Life Cycle Cost
Life Cycle Costing
TLC - Through-Life Cost
WLC - Whole-Life Cost
WLCC - Whole-Life Cycle Costing
TCO – Total Cost of Ownership
TCA – Total Cost of Acquisition
COO – Total Cost Of Operations
LAC - Life Acquisition Cost
LOC - Life Ownership Cost
LLC - Life Loss Cost
LCCA – Life Cycle Cost Analysis

CONCEPTS OF EFFECTIVENESS
Elements of Effectiveness
Effectiveness Analysis
System Effectiveness
Fig. 4: FOM - Factors Of Merit
MOE - Measure Of Effectiveness
Operational Effectiveness
Elements of Operational Effectiveness
Operational Suitability
MOS - Measure Of Suitability
Operational Availability
Operational Utility
Cost Effectiveness

CONCEPTS OF PERFORMANCE
Elements of Performance
Performance
System Performance
Level of Performance
Categories of Performance
Objective Performance
Subjective Performance
System Attributes
Attributes of Operational Performance
Physical Attributes
Functional Attributes
MOP - Measures Of Performance

MODELS OF LCC
Fig. 5: Summary Vision of Total Costs of the Life Cycle
Model of the Composition of the LCC
Fig. 6: The (In)Visibility of the Total Costs
Fig. 7: The Proportions of the Elements of the LCC
Considerations about R&D Methods, Costs and Assurance
Fig. 8: Elementary Cycle of Project Validation and Assurance
Fig. 9: The Impact on Costs Due to Method Change
Fig. 10: The Impact of Changes of |Method on Costs
Fig. 11: The Balance of Factors of Cost-Effectiveness
Fig. 12: The Factors of Effectiveness and the Costs of the Systems

APPENDICES
References
EThICS Engineering - Services and Areas of Action

Published in: Business

Concepts and Principles of Life Cycle Cost (LCC) and Effectiveness

  1. 1. EngineeringEThICS Technology, IntelligenceENGINEERING Consulting & SystemsEThICS 039.BC02E.07 RESEARCH, DEVELOPMENT AND INNOVATION LIFE CYCLE OF PROJECTS AND PRODUCTS - Concepts and Principles of LCC and Effectiveness - Antonio Sallum Librelato - Director – EThICS Engineering - March - 201320/3/2013 Intellectual Property of EThICS Engineering 1
  2. 2. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 PURPOSES OF THE MODULE INTRODUCTION Acronyms Motivations for LCC and Effectiveness Standards for LCC BASIC CONCEPTS OF LCC Elements of Life Cycle: Life Cycle Fig. 1: Model of Life Cycle of Projects and Products Fig. 2: Initial Steps of RDI of Systems and Products Acronyms of RDI Elements of Life Cycle Cost: Cost Driver Cost Profile CBS – Cost Breakdown Structure Recurrent Costs Non-Recurrent Costs Fig. 3: Elements of Life Cycle Costs LCC – Life Cycle Cost Life Cycle Costing TLC - Through-Life Cost WLC - Whole-Life Cost WLCC - Whole-Life Cycle Costing TCO – Total Cost of Ownership TCA – Total Cost of Acquisition COO – Total Cost Of Operations LAC - Life Acquisition Cost LOC - Life Ownership Cost LLC - Life Loss Cost LCCA – Life Cycle Cost Analysis 20/3/2013 Intellectual Property of EThICS Engineering 2
  3. 3. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESS EThICS 039.BC02E.07CONCEPTS OF EFFECTIVENESS MODELS OF LCCElements of Effectiveness Fig. 5: Summary Vision of Total Costs of the Life CycleEffectiveness Analysis Model of the Composition of the LCCSystem Effectiveness Fig. 6: The (In)Visibility of the Total CostsFig. 4: FOM - Factors Of Merit Fig. 7: The Proportions of the Elements of the LCCMOE - Measure Of Effectiveness Considerations about R&D Methods, Costs and AssuranceOperational Effectiveness Fig. 8: Elementary Cycle of Project Validation and Assurance Elements of Operational Effectiveness Fig. 9: The Impact on Costs Due to Method ChangeOperational Suitability Fig. 10: The Impact of Changes of |Method on Costs MOS - Measure Of Suitability Fig. 11: The Balance of Factors of Cost-EffectivenessOperational Availability Fig. 12: The Factors of Effectiveness and the Costs of the SystemsOperational UtilityCost Effectiveness APPENDICES ReferencesCONCEPTS OF PERFORMANCE EThICS Engineering - Services and Areas of ActionElements of Performance Performance System Performance Level of Performance Categories of Performance Objective Performance Subjective PerformanceSystem Attributes Attributes of Operational Performance Physical Attributes Functional AttributesMOP - Measures Of Performance Antonio Sallum Librelato - Director – EThICS Engineering - January - 2013 20/3/2013 Intellectual Property of EThICS Engineering 3
  4. 4. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 [EE_039.BC02.06] Purposes of the Module The main purpose of this module is to present, in an introductory way, concepts and models about LCC - Life Cycle Costs and its relation to the steps and actions RDI - Research, Development and Innovation and SPA - Systems and Products Assurance. The concepts of performance and effectiveness of systems and costs are also treated. It will be shown the advantages of developing projects incorporating solutions that meet the performance requirements, with warranty and with balance between effectiveness and cost. 20/3/2013 Intellectual Property of EThICS Engineering 4
  5. 5. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 INTRODUCTION 20/3/2013 Intellectual Property of EThICS Engineering 5
  6. 6. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 INTRODUCTION [EE_039.BC02.06] Acronyms ACRONYM MEANING CBS Cost Breakdown Structure CISP Construction and Integration of Systems and Products COO Total Cost of Operations DoD, DOD Department of Defense DPSP Definitive Project of Systems and Products DSP Development of Systems and Products EVCN Enterprise Vision and Clients Needs FOM Figure Of Merit HDBK Handbook IEC International Electrotechnical Commission ILS Integrated Logistical Support LAC Life Acquisition Cost LCC Life Cycle Cost LCCA Life Cycle Cost Analysis LCPP Life Cycle of Projects and Products LLC Life Loss Cost LOC Life Ownership Cost 20/3/2013 Intellectual Property of EThICS Engineering 6
  7. 7. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 INTRODUCTION [EE_039.BC02.06] Acronyms ACRONYM MEANING MIL Military MOE Measure Of Effectiveness MOP Measure Of Performance MOS Measure Of Suitability OT&E Operational Test and Evaluation PPSP Preliminary Project of Systems and Products PSP Production of Systems and Products RDI Research, Development and Innovation ROI Return On Investiments ROI Return On Investment SCR Systems Concepts Research SPA Systems and Products Assurance TCA Total Cost of Acquisition TCO Total Cost of Ownership TLC Through-Life Cost TSR Technology and Systems Research USP Use of Systems and Products WLC Whole-Life Cost 20/3/2013 Intellectual Property of EThICS Engineering 7
  8. 8. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 INTRODUCTION Ref.: [JONE_01] Motivations for LCC and Effectiveness The prediction (estimate) of the total costs that will occur over the life of a system, device or product in demand is of great importance in the acquisition process. It lets to make choices and take decisions on various solution alternatives, regarding the characteristics of the systems, infrastructure and physical resources required to operate and maintain the system. The concept of cost of ownership is used to project the future financial obligations and charges that will be required to possess and use the system. During the acquisition of systems and products, cost of ownership allows you to focus on total costs over the life of the system, rather than focusing only on the purchase price. The methods of Supportability Engineering to estimate the cost of property already in the process of acquiring and analyzing future agents which then cost can be reduced without reducing the performance and operational availability. 20/3/2013 Intellectual Property of EThICS Engineering 8
  9. 9. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 INTRODUCTION Ref.: [JONE_01][KAWA_01][BARR_01][GIUD_01] Standards for LCC IEC 60300-3-3 Dependability management – Part 3-3: Application guide – Life cycle costing. Second edition, 2004-07. ISO 15663-1: 2000 Petroleum and natural gas industries - Life cycle costing. Part 1: Methodology. ISO 15663-2: 2001 Petroleum and natural gas industries - Life cycle costing. Part 2: Guidance on application of methodology and calculation methods. ISO 15663-3: 2001 Petroleum and natural gas industries - Life cycle costing. Part 3: Implementation guides. MIL-HDBK-259 Military Handbook - Life Cycle Cost in Navy Acquisitions (1 April 1983). MIL-HDBK-276-1 Military Handbook - Life Cycle Cost Model for Defense Material Systems, Data Collection Workbook (3 February 1984). MIL-HDBK-276-2 Military Handbook - Life Cycle cost Model for Defense Material Systems Operating Instructions (3 February 1984). 20/3/2013 Intellectual Property of EThICS Engineering 9
  10. 10. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 INTRODUCTION Ref.: [JONE_01][KAWA_01][BARR_01][GIUD_01] Standards for LCC NORSOK O-CR-001 Common requirements - Life cycle cost for system and equipment. Rev. 1, April 1996. NORSOK O-CR-002 Life cycle cost for production facility, 1996 SAE-ARP 4293 Life cycle cost: Techniques and applications, 1992. SAE-ARP 4294 Data formats and practices for life cycle cost information, 1992. 20/3/2013 Intellectual Property of EThICS Engineering 10
  11. 11. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC 20/3/2013 Intellectual Property of EThICS Engineering 11
  12. 12. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Ref.: [KOSS_01][KAWA_01] Elements of Life Cycle Cost Life Cycle: It is the interval of time between conception and discarding a product. [KAWA_01] It is the evolution of the system or product, beginning with the identification of a need perceived by the customer, and the activities resulting from development, testing, manufacturing, operation, support and training, continuing over several improvements or developments until the product, and their related processes are discarded. [KOSS_01] 20/3/2013 Intellectual Property of EThICS Engineering 12
  13. 13. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Ref.: [GRAD_01][EE_039.BC01.09] Fig. 1: Model of Life Cycle of Projects and Products RESEARCH, PRODUCTION INTEGRATED USE OF DEVELOP & OF SYSTEMS LOGISTICAL SYSTEMS & outcomes INNOVATION & PRODUCTS SUPPORT PRODUCTS LCPP EXPLORATION ACTIVITIES OF NEW WITH BUSINESSES CLIENTS RESEARCHES Tendencies • Innovations Innovations • Technological and Competitive Analyses PROJECTS Knowledge Needs • Continuous Feedback EVCN Requirements • Results of the Projects Restrictions POTENTIAL MARKETS Suppositions • New Needs 20/01/13 • Needs of Improvements 20/3/2013 Intellectual Property of EThICS Engineering 13
  14. 14. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Ref.: [EE_039.BE01.07] Fig. 2: Initial Steps of RDI of Systems and Products SOURCES OF INFO & KNOWLEDGE RDI TCI SAT TTA TSR TECHNOLOGY & SYST RESEARCH MRP MANAG RDI PROGR NSD STE TPP STE TME OME SCR SYSTEMS CONCEPTS RESEARCH DSP DEVELOP SYST AND PROD SYSTNeeds NRA SCE SCD PPSP DPSP CISP & & PROD Req SRAA PRAA26/11/11 20/3/2013 Intellectual Property of EThICS Engineering 14
  15. 15. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Ref.: [EE_039.BE01.07] Acronyms of RDI MRP Management of RDI Programs SMR Strategic Management of RDI TMR Tactical Management of RDI OMR Operational Management of RDI TSR Technology and Systems Research TCI Technological and Competitive Intelligence SAT Strategic Analysis of Technologies STE Special Technical Studies NSD New Systems Development TPP Technical Presentations of Projects TTA Technology Transfer and Absorption SCR Systems Concepts Research NRA Needs and Requirements Analysis SCE Systems Concepts Exploration SCD System Concept Definition SRAA Systems Risks and Assurance Analysis DSP Development of Systems and Products PPSP Preliminary Project of Systems and Products DPSP Definitive Project of Systems and Products CIPS Construction and Integration of Systems and Products IPSP Installation Project of Systems and Products PRAA Products Risks and Assurance Analysis 20/3/2013 Intellectual Property of EThICS Engineering 15
  16. 16. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Ref.: [KAWA_01] Elements of Life Cycle Cost Cost Driver It is the element of LCC that has a greater impact on life cycle costing. [KAWA_01] Cost Profile It is a tabular or graphical representation showing the distribution of costs over the life cycle (or part thereof) of a product. [KAWA_01] CBS – Cost Breakdown Structure: It ordered the deployment of cost elements to arrive at the cost of the total life cycle of the product. [KAWA_01] 20/3/2013 Intellectual Property of EThICS Engineering 16
  17. 17. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Ref.: [VARG_01] Elements of Life Cycle Cost Recurrent Costs Are the repetitive costs, direct or indirect, that vary with the quantity produced and the time of use. [VARG_01] Non-Recurrent Costs These are costs that occur only once, such as in developments and investments. [VARG_01] 20/3/2013 Intellectual Property of EThICS Engineering 17
  18. 18. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Ref.: [KAWA_01] Fig. 3: Elements of Life Cycle Costs Concepts of elements of cost (source: IEC 60300 3-3) 20/3/2013 Intellectual Property of EThICS Engineering 18
  19. 19. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Ref.: [KAWA_01][JONE_01][JONE_02] Elements of Life Cycle Cost LCC – Life Cycle Cost It is the cumulative cost of a product throughout its life cycle. [KAWA_01] It is a technical process that compares the costs of the relative merits of two or more options. [JONE_01] [JONE_02] Life Cycle Costing The process of economic analysis for the inventory cost of the life cycle of a product throughout its life cycle or a portion of it. [KAWA_01] 20/3/2013 Intellectual Property of EThICS Engineering 19
  20. 20. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Ref.: [JONE_01][JONE_02][BOUS_01] Elements of Life Cycle Cost TLC - Through-Life Cost It is a budget process that estimates the financial cost of a certain option over its intended life, in terms of budget categories and periods of financial accounting. [JONE_01] [JONE_02] It is a process of costing lifecycle where it emphasizes the role of continuous funding over the life of the system, considering the forecasts of costs, reviews, and compilations of actual costs. WLC - Whole-Life Cost It is an estimate of the total cost to acquire, equip, maintain and operate a certain option throughout its intended life. [JONE_01] [JONE_02] Equivalent to the LCC, including financial, environmental and social costs, covering all the elements and agents costs, from "cradle" to "grave". 20/3/2013 Intellectual Property of EThICS Engineering 20
  21. 21. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Ref.: [BOUS_01] Elements of Life Cycle Cost WLCC - Whole-Life Cycle Costing It is a dynamic and progressive process that allows the stochastic evaluation of the performance of built facilities, the feasibility to disposal or sale. [BOUS_01] The WLCC evaluation process takes into account the characteristics of the facilities constructed, reuse, sustainability, maintainability and obsolescence, as well as the capital, maintenance, finance, and the cost and waste disposal. [BOUS_01] The results of this stochastic evaluation form the basis of a series of performance indicators for economic and non-economic, related to the various stakeholder interests and goals throughout the lifecycle of a project. [BOUS_01] 20/3/2013 Intellectual Property of EThICS Engineering 21
  22. 22. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Ref.: [JONE_01][JONE_02] Elements of Life Cycle Cost TCO – Total Cost of Ownership This is the total of costs incurred to get and use a capability, including the costs of research and development, acquisition , operating, support , and disposal. [JONE_01] [JONE_02] It is a financial estimate to help consumers and enterprise managers in determining the direct and indirect costs of a product or system. It is a management accounting concept that can be used in full cost accounting or even ecological economics to include social costs. The TCO analysis includes the total cost of acquisition and operational costs. 20/3/2013 Intellectual Property of EThICS Engineering 22
  23. 23. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Elements of Life Cycle Cost TCA – Total Cost of Acquisition It is a management accounting concept that includes all costs associated with the purchase of goods, services or assets. COO – Total Cost Of Operations Are recurring expenses associated with the operation of a business or operation of a device, component, equipment or system installation. 20/3/2013 Intellectual Property of EThICS Engineering 23
  24. 24. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Ref.: [KAWA_01] Elements of Life Cycle Cost LAC - Life Acquisition Cost [KAWA_01] Equipment purchase cost Installation cost Commissioning cost Insurance spares cost Reinvestment cost Design and administration cost 20/3/2013 Intellectual Property of EThICS Engineering 24
  25. 25. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Ref.: [KAWA_01] Elements of Life Cycle Cost LOC - Life Ownership Cost [KAWA_01] Man-hour cost Corrective maintenance Preventive maintenance Servicing Spare parts consumption cost Corrective maintenance Preventive maintenance Servicing Logistics support cost Energy consumption cost Insurance cost 20/3/2013 Intellectual Property of EThICS Engineering 25
  26. 26. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Ref.: [KAWA_01] Elements of Life Cycle Cost LLC - Life Loss Cost [KAWA_01] Cost of deferred production Hazard cost (Liability cost) Warranty cost Loss of image and prestige cost 20/3/2013 Intellectual Property of EThICS Engineering 26
  27. 27. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 BASIC CONCEPTS OF LCC Ref.: [BLAN_02] Elements of Life Cycle Cost LCCA – Life Cycle Cost Analysis It is the process of evaluating alternative configurations for system designs, according to an economic perspective. [BLAN_02] It is a procedure of economic analysis of LCC, based on engineering data. It is used for comparison of LCC alternatives considering all significant costs. Take the present value of the costs. 20/3/2013 Intellectual Property of EThICS Engineering 27
  28. 28. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF EFFECTIVENESS 20/3/2013 Intellectual Property of EThICS Engineering 28
  29. 29. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF EFFECTIVENESS Elements of Effectiveness The degree of success of a system and its mission depends on four factors (subjective and objective): If there is an operational need for the system by the market (window of opportunity). If there is a perception by users of the operational usefulness, suitability and availability of the system. If the system is able to perform the mission of the user, if there is systems effectiveness. If there is a return on investment (ROI) for the resources spent to operate and maintain the system, if there is the cost effectiveness. 20/3/2013 Intellectual Property of EThICS Engineering 29
  30. 30. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF EFFECTIVENESS Ref.: [KOSS_01] Effectiveness Analysis It is an analytical approach used to determine how well a system performs in its intended operational environment. [KOSS_01] 20/3/2013 Intellectual Property of EThICS Engineering 30
  31. 31. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF EFFECTIVENESS Ref.: [KOSS_01][BLAN_02][WASS_01][INCO_01] System Effectiveness It is a measure of the ability of a system to meet the operational effectiveness of their intended uses when called to do so. [KOSS_01] This is the extent to which a system is able to perform its intended functions. [BLAN_02] It is a quantitative measure of the extent to which a system is expected to meet the needs and requirements of customers. [WASS_01] [INCO_01] It is a function of adequacy, dependability (reliability, availability, maintainability), and capacity. Represents the physical reality of performance and results, based on the effects of the operation of the system, which can be viewed from two perspectives: Planned performance. Actual performance. 20/3/2013 Intellectual Property of EThICS Engineering 31
  32. 32. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF EFFECTIVENESS Ref.: [BLAN_01] Fig. 4: FOM - Factors Of Merit They are forms of measures of effectiveness (MOE) that seek to take into account both the technical factors as economic factors, such as: [BLAN_01] Performance x Availability Supportability LCC LCC FOM System Capacity LCC Revenues - Costs 21/01/13 Facility Space 20/3/2013 Intellectual Property of EThICS Engineering 32
  33. 33. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF EFFECTIVENESS Ref.: [KOSS_01][DoD 500.59-M] MOE - Measure Of Effectiveness It is a metric used to quantify the degree to which the performance objectives of a given system, subsystem, or component are achieved. [KOSS_01] Are qualitative or quantitative measures of performance of a model or simulation, or characteristic that indicates the degree to which it performs the task or achieve the operational objective or requirement under specified conditions. [DoD 500.59-M] [KOSS_01] 20/3/2013 Intellectual Property of EThICS Engineering 33
  34. 34. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF EFFECTIVENESS Ref.: [KOSS_01][WASS_01][INCO_01] Operational Effectiveness It is the overall degree of mission accomplishment of a system when used in its operating environment. [KOSS_01] It is a measure of test and operational evaluation (OT & E), which measures the overall degree of mission accomplishment of a system when used by personal representative, in the environment planned or assumed for the operational use of the system, considering organization, doctrine, tactics, survival, vulnerability and threat (including countermeasures, initial effects of nuclear weapons, threats of nuclear contamination, biological and chemical. [WASS_01] [INCO_01] Elements of Operational Effectiveness: Are those witch define whether the goals and organizational objectives were achieved in: Results Costs Deadlines Risks 20/3/2013 Intellectual Property of EThICS Engineering 34
  35. 35. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF EFFECTIVENESS Ref.: [WASS_01] Operational Suitability It is the degree to which a system can be implemented satisfactorily for field use, considering the requirements of availability, compatibility, transportability, interoperability, reliability, ... rate of use, maintainability, safety, human factors, supportability to the work force, logistics supportability, effects and impacts of the natural environment, documentation and training. [WASS_01] Characterizes HOW WELL a system or product: [WASS_01] It is suitable for a specific user´s application in a given operating environment. Integrates and performs through the already existing user´s system. MOS - Measure Of Suitability These are objective measures of performance derived from subjective criteria of users to evaluate the operational suitability of the system for organizational applications and mission. [WASS_01] 20/3/2013 Intellectual Property of EThICS Engineering 35
  36. 36. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF EFFECTIVENESS Ref.: [BLAN_02][WASS_01] Operational Availability It is the probability that the system will operate satisfactorily when requested at any instant in time under specified operating conditions in a real environment and logistical support. [BLAN_02] This means the system, product or service is ready and on demand to carry out the mission, when assigned the task. [WASS_01] The operational availability becomes a critical metric for assessing the readiness of the system to perform the task. [WASS_01] It is a function of reliability and maintainability of the system. [WASS_01] 20/3/2013 Intellectual Property of EThICS Engineering 36
  37. 37. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF EFFECTIVENESS Ref.: [WASS_01] Operational Utility Users expect that systems and products have a degree of operational utility to enable them to fulfill their missions and complete the organizational goals and objectives. [WASS_01] A system or product that has operational usefulness is one that: [WASS_01] Its the RIGHT system, product or service for the objective to be achieved. Has no unacceptable hazard or risk to safety, the environment or human health. 20/3/2013 Intellectual Property of EThICS Engineering 37
  38. 38. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF EFFECTIVENESS Ref.: [WASS_01] Cost Effectiveness It is an objective way to measure the success of the system. [WASS_01] Does the system produce a performance based on its results and performance and provide a return on investment (ROI) that justify its continued use? The cost effectiveness is a metric computed from: Life Cycle Cost (LCC, TCO). System Effectiveness. 20/3/2013 Intellectual Property of EThICS Engineering 38
  39. 39. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF PERFORMANCE 20/3/2013 Intellectual Property of EThICS Engineering 39
  40. 40. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF PERFORMANCE Ref.: [KOSS_01][WASS_01][IEEE 649-1998] Elements of Performance Performance The degree to which a system or component may, within a given set of constraints, perform their designated functions. [KOSS_01] It is a quantitative measure that characterizes a physical or functional attribute relating to the execution of an operation or function. [WASS_01] [IEEE 649-1998] System Performance Represents the performance of the integrated system elements, such as equipment, personnel, and resources of the mission that provide capabilities, operations and system processes. [WASS_01] Level of Performance It is an objective and measurable parameter which serves to delineate the ability of a system to perform a function based on a set of assumed scenarios, initial conditions and operating conditions. [WASS_01] 20/3/2013 Intellectual Property of EThICS Engineering 40
  41. 41. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF PERFORMANCE Ref.: [WASS_01] Elements of Performance Categories of Performance [WASS_01] Objective Performance : Performance that produces measurable physical evidences of system effectiveness based on pre-defined criteria. Subjective Performance : Performance indicated by a subjective quality that varies according to the sensory values​​, interpretations or individual perspectives. 20/3/2013 Intellectual Property of EThICS Engineering 41
  42. 42. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF PERFORMANCE Ref.: [WASS_01][IEEE 649-1998] System Attributes Attributes of Operational Performance Are the critical performance parameters of the system needed to achieve the objectives in the different places of operation. They can include: Quantity: how many, how much they cost Quality: how well Coverage: how much area, how far Temporality: how often, how responsive Readiness availability, mission and operational readiness Other: according to each of systems operation Physical Attributes Quantitative and qualitative expressions about material aspects, such as composition, size, finish, form, fit, and their respective tolerances. [WASS_01] [IEEE 649-1998 Functional Attributes Are measurable performance parameters including reliability, maintainability and safety. [WASS_01] [IEEE 649-1998] 20/3/2013 Intellectual Property of EThICS Engineering 42
  43. 43. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 CONCEPTS OF PERFORMANCE Ref.: [WASS_01] MOP - Measures Of Performance Are measures from the lowest performance level representing subsets of measures of effectiveness (MOEs). [WASS_01] Examples: speed, load, distance, time, frequency, or other attribute or feature. 20/3/2013 Intellectual Property of EThICS Engineering 43
  44. 44. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 MODELS OFF LCC 20/3/2013 Intellectual Property of EThICS Engineering 44
  45. 45. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 MODELS OF LCC Fig. 5: Summary Vision of Total Costs of the Life Cycle TCO Total Cost of Ownership TCA COO Total Cost of 21/01/13 Total Cost of Acquisition Operation 20/3/2013 Intellectual Property of EThICS Engineering 45
  46. 46. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 MODELS OF LCC Ref.: [BLAN_01] Model of the Composition of the LCC PREPARATION COSTS SUSTAINMENT COSTS Costs of Schedule and Cost of Use of RDI Costs Replication Cost Cost of Investments Non-Schedules Disposal Costs Facilities Maintenance Non-Recurring Recurring Non-Recurring Recurring Recurring Recurring Occur for every Occur for each unit Occur for each unit Occurs only once for Occur for each unit Occur only once for installation of each installed and for each installed and for each all units produced produced each unit installed unit maintenance cycle operation cycle TSR Technology and PSP Production of ILS Integrated Logistic Installation Project Operation Legal Permission Systems Research Systems and Products Support Design and SCR Systems Concepts Factory Acceptance Replacement and Training for Continued Demolition and Construction of Research Tests Renovation Operation Disposal Infrastructure Consumption of Improvement of Modification of DSP Development of Qualification and Energy , Water, Repairs and Equipment and Systems and Systems and Products Certification Communications and Restorations Infrastructure Equipment Other SPA Systems and Improvement of Materials, Labor- Supply of Materials Depreciation Products Assurance Utilities Work, Charges and Consumables Improving the Trading and Systems Integration Transportation and Rents Environmental Contracting and Commissioning Insurance Sustainability Initial Preparations for Outsourced Services Operation Management and Management and Management and Management and Management and Management and Documentation Documentation Documentation Documentation Documentation Documentation TCA TOTAL COST OF ACQUISITION COO COST OF OPERATION TCO TOTAL COST OF OWNERSHIP 20/3/2013 Intellectual Property of EThICS Engineering 46
  47. 47. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 MODELS OF LCC Ref.: [BATA_01][BLAN_01][BLAN_02][KAWA_01] Fig. 6: The (In)Visibility of the Total Costs The TCO is represented by the Barely Part of the Total Cost of Acquisition complete “iceberg” of costs! What is done here, at each project and at each produced unit,... Cost of RDI + PSP + Infra Before having the full possession ...defines what happens of the system or product, the here, and that is repeated at each acquisition and in Part of the Non-Recurrent client often does not realize the Investments Costs costs beyond what is "visible.“ each period of the rest of + After the inauguration, he will the life cycle of each one! have to look the "invisible“ part Most part of the TCO is Recurrent Investment Costs of the iceberg. associated to the Investments + Costs and Sustainment Costs. Sustainment Costs During the steps of the RDI and PSP, those costs are often neglected, when there is more Remainder of the Total Cost of focus only on the purchase costs. Acquisition + 21/01/13 Total Cost of Operation 20/3/2013 Intellectual Property of EThICS Engineering 47
  48. 48. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 MODELS OF LCC Ref.: [BLAN_01] Fig. 7: The Proportions of the Elements of the LCC Use Cost Acquisition Discard 21/01/13 Time 20/3/2013 Intellectual Property of EThICS Engineering 48
  49. 49. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 MODELS OF LCC Ref.: [EE_039.BG01.06] [EE_039.BG02.00] Considerations about R&D Methods, Costs and Assurance “Traditional” R&D Method: Focus on lowest time and cost to obtain the prototype of the product (R&D costs) to be reproduced (manufactured) and used by the customers. Tendency to start the project directly from the development steps (DSP), ignoring the steps of the Systems Concepts Research (SCR). Unconcern about the Total Cost of Ownership (TCO) of the systems and product. Strong confidence on past experience and on already used technologies. Tendency to disregard risks due to hazards and uncertainties created by the new solutions. Tendency to react (a posteriori) to faults, errors and failures, instead of being proactive (a priori) to select solutions that avoid them. Considerations about product assurance limited to reliability, availability and maintainability (RAM), non-integrated with each development step. 20/3/2013 Intellectual Property of EThICS Engineering 49
  50. 50. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 MODELS OF LCC Ref.: [EE_039.BG01.06] [EE_039.BG02.00] Considerations about R&D Methods, Costs and Assurance “New” Proposed R&D Method: Focus on LCC and Effectiveness, aiming the best TCO. Perform the TSR and SCR steps, before starting the DSP steps. Look for strong knowledge about new technologies, compared with the dominated technologies. Exert deep analysis and actions to mitigate the risks of hazards and uncertainties, since the initial steps of the project. Promote the proactive actions of systems and products assurance, integrated and simultaneous with the actions of SCR and DSP steps, and at each elementary step of project (See Fig. 8). 20/3/2013 Intellectual Property of EThICS Engineering 50
  51. 51. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 MODELS OF LCC Ref.: [EE_039.BG01.06] [EE_039.BG02.00] Fig. 8: Elementary Cycle of Project Validation and Assurance Operational, Technical and Performance and SPA Functional Requirements. Requirements. PROJECT Methods of Project. Methods of SPA. EXECUTION RDI Plan of the Project. SPA Plan of the Project. Documentation EACH of Project and of SOLUTION OF Results. THE PROJECT PROJECT REVISION V? = is the solution valid? A? = is the solution assured? V&A? NON YES EACH SOLUTION NEXT STEP OF THE PROJECT OF THE 20/03/13 V&G PROJECT 20/3/2013 Intellectual Property of EThICS Engineering 51
  52. 52. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 MODELS OF LCC Ref.: [BLAN_01] Fig. 9: The Impact on Costs Due to Method Change Costs of Design Changes Cost to change the solutions, by using the current practices Costs to change the solutions, by using the new desired practices 21/01/13 TSR + SCR PPSP DPSP + CISP PSP ILS USP Major Program Phases 20/3/2013 Intellectual Property of EThICS Engineering 52
  53. 53. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 MODELS OF LCC Ref.: [GROS_01][SOUT_02] Fig. 10: The Impact of Changes of Method on Costs N times the costs of these steps! 21/01/13 Curve of the Curve of the accumulated costs accumulated costs by by the traditional the new proposed Saving! method LCC Accumulated method Reduced costs of production Higher costs of development Lower costs of support and usage TSR + SCR PPSP DPSP + CISP PSP ILS USP Major Program Phases Non-Recurrent Costs Recurrent Costs 1~3 years 15~25 years 20/3/2013 Intellectual Property of EThICS Engineering 53
  54. 54. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 MODELS OF LCC Ref.: [KAWA_01] Fig. 11: The Balance of Factors of Cost-Effectiveness ECONOMIC FACTORS TECHNICAL FACTORS FACTORS OF FACTORS OF COST EFFECTIVENESS COSTS OF ACQUISITION FACTORS OF PERFORMANCE + + COSTS OF SUSTAINMENT FACTORS OF ASSURANCE 21/01/13 The balance between cost factors and factors of effectiveness must be achieved by the use of methods, best practices and knowledge of engineering and management. 20/3/2013 Intellectual Property of EThICS Engineering 54
  55. 55. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 MODELS OF LCC Ref.: [BLAN_01][BLAN_02] Fig. 12: The Factors of Effectiveness and the Costs of the Systems COST-EFFECTIVENESS OF THE SYSTEM ECONOMICAL FACTORS 21/01/13 TECHNICAL FACTORS (benefit/cost) (effectiveness) Benefits (return on investments) Characteristics of performance Costs of the life cycle: Factors of systems assurance: 1. Costs of R&D Quality 2. Costs of production or Reliability construction Maintainability 3. Costs of operation and Human factors maintenance Safety and security 4. Costs of retirement or discard Logistical support Other factors OBJECTIVE: A balanced approach 20/3/2013 Intellectual Property of EThICS Engineering 55
  56. 56. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 APPENDICIES References[BATA_01] BATTAGLIA, M. Design for supportability. Available at<https://c3.nasa.gov/dashlink/static/media/other/Design4Supportability.pdf>. Accessed in12/04/2011. 16p.[BLAN_01] BLANCHARD, B. S. System engineering management. 4th ed. Hoboken NJ:John Wiley, 2008. 539 p.[BLAN_02] BLANCHARD, B. S.; VERNA, D.; PETERSON, E. L. Maintainability: a key toeffective serviceability and maintenance management. New York, NY: John Wiley, 1995.537 p.[BOUS_01] BOUSSABAINE, H.; KIRKHAM, R. Whole life-cycle costing: risk and riskresponses. Blackwell Publishing, 2004. 252 P.[EE_039.BC01.09] LIBRELATO, A. S. EThICS 039.BC01.09: CVPP - Ciclo de Vida deProjetos e Produtos - Visão Geral. Novembro, 2011. 13 p.[EE_039.BC02.06] LIBRELATO, A. S. EThICS 039.BC02.06: CVPP - Conceitos e Princípiosde LCC e Efetividade. Dezembro, 2011. 55 p.[EE_039.BE01.07] LIBRELATO, A. S. EThICS 039.BE01.07: PDI - Pesquisa,Desenvolvimento e Inovação - Visão Geral. Novembro, 2011. 39 p. 20/3/2013 Intellectual Property of EThICS Engineering 56
  57. 57. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 APPENDICIES References[EE_039.BG01.06] LIBRELATO, A. S. EThICS 039.BG01.06: GSP - Visão Geral. Abril, 2012.30 p.[EE_039.BG02.00] LIBRELATO, A. S. EThICS 039.BG02.00: GSP - Conceitos e Princípios deGSP. Maio, 2011. 57 p.[GIUD_01] GIUDICE, F.; ROSA, G. L.; RISITANO, A. Product design for the environment- a life cycle approach. Boca Raton, FL: CRC Press, 2006. 471 p.[GRAD_01] GRADY, J. O. System requirements analysis. Burlington, MA: Elsevier, 2006.455 p.[GROS_01] GROSSON, J. Integration of Systems Engineering & Supportability. NDIATechnical Information Division Symposium, Lockheed Martin, 3 March 2005. 15 p.Available at <www.dtic.mil/ndia/2005techinfo/grosson.ppt>. Accessed in 12/04/2011.[JONE_01] JONES, J. V. Supportability engineering handbook: implementation,measurement and management. USA: McGraw-Hill, 2007.[JONE_02] JONES, J. V. Integrated logistics support handbook. 3rd ed. USA: McGraw-Hill, 2006.[KAWA_01] KAWAUCHI, Y.; RAUSAND, M. Life Cycle Cost (LCC) analysis in oil andchemical process industries. RAMS Group, NTNU, Norway. 1999. 82 p. 20/3/2013 Intellectual Property of EThICS Engineering 57
  58. 58. EThICSENGINEERING CONCEPTS AND PRINCIPLES OF LCC AND EFFECTIVENESSEThICS 039.BC02E.07 APPENDICIES References[SOUT_02] SOUTES, D. O. Custo Total de Propriedade (TCO): É importante? Paraquem? Anais do II Encontro Científico de Ciências Sociais Aplicadas de Marechal CândidoRondon. Perspectivas do Ensino, da Pesquisa e da Extensão nas Ciências Sociais Aplicadas,Unioeste, outubro (15, 16 e 17), Editora Coluna do Saber, 2007. ISBN: 85-98475-22-X. 10p.[TAYL_01] TAYLOR, G. D. Logistics engineering handbook. Boca Raton, FL: CRC Press,2008. 640 p.[TAYL_02] TAYLOR, G. D. Introduction to logistics engineering. Boca Raton, FL: CRCPress, 2009. 315 p.[WASS_01] WASSON, C. S. System analysis, design and development: concepts,principles and practices.. Hoboken, NJ: John Wiley, 2006. 818 p. 20/3/2013 Intellectual Property of EThICS Engineering 58
  59. 59. EngineeringEThICS Technology, IntelligenceENGINEERING Consulting & SystemsEThICS 039.BC02E.07 APPENDICIES SERVICES Consulting Assessorship Study, Analysis & Diagnostic Planning Research & Development Deployment Training MentoringENGINEERING ORGANIZATIONAL& TECHNOLOGY AREAS OF ACTION STRATEGY Antonio Sallum Librelato – Director +5512 3941 8277 – a.sallum@uol.com.br – skype: a_sallum1 Profile: http://www.linkedin.com/in/sallum 59

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