Life Cycle Costing

Life Cycle Costing includes the cost of the whole in-service phase. costfact calculates the life cycle cost of the project in terms of actual cash values and annuities and enables comparisons of alternatives. These analyses are not only useful for the ship operator, but for the manufacturer as well, for example, when the manufacturer can demonstrate to the buyer that the choice of a technical alternative can lead to a higher purchase price, but simultaneously to savings during operation that exceed the initial additional costs. Displaying the results in diagrams enables different projects to be compared easily. Also, optimum service life of a project and the point in time, at which a project profitability change may take place, becomes directly identifiable.

Furthermore, with costfact an analysis of the in-service costs is possible. The target of this analysis is identifying the main cost drivers in order to get indications of the cost causing technical parameters. The illustration gives a quick and easy overview to height and structure of the different shares of the operating costs.

Life cycle costing requires prognoses that inevitably contain uncertainty. costfact incorporates this uncertainty by risk analyses and sensitivity analyses:

• Risk Analysis:
  costfact calculates best and worst case scenarios for the life cycle costs. The calculation is based on an assumed error in estimating the input parameters differentiated according to the type and payment time point as well as the error compensation effect.

• Sensitivity Analysis:
  By a sensitivity analysis of input parameters, the quantitative effect of variance in the predicated values on the cash value of a project is calculated.
  The sensitivity analysis of compared projects calculates the critical value of an input parameter that would cause a change in advantageousness of the projects.

Based on these analyses, questions can be answered such as, "what increase in the expected price of fuel will cause a profitability change in two compared projects?"