A method of estimating the total cost of a system over its entire life-cycle
When deciding on a project design, there are various alternatives that engineers are confronted with. These alternatives can vary in design, material, and expected life span. It is not enough
to just consider costs of these alternatives at initial construction, but rather, the total costs over the entire life of the transportation infrastructure investment must be considered.
This includes the maintenance, rehabilitation, and use of the transportation infrastructure over its life-cycle.
Time Value of Money
In addition, the inflation of money spent over time must also be factored into any cost analysis. This time value of money is often considered using one
or two methods (both of which are available in ProLCCA):
- The equivalent uniform annual cost can be calculated, which converts the life-cycle costs to a series of equal payments over time or
- The present value can be calculated, which converts the life-cycle costs to a single payment at one point in time.
Both methods use a discount rate to apply the money inflation over time
Steps of LCCA
LCCA is a vital decision-making tool that can account for both initial as well as discounted future costs of an infrastructure system. Five steps are needed to conduct an LCCA, include the following:
- Establish design alternatives
- Determine activity timing
- Estimate costs (agency and user)
- Compute life-cycle costs
- Analyze the result