Life Cycle Cost: An Examination of Its Application in the United States, and Potential for Use in the Australian Defense Forces

This research has two objectives firstly, to examine the application of life cycle costing in the United States and secondly, to discuss its potential for use in the decision making of the Australian Defense Forces. It has been found that despite almost 30 years of application in the United States, life cycle cost for the most part, is given little real attention in decision making. Reasons for this include an institutional emphasis that accords greater attention to acquisition cost than life cycle cost and the dominance of a budgeteers view of life cycle cost as a technique for affordability analysis, an approach which the current state of the data does not readily support. Life cycle costs greatest potential is as a criteria to evaluate and tradeoff design and logistics issues, but it receives comparatively little emphasis in the U.S. in these areas. For Australia to avoid the problems experienced in the U.S., there needs to be acceptance at all levels of the concept of life cycle cost, and what it is trying to achieve. Since the cornerstone of the techniques of life cycle cost analysis is the data, an accounting system capable of capturing direct and indirect costs is needed. This study contains seven broad points for Australia to consider in implementing the techniques and concept of life cycle cost.