CME1210-14 Infrastructure Asset Management

Method Description

Life Cycle Costing

Author:
Andres Vander Horst | Student number: 4623274

Professor:
Dr. Rob Schoenmaker

December 2016
CME1210-14 Infrastructure Asset Management December 2016

Preface

This research paper is written as part of the course Infrastructure Asset Management
given in Delft University of Technology. The main purpose of this report is to describe the
method Life Cycle Costing in a way that can be applied right away in the context of Asset
Management after reading it. Because of this, the author tries to use simple examples and
definitions in order to make it easy to understand. In the Introduction section, the reader
can find the Problem Statement, Goal, and Research Question used to write this paper.
Definitions, examples, applications and other useful information can be found throughout
the body of this report. A conclusion to the research question can be found at the end of
the report, and also a personal comment about the method from the author.

1 Life Cycle Costing

Contents

1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

3 Explanation of the Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

3.1 Life-Cycle Cost During the Planning Phase . . . . . . . . . . . . . . . . . . 6

4 Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Present Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Net Present Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Equivalent Annual Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 Discount Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

5 Type of Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

6 Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

7 Life Cycle Costing Analysis in Asset Management . . . . . . . . . . . . . 14

8 Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

9 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

10 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.1 Personal Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

11 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

12 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.1 Literature Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 Research Method: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
List of Figures

3.1 Costs over Life Cycle of Asset. (Hasting, 2015) . . . . . . . . . . . . . . . . 6

4.1 Present Value of Annuity. (Investopedia, 2016) . . . . . . . . . . . . . . . . 9

7.1 The IAMs Conceptual Asset management model . (IAM, 2015) . . . . . . . 14

CME1210-14 Infrastructure Asset Management December 2016

1. Introduction

Asset Management standard ISO 55000 published by the International Standards Associ-
ation defines Asset Management as the coordinated activity of an organization to realize
value from assets. Where the term asset is defined by the same standard as item, thing
or entity that has potential or actual value to an organization (55000:2014, 2014). Both
of these definitions give a simple idea of what Asset Management is. In order to realize
value there are multiple tools, methods and/or techniques that an asset manager can use
in the process. Each of these techniques or methods may differ in purpose, and the use of
them depends on the necessity of the project and the stage of it.

Among all techniques or methods, this report will describe the method Life Cycle Cost-
ing Analysis (LCCA or LCC). Since the use of this technique is wide, meaning that the
application can be use in multiple sectors, the scope of this report will be in the context
of Infrastructure Asset Management.

Several definitions of Life Cycle Costing can be found by many authors. All, different
in words and/or scope but, equal in essence. A general definition for Life Cycle Costing
Analysis can be, a technique that works towards the minimization of the costs involved
in obtaining a certain level of output by taking into account all costs associated with an
asset, from its acquisition to its disposal (Hastings, 2015).

With this definition a basic relation can be identified between LCCA and Asset Man-
agement. Still, it is not clear how. So, in order to explain this tool and the integration
within Asset Management, this report will answer the following research question: Can
an asset manager optimize costs of investments by applying Life Cycle Costing Analysis?.
To answer this question and give a more detailed explanation, this report will also address
the following sub questions:

-In what phase should Life Cycle Costing be used?

-What are the different types of costs involved in an asset?
-How can Life Cycle Costing be applied?
-What are the limitations of Life Cycle Costing?

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CME1210-14 Infrastructure Asset Management December 2016

2. Definitions

As mentioned before, several definitions of Life Cycle Costing can be found by many au-
thors. They may vary in words and/or scope, but they all have the same essence. In order
to get a better understanding of this method, a definition of life cycle while be given
below followed by other definitions of what the technique, Life Cycle Costing, is.

Life Cycle is defined as the series of stages in form and functional activity through
which an organism passes between successive recurrences of a specified primary stage.
(Merriam-Webster, 2016)

Author Klaus L. Wubbernhorst divides the life cycle of a system into the following phases:
initiation, planning realization or acquisition, operation, and disposal. Then he states that
the main purpose of LCC is to take into consideration the major part of the total costs
during the early phases. (Wubbenhorst, 1986)

Life Cycle Costing, is defined as the estimation of the cost of acquiring, commissioning,
operating, maintaining and disposing of equipment. It is a cradle to grave cost analysis.
(Hastings, 2015)

Life- Cycle Cos Analysis (LCCA), is defined as an economic method of project

evaluation in which all costs arising from owning, operating, maintaining, and ultimately
disposing of a project are considered to be potentially important to that decision. (Fuller,
1995)

Life Cycle Costing (LCC), is defined by William J Kolarik of Texas Tech University
and Yosef Sherif of University of Alabama as an analysis technique which encompasses
all costs associated with a product from its inception to its disposal. (Kolarik, 1981)

Combining these definitions and focusing them with the scope of this report Life Cycle
Costing will be defined as a tool that considers all costs of an investment during its life
cycle. The word investment in this case refers to:

Acquisition Decision
Replacement decisions
Expansions
Design Alternatives
Operation and Maintenance Optimization

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3. Explanation of the Method

3.1. Life-Cycle Cost During the Planning Phase

The concept of LCC promotes a long-range view concerning the life of a system. This
attitude can avoid short-range actions, such as looking at the first costs of a system alone.
(Wubbenhorst, 1986)

As defined in the last chapter, life cycle of an asset is the total time from planning to
acquire to disposal. This cycle is divided in different phases in which different costs are
involved. The graph below gives an explanation on how the costs are divided within these
phases using the red line.

Figure 3.1: Costs over Life Cycle of Asset. (Hasting, 2015)

We can observe with the green line that during the planning phase the opportunity to
influence costs is at its maximum point. This because no major investment has been made
and changes can still be applicable without resulting in major losses. In this phase is
where Life Cycle Costing Analysis comes in. When planning, LCCA is used as the basis
because, as mentioned before, it takes into consideration all major costs during the life
cycle of an investment. A simple example of this might be when choosing between two
investment options, by taking into account all major costs through the life cycle of the
different options the manager can take an intelligent decision on what is better for the
organization (See Example Chapter).

Also, there is concentration of opportunity to influence costs during the acquisition phase
because, it is where the managers can polish the costs. This graph represents the impor-
tance of the planning phase (also known as design phase) because in the following phases
the opportunity to influence costs (optimizing) is almost null.(Hastings, 2015)

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CME1210-14 Infrastructure Asset Management December 2016

As the standard IEC 60300 that provides the guidance for conducting a Life Cycle Costing
Analysis states, LCCA is most effectively applied in the products early design phase to
optimize the basic design approach. However, it should also be updated and used during
the subsequent phases of the life cycle to identify areas of significant cost uncertainty and
risk (IEC, 2004)

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CME1210-14 Infrastructure Asset Management December 2016

4. Application

As an asset manager, technical knowledge of physical assets is not enough. The Institute
of Asset Management describes Asset Management as an Integrative Discipline because it
integrates knowledge from disciplines such as business, risk, finance, design, project man-
agement, engineering, maintenance, etc. An example of this integration is LCCA, where
economics plays a key role in.

When doing the Life Cycle Analysis one cannot simply add or subtract money that is
spent or gained over the years. The value of money changes over time, and this is required
to take into consideration when doing a LCCA. Therefore, several economic factors cannot
be missed such as Discount Rate, Net Present Value, Future Value, and Equivalent Annual
Costs (EAC) (Schoenmaker, 2016).

4.1. Present Value

In life cycle costing, future costs, such as operation and maintenance costs associated with
an item, have to be discounted to their present values before adding them to the items
acquisition or procurement costs. (Dhillon, 2010). Present Value and is obtained with the
formula below (Schoenmaker, 2016).

FV
PV = (4.1)
(1 + i)n

where,
PV, Present Value
FV, Future Value (cash flow in year n)
i, discount rate (i.e rate of return of equivalent-risk security).
n, year number

Now that Present Value is defined, it can be inferred that the costs (or cash flows) have
to be discounted to the year where the LCC is being made in order to get a correct result
of the analysis.

4.2. Net Present Value

One way to apply LCCA is by determining the Net Present Value (NPV) of the invest-
ments. The Net Present Value is the sum of all the costs discounted to the present.
(Schoenmaker, 2016)

CF n
N P V = Io + (4.2)
X

n=1
(1 + i)n

where,
NPV, Net Present Value

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CME1210-14 Infrastructure Asset Management December 2016

Io, Initial Investment

CFn, Cash flow in year n)
i, discount rate (i.e rate of return of equivalent-risk security).
n, year number

The image below gives a clearer explanation of how NPV and PV works. It calculates the
Present Value of each payment of a annuity of 5 years with a 5% of interest rate. The
NPV of this would be the sum of all the payments and the initial investment.

Figure 4.1: Present Value of Annuity. (Investopedia, 2016)

4.3. Equivalent Annual Cost

Another calculation that can be used is the Equivalent Annual Cost Analysis (EAC)
which gives an average of the cost of the investment by year. Is defined as the annual cash
flow enough to fulfill the capital investment over its economic life.(Brealey,2006. EAC is
used when a comparison between different investment options with unequal lives wants to
be achieved. To obtain this, the following formula should be applied. (Schoenmaker, 2016)

i (1 + i)n
EAC = N P V (4.3)
(1 + i)n 1

where,
EAC, Equivalent Annual Cost
PV, Present Value
i, discount rate (i.e rate of return of equivalent-risk security).
n, year number

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CME1210-14 Infrastructure Asset Management December 2016

4.4. Discount Rate

For the discount rate it is recommended to calculate the cost of capital of an organi-
zation(van der Boomen,2016). The cost of capital is defined in the book Principles of
Corporate Finance as the expected return on a portfolio of all the companys existing
securities(Brealey,2006). It is the expected rate of return that an investor can demand
from an organization with the same risk.

The cost of capital can be measured by calculating a companys weighted-average cost

of capital (WACC).

Af ter taxW AACC = (1 TC )rD D/V +rE E/V (4.4)

where,
Tc, marginal corporate tax rate
rD, cost of debt
rE, cost of equity
D/V, weight of market values of firms debt (%)
E/V,weight of market values of firms equity(%)

WACC is calculated from the balance sheet of the organization.

For public organizations, WACC is not the best approach, since the aim of this institutions
are not maximizing private wealth. There are social discount rates that can be used
within these organizations. For example, The Werkgrouep Discontovoet estimated a social
discount rate from 3% to 5% within the Netherlands. (van der Boomen,2016)

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5. Type of Costs

One of the challenges of financial analysis is deciding what factors take into account, and
how to estimate cost. (Hastings, 2015) In this section of the report different types of costs
will be listed below in order to give the reader a starting point for the cost analysis but,
as there is no formula, it is about the interpretation, information available and experience
that defines a good cost analyses.

Note: Costs are also known as cash flows.

Acquisition Cost

May include, but not limited to:

Investment including transportation and installation.
Sales of old installation, salvage value, taxes on revenue.
Demolition, cleaning up.
Stock items, warehouse, liquid capital, software.

Ownership Cost

May include, but not limited to:

Sales and taxes on profit.
Salaries.
Operation and Maintenance.
Material and Consumables.

Disposal Costs

May include, but not limited to:

Demolition.
Cleaning up.
Salvage Values and Taxes on Revenues.

Be aware not to include:

Sunk Costs (i.e. Research and Development)
Interest Payments
Depreciation

Life Cycle Cost = Acquisition Cost + Ownership Cost + Disposal Costs

(M. van der Boomen, 2015)

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6. Example

As an asset manager one may encounter a situation where decisions on acquiring cer-
tain equipment is necessary. This may sound simple, but in reality there are multiple
choices of assets that can deliver the same output. In this situation the manager can use
Life Cycle Costing Analysis as a tool to decide what is the best option for the organization.

Suppose a company needs a trailer with the capacity to transport 30m3 of material from
an excavation site to a construction site for three years. The asset manager receives two
different options from different vendors, both with same characteristics.

According to the specifications of option A, the trailer needs 3 maintenances per year in
order to give optimal service. On the other hand, option B promises to deliver with just
one service per year.

Option A has a cost of 120,000. Each maintenance is given by the same company for a
fixed price of 150 for the first year, 175 the second year, and 200 the third year. It is
estimated that at the end of the third year, the trailer can be sold for the value of 100,000.

Option B has a cost of 135,000. Maintenance of 400, 425 and 450 for the first, second
and third year. Salvage value of 120,000 .

The inflation rate is 8%.

The two options share the same life time (3 years) so, in order to decide what of the two
options is better for the company, the manager will compare the Net Present Value of
each option. The option with a higher NPV assures to be a better investment. Operation
costs are equal for both options so it wont be taken into account for this example.

Net Present Value for Option A

Investment = Io = -120,000
Maintenance Y=1 = CF1= -150 * 3= -450/year
Maintenance Y=2 = CF2= -175 * 3= -525/year
Maintenance Y=3 = CF3= -200 * 3= -600/year
Salvage Value = + 100,000
Inflation Rate = i = 8%

N P VA = Io +
P3 CF n
n=1 (1+i)n

450 525 600 + 100, 000

N P VA = 120, 000 + + +
1 + 0.08 (1 + 0.08)2 (1 + 0.08)3

N P VA = 120, 000 + 416.67 450.10 + 78, 906.92

N P VA = 41, 959.84

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Net Present Value for Option B

Investment = Io = -135,000
Maintenance Y=1 = CF1= -400
Maintenance Y=2 = CF2= -425
Maintenance Y=3 = CF3= -450
Salvage Value = + 120,000
Inflation Rate = i = 8%

N P VB = Io +
P3 CF n
n=1 (1+i)n

400 425 450 + 120, 000

N P VB = 135, 000 + + +
1 + 0.08 (1 + 0.08)2 (1 + 0.08)3
N P VB = 350, 000 + 370.37 364.37 + 94, 902.64
N P VB = 40, 832.09
N P VA < N P VB
According to this calculations, option B is the best option because the net present value is
greater than NPV of option A. This means that option A is more expensive than option B.

Now, lets suppose that Option A is 45m3 instead of 30m3 . With this capacity the mate-
rial needed to transport can be done in two years instead of three. Lets now compare the
two options by calculating their EAC.

450 525 + 100, 000

N P VA = 120, 000 + + = 35, 132.89
1 + 0.08 (1 + 0.08)2
N P VA = 35, 132.89

N P VB = 40, 832.09

To obtain EACA adn EACB the equation 4.3 is applied as follows.

EACA

i(1+i)n
EACA = N P VA (1+i)n 1

0.08(1+0.08)2
EACA = 35, 132.89 (1+0.08)2 1

EACA = 19, 701.4

EACB

i(1+i)n
EACB = N P VB (1+i)n 1

0.08(1+0.08)3
EACB = 40, 832.09 (1+0.08)3 1

EACB = 15, 844.22

By comparing N P VA with N P VB one can infer that A is a better option because it has
a greater NPV. But it is proved that B is a better option because the EAC is lower, this
means that it costs less. NPV should only be compared when assets have the same life
time.

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7. Life Cycle Costing Analysis in Asset Management

The image below is a conceptual model of Asset Management made by the Institute of
Asset Management. Through this image the different stages of asset management can be
identified, and also the connection between them.

Figure 7.1: The IAMs Conceptual Asset management model . (IAM, 2015)

The blue box encloses the phase of Asset Management where LCCA is mainly applied.
Enclosed in orange is a phase where LCCA is recommended to be applied.
The phase where the LCCA can be applied is in the Asset Management Decision
Making. The purpose of this phase is to work towards the maximization of the value
realized over the lives of its assets. (IAM, 2015) In this stage is where the managers
consider all the encounters that an asset can have during the acquisition, operation and
maintenance, and disposal.

The Institute of Asset Management divides this phase in the next sections:
Capital Investment Decision-Making
Operations and Maintenance Decision-Making
Lifecycle Value Realization
Resourcing Strategy
Shutdowns and Outage Strategy

The tool can be used in mainly all of the sections mentioned above in order to have a
reference of how the decisions can affect the finances of the organization. But it is mainly
used in the Capital Investment Decision-Making process. Here, the manager evaluates
and analyzes all the investment options that the organization has and tries to add equity
value to it. (IAM, 2015)

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CME1210-14 Infrastructure Asset Management December 2016

As stated in chapter 3.1, Life Cycle Costing it is effectively applied during the Planning
Stage (Decision-Making), but it should also be applied in the ongoing stages (Life-Cycle
Delivery). By applying LCCA in the Life-Cycle Delivery, the costs can be updated and
polished during the life of the asset. This enables the manager to have certain information
of the real costs of the assets, and information for future analysis. This is also aligned
with Asset Information group, because it is the group responsible for the acquisition of
that data and the articulation of it, in order to take better decisions.

Also, it is necessary to state that asset management consists in integrating different de-
partments of an organization so, decisions taken in the Decision Making phase will have
certain impact in the following phases (Life Cycle Deliver). For this reason, it is stated
that LCC impact these phases of the Asset Management Model given by IAM.
In conclusion, by applying LCC in Capital Investment Decision Making, the asset manager
may increase the financial worth of the organization if good decision is taken. By this, he
generates value to the organization and can generate a significant impact on the success
of a company(IAM,2015).

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CME1210-14 Infrastructure Asset Management December 2016

8. Standards

The standard IEC 60300 is the introduction to the Life Cycle Costing application. There,
the reader can find a general introduction and the concepts used. The IEC 60300-3-3 is
the International Standard for Application of Life Cycle Costing. It contains explanation
and guidelines that could help the reader to get a better understanding of LCCA. It is
intended for a general use.

For the Oil and Gas Industry, the ISO 15663-1:2000 specifies the requirements for re-
alizing a life-cycle costing analysis for the development and operation of activities in this
industry, such as drilling, production and pipeline transportation.

The guidelines for performing a Life- Cycle Cost in Buildings and Structures constructed
assets and their parts is given in ISO 15686-5:2008 standard.

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CME1210-14 Infrastructure Asset Management December 2016

9. Limitations

Limitations comes by hand with many methods and tools, and Life Cycle Costing is not
an exception. It is important to mention some of the limitations of this method in order to
tackle them at best in practice. Below are listed the limitations found during this research.

Lack of information: Sometimes information about costs may not exist, and this may
lead the manager to overestimate the costings.

Inaccuracy: Although LCC is an excellent tool to analyze costs, the result are only es-
timations that may vary in real life.

Financial Knowledge Required: It is important to have a basic understanding of Fi-

nance. This, in order to avoid misunderstandings in the calculations (i.e. calculating
the correct discount rate). If the calculations are made with the incorrect discount rate,
the outputs of the LCCA will be incorrect and this may lead to a bad decision. Ac-
cording to the article Common misunderstanding in life cycle costing analyses and how
to avoid them, this is a common mistake among corporations (M. van der Boomen, 2015).

No control over costs: There will be always uncertainties with this method because,
for example, most of contractors give estimations of costs or a budget, but many times
this costs overrun. (Wubbenhorst, 1986)

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CME1210-14 Infrastructure Asset Management December 2016

10. Conclusion

It can be concluded that Life Cycle Costing Analysis is a useful tool used in the context of
Asset Management in order to attain value from the assets by ensuring that the decisions
of investments are made with a reasonable justification. This report started by defining
the following research question: Can an asset manager optimize costs of investments by
applying Life Cycle Costing Analysis?. This question was answered by first explaining the
method and then the application of it. The example given in this report aligns with the
question by describing a situation where a manager needs to optimize costs by choosing
between different investments options where the less expensive is the more optimal. Al-
though there are many ways to optimize costs with LCCA, this report focused on choosing
for an optimal solution.

It was shown that a decision to invest is not only influenced by the initial costs (acquisi-
tion) but also by all other expenses throughout the life cycle. Life Cycle Costing Analysis
is an essential tool in the Decision Making phase of Asset Management, because with this
tool the managers can identify all the costs that an asset can have throughout its life
cycle. With this information the manager can take a wise decision on what is best for an
organization. The analysis also helps the managers to optimize the design of a product
by evaluating different operating, maintenance and disposal strategies(IEC60300, 2004).

10.1. Personal Comment

I found Life Cycle Costing an indispensable tool for the planning phase of a project. Ev-
ery investment decision should take into account all the future costs discounted with the
correct discount rate. Although it may have some limitations, this tool is capable of giving
a clear overview of costs and the real value of an asset. Also, I find very interesting that
when planning, this tools also motivates the manager to get a clearer understanding of all
costs. As an asset manager, by using this tool better decisions can be made that could
result in monetary optimization.

The purpose of this paper was to explain the Life Cycle Costing method through its ap-
plicability in Asset Management. The example was formulated in a way that shows that
LCCA can be applied in day todays decisions of an asset manager. The research was
focused on the research question and sub questions, which made it easier to get sources
and information.

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11. References

55000:2014, I. (2014). Asset Management - Overview, principles and terminology. Geneva:ISO.

Barringer. (1996). Life Cycle Cost Tutorial. Houston: Gulf Publishing Company.

Brealey, R. A., Myers, S. C., Allen, F. (2006). Principles of corporate finance. New
York, NY: McGraw-Hill/Irwin.

Dhillon, B. (2010). Life Cycle Costing for Engineers. Boca Raton: CRC Press.

Fuller, S. K. (1995). Life-Cycle Costing Manual for the Federal Energy Management Pro-
gram. Washington.

Hastings. (2015). Physical Asset Management. Springer.

IAM. (2015). Asset Management - an anatomy. The Institue of Asset management.

EN 60300-3-3:2004. Dependability Management - Part 3-3: Application guide-Life Cycle

Costing

Kolarik, Y. S. (1981). Life Cycle Costing: Concept and Practice. OMEGA. The Interna-
tional Journall of Management, 287-296.

M. van der Boomen, R. S. (n.d.). Common misunderstandings in life cycle costing anal-
yses and how to avoid the,. Civil Engineering and Geosciences, Delft University of Tech-
nology.

Merriam-Webster. (2016, December 1). Retrieved from Life Cycle: http://www.merriam-

webster.com/dictionary/lifeSchoenmaker, D. R. (2016). Infrastructure Asset Manage-
ment: Study Guide and Reader. Delft: Delft University.

van de Boomen, M. (2016, December 7). Blackboard. Retrieved from Infrastructure Asset
Management: https : //blackboard.tudelf t.nl/webapps/blackboard/execute/content/f ile?cmd =
viewcontenti d =2 9042581 coursei d =5 74521

Wubbenhorst. (1986). Life Cycle Costing for Construction Projects. Pergamon Journals
Ltd., 87 to 97

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12. Appendix

12.1. Literature Search

Search Terms:
Life Cycle Costing
Asset Management
Life Cycle Costing in Asset Management
Life Cycle Costing Application
Investments Evaluation

Sources Used:
Google Scholar
Google
TU Delft Library
Lecture Slides
IEEE XPLORE Digital Library
Perinorm
NEN COnnect
Lecture Notes

Collected Reference
55000:2014, I. (2014). Asset Management - Overview, principles and terminology. Geneva
: ISO.

Barringer. (1996). Life Cycle Cost Tutorial. Houston: Gulf Publishing Company.

Brealey, R. A., Myers, S. C., Allen, F. (2006). Principles of corporate finance. New York,
NY: McGraw-Hill/Irwin.
Dhillon, B. (2010). Life Cycle Costing for Engineers. Boca Raton: CRC Press.

Fuller, S. K. (1995). Life-Cycle Costing Manual for the Federal Energy Management Pro-
gram. Washington.

Hastings. (2015). Physical Asset Management. Springer.

IAM. (2015). Asset Management - an anatomy. The Institue of Asset management.

IEC. (2004). Life Cycle Costing International Standard IEC 60300. IEC.

Kolarik, Y. S. (1981). Life Cycle Costing: Concept and Practice. OMEGA. The Interna-
tional Journall of Management, 287-296.

M. van der Boomen, R. S. (2016). Common misunderstandings in life cycle costing analyses
and how to avoid the,. Civil Engineering and Geosciences, Delft University of Technology.

Schoenmaker, D. R. (2016). Infrastructure Asset Management: Study Guide and Reader.

Delft: Delft University.

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CME1210-14 Infrastructure Asset Management December 2016

Wubbenhorst. (1986). Life Cycle Costing for Construction Projects. Pergamon Journals
Ltd., 87 to 97

Possible Results:
Information
Images
Graphs
Examples
Standards

12.2. Research Method:

The method of research used for this report was first defining a Problem Statement, a
Goal and a Research Question. With these three things identified, the author narrowed
the scope of the report and avoid getting lost with all the information available. After
having the research question, the sub questions were defined in order to help answering
the main question. General readings were made before establishing the main research
question, in order to have an idea of what the tool is about, but after defining the goal
the research was very specific.

Main Research Topic:

Can an asset manager optimize costs of investments by applying Life Cycle Costing Anal-
ysis?

Aspects of the main topic:

Description of the method and its applicability in the context of Asset Management.

Sub-questions:
In what phase should Life Cycle Costing be used?
What are the different types of costs involved in an asset?
How can Life Cycle Costing be applied?
What are the limitations of Life Cycle Costing?

21 Life Cycle Costing