Question

1. What is life cycle costing (LCC)? What are the main issues in applying LCC in the government context?

Answer 1

life cycle costing means the calculation of the cost that a person will spend on the life cycle of an asset during its useful life.

It includes all costs related to the asset as soon as you purchase it till the point we get rid of the same asset. It also includes all costs used for the maintenance of that asset.

The life cycle of such a cost is as follows:

Some of the issues using this:

1. Management Issues

2. The assumption that the asset is useful in later years than in initial year of purchase

3. Politics and corruption

4. Fight between the thought of "best value for money" and " best value through life cycle of asset"

5. Tussle between capital and revenue budget

6. Application use of LCC

7. Inability to apply LCC effectively

8. Which tools / methods used for LCC? Are they capable?

9. Attributing costs to different life cycle events