Life Cycle Cost Analysis

Life Cycle Cost Analysis
The Real Cost of a Materiel System
Costs can be attributed to three major factors:

•  Technology Lead
•  Time In-service
•  Technology Lag

Technology Lead
To achieve a technological edge, significant funds are invested in research and development (R&D).
This can lead to increased risks and hence costs and cost blow-outs.
There is a significant difference between ‘Leading edge’ and ‘Bleeding edge’ and development costs will generally be reflected in ‘Leading edge’.

Time In-service
The heavy investment in seeking leading edge technologies demands an effective return on investment.
This can lead to Materiel Systems being kept in service longer than equivalent commercial equipment.

Technology Lag

Towards the end of the capabilities life, support costs can significantly increase.
This can create problems in the identification of replacement Mission Systems.

Life Cycle Costing

Life Cycle Costing (LCC) Analysis comprises estimation and analysis techniques applied to the financial management of a capability.

It provides for the structured collection, analysis and presentation of Life Cycle Cost LCC data, to assist in decision making for mission system capabilities

When done well, LCC provides the evidence to support the expenditure on the capability.