Instructions

Life cycle cost analysis - instructions

General guidance notes

The purpose of a full life cycle cost analysis is to enable better assessment of alternative asset choices and value-for-money outcomes through consideration of all the costs associated with an asset over its useful life, including acquisition, installation, operation, maintenance, refurbishment, and disposal.

It is intended that the results of the full life cycle cost analysis undertaken with this template would form part of the quantitative analysis component of a business case supporting the acquisition of an additional or replacement medical equipment item or system.

This template has been designed to assist healthcare providers to undertake a life cycle cost analysis. It has been designed as a general tool to be applied to all types and values.

The analysis should cover a range of options, including maintaining the status quo, referred to as the base case. This template includes a number of cost items. Please complete the template for all cost items that have relevance and are material to the objective of the LCC.

Where possible, the analysis should identify total costs rather than incremental costs to ensure the total costs are being captured. The comparative analysis on the summary sheet is based on discounted cash flows and is linked back to the individual options being considered. The template automatically calculates these values based on the discount rate entered on the assumptions sheet.

All amounts should be expressed exclusive of GST.

Escalation factors

• Cost escalation: estimated annual percentage increase for non-salary related costs.
• Revenue escalation: estimated annual percentage increase of revenues generated over the analysis period.
• Salary escalation: estimated annual percentage increase for salary related costs.
• None: use for fixed values or uneven revenue/cost profiles over the life cycle.

Revenues

• External revenue: revenues generated from external sources resulting from the acquisition.
• Other revenue: other significant revenues associated with the objective of the LCC.

Residual values

This refers to the estimated value of the objective of the LCC at the end of the life cycle cost analysis. Where possible, residual values of similar items may provide a suitable guide.

Initial acquisition costs

• Purchase cost
• Delivery and installation costs
• Integration costs
• Facility modifications
• Initial training
• Trade-in

Leasing costs (if applicable)

• Lease payments
• Residual lease payments

Maintenance costs

• Scheduled or preventative maintenance
• Decontamination and waste disposal
• Other maintenance costs

Repairs

• Repairs or unscheduled maintenance
• Upgrades and refurbishments
• Spare parts and accessories
• Other repair costs

Operating costs

• Staffing costs
• Accreditation and certification
• Supplies and consumables
• Ongoing training
• Utilities
• Licences
• Other operating costs

End-of-life disposal costs

These include the costs to decommission, remove from service, and safely dispose of the equipment at the end of its useful life, such as removal costs, freight, or make-good repairs to the facility.