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 Life Cycle Costing

Life-cycle costing (LCC) is a technique for objectively assessing the total costs of ownership.  Increasingly, LCC is an accepted alternative to low initial price for selection of transportation rolling stock, during the procurement selection process.  The use of LCC models reduces the probability that low-priced, but inappropriate vehicles or equipment will be selected for transport service and encourages cost-effective improvements for the tendered vehicles.

PAI has developed a comprehensive rolling stock LCC model which can be easily customized for your project.  PAI’s models allow you to carry out both sensitivity studies and cost trade off studies, by simply changing identified parameters.

PAI’s spreadsheet-based model provides a method for preparing a detailed economic analysis of rolling stock projects.  Given certain input data for a project, the model calculates its life-cycle costs, life-cycle benefits, net present value, benefit/cost ratio and payback period.

The model is based on a series of interlinked worksheets.  The model is designed so that the user generally needs to enter data only on the Project Information worksheet.  Summary results are shown in the Results worksheet.  The remaining worksheets are provided for calculations performed automatically within the model’s structure. 

Experience

PAI has developed and maintained an LCC Model for various locomotive (BoBo and CoCo) combinations, based on Maintenance Programs and financial parameters covering the 30 year lifespan for the Spoornet Main Line Locomotive Improvement Project (SMLLIP) in South Africa.  We prepared a Maintenance Proposal based on the original proposal for two options (maintenance by Spoornet and maintenance by the supplier).

Additional tasks included:

- Preparation of Maintenance Plans, including costing of the preventive and corrective maintenance work, replacement of consumables, scheduled replacement of equipment and the mid-life major overhauls.

- Performance of failure analyses to create the cost for corrective maintenance (unscheduled repair).

- Performance of a bench-marking comparison, to validate the results of the LCC analysis.

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