IENG 217Cost Estimating for Engineers

Life Cycle

Life Cycle Costing

LCC is concerned with Pay Now or Pay Later

Examples Energy efficient building vs traditional heating/cooling Brick dormitory vs throw away Car buying Obsolete electronic components for airplane

Last time buy vs redesign

Life Cycle Costing

Design, development, and engineering Initial capital investment and financing Operation, maintenance, and functional use Replacement Alteration, refurbishing, and improvement Salvage and retirement

Life Cycle Costing

Two major concerns Annual Deterioration Obsolescence

What is the life cycle? Truck tires might be 30,000 miles Crane engine might be 50,000 hours of use Public works might be 30-60 years Product might be 5-10, 1-3, 0.5-1 year

Estimating Costs

(hrs) timeoperting scheduled SOH

timecyleemaintenancpreventive

where

timecyclePM

SOH

actionsPM

Estimating Costs

(hrs) timeoperting scheduled SOH

timecyleemaintenancpreventive

where

timecyclePM

SOH

actionsPM

repairtotimemean

failuresbetweentimemean

laboremaintenancofcost

)(MTBF

SOH

($) emaintenanc correctivefor cost

MTTR

MTBF

C

where

CMTTR

C

m

m

cm

LCC Estimates (Assumptions)

Cost Elements Concrete Pumping Equip. Element Amount Equipment Cost 1,000,000Service before Overhaul (yrs) 4Overhaul Cost 200,000Service life after Overhaul (yrs) 3Concrete Pumping hrs (annual) 3,000Salvage value (% of IC) 10.0%Periodic maintenance (% of IC) 3.0%Spare parts, tire replacement 10,000Hourly labor cost 30Fuel, Oil, (per oper hr) 15Cleanup material (annual $) 5,000MARR 15.0%

LCC Estimates (Analysis)

LCC Analysis for Concrete Pumping (175 yd3)

Element Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7Equipment 1,000,000Labor 90,000 90,000 90,000 90,000 90,000 90,000 90,000Equipment Operation 45,000 45,000 45,000 45,000 45,000 45,000 45,000Maintenance 30,000 30,000 30,000 30,000 30,000 30,000 30,000Tires, Spare parts 10,000 10,000 10,000 10,000 10,000 10,000 10,000Cleanup Material 5,000 5,000 5,000 5,000 5,000 5,000 5,000Overhaul 200,000Salvage Value (100,000)Total Cash Flow 1,000,000 180,000 180,000 180,000 380,000 180,000 180,000 80,000Discount Factor 1.00 0.87 0.76 0.66 0.57 0.50 0.43 0.38Discounted Cash Flow 1,000,000 156,522 136,106 118,353 217,266 89,492 77,819 30,075Total LCC (Cumulative) 1,000,000 1,156,522 1,292,628 1,410,981 1,628,247 1,717,739 1,795,558 1,825,632

LCC Estimates Cost Elements Concrete Pumping Equip. Element Amount Equipment Cost 1,300,000Service before Overhaul (yrs) 4Overhaul Cost 250,000Service life after Overhaul (yrs) 3Concrete Pumping hrs (annual) 3,000Salvage value (% of IC) 10.0%Periodic maintenance (% of IC) 2.0%Spare parts, tire replacement 10,000Hourly labor cost 30Fuel, Oil, (per oper hr) 15Cleanup material (annual $) 5,000MARR 15.0%

LCC Estimates

LCC Analysis for Concrete Pumping (200 yd3)

Element Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7Equipment 1,300,000Labor 90,000 90,000 90,000 90,000 90,000 90,000 90,000Equipment Operation 45,000 45,000 45,000 45,000 45,000 45,000 45,000Maintenance 20,000 20,000 20,000 20,000 20,000 20,000 20,000Tires, Spare parts 10,000 10,000 10,000 10,000 10,000 10,000 10,000Cleanup Material 5,000 5,000 5,000 5,000 5,000 5,000 5,000Overhaul 250,000Salvage Value (130,000)Total Cash Flow 1,300,000 170,000 170,000 170,000 420,000 170,000 170,000 40,000Discount Factor 1.00 0.87 0.76 0.66 0.57 0.50 0.43 0.38Discounted Cash Flow 1,300,000 147,826 128,544 111,778 240,136 84,520 73,496 15,037Total LCC (Cumulative) 1,300,000 1,447,826 1,576,371 1,688,148 1,928,285 2,012,805 2,086,300 2,101,338

LCC Estimates

LCC Analysis

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

0 2 4 6 8

Life Cycle

Dis

cou

nte

d C

ash

Flo

w

175 AOC

175 Cum

200AOC

200 Cum