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8/4/2019 Lcc Aamcog
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Ch4 LifeCycleCosting 1
LifeCycleCosting
Dr
Nick
Hastings
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IceBergDiagram
Ch4 LifeCycleCosting 2
Ref: B. Blanchard,
Logistics
Engineering and
Management,
Prentice-Hall, 1992.
AcquisitionCost
Operating Cost
Maintenance CostSpares Cost
Supporting Facilities Cost
Software Cost
Training cost
Poor management
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LifeCycleCosting Aims
To avoid nasty surprises down the track;
To make the best overall decisions and budgetprovision for:
equipment acquisition,
operation,
through-life-support, disposal,
Ref: Standards Australia AS4536 Life Cycle Cost
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TowardsaUnifiedLCCFrameworkDr. Lyle Turner, CIEAM, April 2008
Identified approximately 40 leading references on LC
Highlighted four different approaches to costing withitechniques;
Outlined strengths and weaknesses in existing techni
Indicated potential improvements in the ANZ Standar
Concluded that LCC is of most benefitinterpreted within the overall management framewthe asset, and it is the authors opinion that this fcommonly understated when demonstratingadvantages of LCC.
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InputstoCapability NetCost
Operatorsand
operations
Utilities e.g.Power
Water
Environ-
ment
Health and
Safety
PrimeMission
Equipment
Logisticsupporte.g.
spares
Facilitiese.g.
BuildingsRoads
SupportServices
e.g.Catering
Management
Personnel,Financial
Communic-ations and
I.T.
Maintenanceand
Engineeringsupport
Training
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PersonnelActivities Net
CostBusinessAnalysis
andPlanning
Operationsmanagement,
planning andstaffing
Tenderingand
Contracting
Health,Safety and
EnvironmenAnalysis
SeniorDecisionMaking
IT andancillary
staff
ProjectManagement
MaintenanceStrategy and
Planning
Recruitment
Design,Engineering FinancialAnalysis
Trainingdevelopmen
and deliver
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LifeCycleCostingExampleCircuit
BreakerBay
Ch4 LifeCycleCosting 7
An electricity transmission company is planning to install a new substation bay.
The following item costs have been estimated.
Create a spreadsheet summary of costs year by year over the 30 year life.Decide the year in which various costs are incurred.
Calculate the net present value of the total cost, and the equivalent annual
cost, assuming a real interest rate of 4%.
Initial engineering analysis and planning $30,000
Acquisition project and vendor selection $35,000
Installation project planning and management $45,000
Roads, paths, ducts, supports and fences $75,000
Main switchgear $950,000
Secondary wiring and controls $125,000Installation and commissioning $65,000
Documentation $10,000
Initial spares and consumables purchase $45,000
Maintenance annual incl. spares and consumables $3,000
Maintenance 3 year cycle incl. spares and consumables $6,000
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LCCforCircuitBreakerbay
1234
5
67
8910
111213141516
171819202122
23
A B C D E F G H I J K
Year -1 0 1 2 3 4 5 6 7 8
Real rate of interest 4.00%
Discount factor 1.04 1.000 0.962 0.925 0.889 0.855 0.822 0.790 0.760 0.731
Prior year
Initial engg analysis & planning
30
Aquisition project + vendorselection 35
Year zero
Installation plan & mgmt 45
Roads, paths,ducts, 75
Main switchgear 950
Secondary wiring & controls 125Installation and commissioning 65
Documentation 10
Initial spares & consumables 45
Maintenance
Annual maint 3 3 3 3 3 3 3 3
3 year cyclic maint 6 6Upgrade
Disposal
Totals 65 1315 3 3 9 3 3 9 3 3
NPV 1619
EAC 94 8
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AssetManagement
Flowchart
Ch4 LifeCycleCosting 9
Requirements
Analysis
Acquire
Asset
OperateMonitor Maintain
Business
need oropportunity
Logisticsupport
Businessand
Technicalreview
Install
Disposal
Financial
plan
Renewal
Profit or
Service
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ConclusionIntegration of LCC into overall
asset management planningframework:
Awareness by top
management;Requirements stage;
Feasibility analysis stage;
Acquisition stage;
Logistic support;
Renewal.
Skidoo in
Antarctica:Logisticsupportessential.