Description: Until the 1970s, it was commonplace for institutions and governments to purchase equipment based on lowest initial (first) costs. Recurring costs such as operational, maintenance, and energy costs often were not considered in the purchase decision. If an agency wanted to buy something, it published specifications and requested bids from several manufacturers. Often, the lowest bidder who met the specifications won the job, with no consideration given to the economic life of the equipment or yearly recurring costs such as energy and maintenance costs. The practice of purchasing based on lowest initial costs probably did not make good economic sense prior to 1970, and it certainly does not make good sense now. The wise person will consider all costs and benefits associated with a purchase, both initial and post-purchase, in order to make procurement decisions that are valid for the life of the equipment. This describes a method of financial analysis that considers all pertinent costs: life cycle costing (LCC).
Date: February 1, 1996
Item Type: Refine your search to only Report
Partner: UNT Libraries Government Documents Department