LIFE CYCLE COSTING IN EQUIPMENT PROCUREMENT
LOGISTICS MANAGEMENT INST BETHESDA MD
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Following field investigations and reviews of other studies, conclusions are that 1 techniques are either available or capable of development for predicting and measuring logistics costs within tolerances which should permit their use in bid evaluation, 2 their utility and economic feasibility should be tested in actual competitive procurements, 3 any assessment of logistics costs, no matter how limited, is to be preferred to the alternative viz., a complete disregard for the impact of procurement decisions on such costs. The report points out that traditionally the competitive decision involves a choice between three alternatives sole source, price competition, and competition with logistics cost analysis. Guidelines for measuring the economic feasibility of making a logistics cost analysis are developed for use when competition is contemplated, and ways of performing the analysis in the process of bid evaluation are suggested and illustrated. Recommendations are that 1 The practicability of evaluating logistics costs in procurement should be tested in actual procurements of non-commercial reparable equipments and the quidelines outlined in this report should be used in conducting such tests, and 2 award of contracts for non-reparable equipments on the basis of lowest price per unit of service life e.g., mile, operating hour, calendar month should be tested in actual procurements in which service life in excess of the minimum required is useful.
- Economics and Cost Analysis
- Logistics, Military Facilities and Supplies