Life Cycle Cost(LCC)
Definition
The total cost of acquiring, owning, operating, maintaining, and disposing of an asset over its entire lifecycle, expressed in present-value terms. LCC includes capital expenditure (design, procurement, installation), operating expenditure (energy, consumables, operator time), maintenance expenditure (preventive, corrective, condition monitoring), downtime costs (lost production), and end-of-life costs (decommissioning, disposal, remediation). LCC analysis enables objective comparison of alternatives that may differ in initial cost but have different long-term cost profiles.
Context
LCC is the economic foundation for asset management decisions under ISO 55000. It prevents the common mistake of selecting the lowest initial-cost option when a higher-cost option has significantly lower total lifecycle cost. LCC analysis supports material selection, maintenance strategy optimization, repair-vs-replace decisions, and capital budgeting.
Formula
LCC = Capital Cost + sum(Annual O&M Cost / (1+r)^n) + End-of-Life Cost / (1+r)^N, where r = discount rate, n = year, N = total life
Examples
- LCC comparison for a pump seal: Option A (standard seal, $2K, 12-month life, $5K/replacement including downtime) vs Option B (premium seal, $8K, 36-month life, same replacement cost). Over 10 years: A = $52K, B = $33K — the premium seal saves 37%.
- LCC analysis shows that upgrading piping material from carbon steel to duplex stainless steel increases capital cost by $300K but eliminates $150K/year in corrosion-related maintenance, paying back in 2 years.
Applicable Standards
- ISO 55000:2014
- IEC 60300-3-3
- EN 60300-3-3
Related Terms
The complete span of an asset's existence from initial conception through design, procurement, construction, commissioning, operation, maintenance, modification, and eventual decommissioning and disposal. Asset lifecycle management optimizes the total cost of ownership by making informed decisions at each stage that consider the full remaining lifecycle, not just the immediate cost.
Remaining Useful Life(RUL)The estimated time from the present until an equipment item reaches a condition where it can no longer perform its intended function safely and must be repaired, replaced, or retired. For static equipment, RUL is typically calculated from the current measured wall thickness, the minimum required thickness, and the corrosion rate. For rotating equipment, RUL may be estimated from degradation models fitted to condition monitoring data.
ISO 55000Asset Management standard — provides an overview, principles, and terminology for the management of physical assets. It establishes that asset management is a coordinated activity to realize value from assets, balancing cost, risk, opportunity, and performance over the entire lifecycle. ISO 55001 specifies requirements for an asset management system.
Preventive Maintenance(PM)Maintenance performed at predetermined intervals or according to prescribed criteria to reduce the probability of failure or functional degradation. Preventive maintenance includes time-based activities (replacement, overhaul, calibration at fixed intervals), usage-based activities (at fixed operating hours or cycles), and condition-based activities (when monitored parameters indicate intervention is needed). The goal is to prevent failures that would otherwise occur.
Where this appears in Reliatic
This concept is used in the Asset Register module.