Department of Administrative Services - State Agencies, Boards, or Commissions - Definitions.

Published: 1980-07-10

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(A) "Life cycle costing (LCC)" - a method of procurement evaluation based on a commodity or service's economic life - taking into account not only the initial acquisition or purchasing cost, but also the cost of ownership and its slavage value, if any. Thus, we have:

(1) Initial acquisition or purchasing cost.

(2) Cost of ownership; economic life will be determined by two things:

(a) How long the asset is used

(b) How long the asset lasts physically

Therefore, the "economic life" or "average useful life" is that period during which the asset is expected to be retained as the lowest cost alternative for satisfying an intended purpose.

(3) Salvage value.

(B) "Sunk costs" - those costs already incurred that would be non-recoverable if the commodity or service would be discontinued.

(C) "Energy efficient ration (EER)" - the efficiency rating of an energy consuming commodity, determined by dividing the service output (Btu's, etc.), by the power input (watts, etc.). Thus, the greater the EER, the more efficient the commodity or service.