Finance
Life Cycle Costing
An economic assessment that sums all costs of an asset across its life — acquisition, operation, maintenance and disposal — rather than purchase price alone.
Definition
Life cycle costing (LCC) is a methodology for the systematic economic evaluation of the total cost of an asset, product or system over its life cycle, covering development, acquisition, operation, maintenance and end-of-life disposal, with future costs typically discounted to present value. For buildings and constructed assets it is standardised in ISO 15686-5; a petroleum-sector counterpart exists in ISO 15663.
References
ISO 15686-5 purpose statement, cost categories, ISO 15663 sector standard
Whole-life phases, discounting, TCO relationship, sustainability use
Overview
What it means
Acquisition cost is often a small share of lifetime cost: the cheapest option to buy can be the most expensive to own. LCC makes the full cost visible at the decision point, enabling fair comparison of alternatives — and, in sustainability applications, putting energy use, carbon-related costs and end-of-life liabilities on the balance sheet.
The procurement-facing variant is total cost of ownership (TCO); an environmental extension, environmental LCC, internalises externality costs and parallels life cycle assessment in scope.
How it is used
Used in capital budgeting, procurement, building design appraisal and infrastructure decisions, and increasingly in sustainable procurement and whole-life carbon assessments.
Why it matters
LCC aligns economic and environmental incentives: efficient, durable, low-impact options frequently win once the whole life is priced. **Note:** Candidates 1624 ("Life cycle cost") and 1625 ("Life cycle cost (LCC)") merge here as the same concept.
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