Common misunderstandings in life cycle costing analyses and how to avoid them

LCC analyses (LCCA) and discounting calculations are applied by public sector organizations in the Netherlands. Still numerous misunderstandings can be recognized. An overview is given of some common misunderstandings found in Life Cycle Costing Analyses. Issues relating to public assets are: the absence of residual value, long life cycles, high investment costs, long operation and maintenance expenditures and a low discount rate. All these issues make a careful estimation of life cycles and input parameters more important than most governments and local authorities realize. Six suggestions to improve LCC analyses of public assets are given.