Life-Cycle Costing

Life-Cycle Costing (LCC) is used to ascertain the relevant costs arising for one or more actors in relation to a product and its alternatives in the course of a product life cycle. As yet, no standard or internationally recognized Code of Conduct exists for generating a life-cycle cost analysis.

Economic analyses are generally considered to be highly exact and objective, but in practice there are considerable problems due to the poor availability of data, different types of costs (full costs, partial costs, budget costs, actual costs, time-dependent dynamic costs, scaling-dependent costs), prices influenced by the state (subsidies, prescribed recycling quotas etc.), the assumption of varying interest rates or types of depreciation etc.

Like a Life-Cycle Assessment (LCA), an LCC can be divided up into four parts:

  • study goal and scope definition,
  • inventory analysis (collecting data on individual costs),
  • cost assessment,
  • interpretation.

Since the costs vary depending on the actor, it is necessary to determine at the start the actor/s for whom the life-cycle costs are being ascertained. While economic data have the advantage that there is a corresponding economic unit (leaving aside the issue of different currencies), it is important to remember nonetheless during the interpretation stage that costs cannot always simply be added up. It makes little sense, for example, simply to count up the wages in developing countries and industrialized countries without taking the cost of living in each case into account.

If a comparison with competitor products is conducted and published, the Life-Cycle Costing should be accompanied by a critical review.

Decisions and models that, based on experience, should be given particular attention are summarized in the checklist presented beside.


Check list for Life-Cycle Costing