Whole-life cost

Whole-life cost is the total cost of ownership over the life of an asset. The concept is also known as life-cycle cost (LCC) or lifetime cost, and is commonly referred to as "cradle to grave" or "womb to tomb" costs. Costs considered include the financial cost which is relatively simple to calculate and also the environmental and social costs which are more difficult to quantify and assign numerical values. Typical areas of expenditure which are included in calculating the whole-life cost include planning, design, construction and acquisition, operations, maintenance, renewal and rehabilitation, depreciation and cost of finance and replacement or disposal. Whole-life cost analysis is often used for option evaluation when procuring new assets and for decision-making to minimize whole-life costs throughout the life of an asset. It is also applied to comparisons of actual costs for similar asset types and as feedback into future design and acquisition decisions. The primary benefit is that costs which occur after an asset has been constructed or acquired, such as maintenance, operation, disposal, become an important consideration in decision-making. Previously, the focus has been on the up-front capital costs of creation or acquisition, and organisations may have failed to take account of the longer-term costs of an asset. It also allows an analysis of business function interrelationships. Low development costs may lead to high maintenance or customer service costs in the future. When making this calculation, the depreciation cost on the capital expense should not be included. Life cycle assessment The use of environmental costs in a whole-life analysis allows a true comparison options, especially where both are quoted as "good" for the environment. For a major project such as the construction of a nuclear power station it is possible to calculate the environmental impact of making the concrete containment, the water required for refining the copper for the power plants and all the other components.