Whole Life Costs

Whole Life Costs

Whole life costs (WLC) is the total cost of ownership of an asset over its entire lifetime. It includes all costs associated with acquiring, operating and disposing of the asset.

WLC is a important consideration in procurement, as it can have a significant impact on the overall cost of a project. It is therefore important to consider all relevant costs when making decisions about procuring goods and services.

There are a number of different methods that can be used to calculate WLC. The most appropriate method will depend on the situation and the information available. The most common methods are outlined below:

1) Depreciation method: This approach estimates the future replacement cost of an asset, based on its current value and expected lifespan. It can be used for both new and existing assets.

2) Cost-benefit analysis: This technique compares the benefits of an investment with the costs associated with it, in order to determine whether it is economically viable. It is often used when making decisions about major projects or investments.

3) Life cycle costing: This method calculates all of the costs associated with an asset over its entire lifetime, from acquisition through to disposal. It takes into account factors such as maintenance, repairs, replacement and fuel costs.

4) Activity-based costing: This approach identifies the specific activities that are required to produce a product or service, and allocates costs to these activities based on their consumption of resources.