ABSTRACT
In this chapter, the principle of life cycle costing (LCC) has been discussed. In this method, not only the initial costs of an asset, but also the future costs to be incurred during the subsequent life span of the asset are considered. Thus, by applying the LCC concept, a solution with a higher initial cost may be justified because of reduced future running costs, compared to a solution with a lower initial cost. In this method, future costs as well as benefits (revenues) are brought together by applying the traditional net present value (NPV) concept on a base date corresponding to the initial costs. LCC involves four basic issues, viz., initial costs, future costs, life of the structure and discount rate. These issues are discussed in this chapter. This chapter also includes a brief discussion on limitations of the method, its applications and the stages for LCC assessment. This chapter concludes by reviewing the utilities of the method particularly for addressing the future costs in proper perspective for comparing alternative solutions.
