3.1. Life-Cycle Costs/Total Ownership Costs
3.1.1. Introduction
3.1.2. Life-Cycle Cost Categories and Program Phases
3.1.3. Life-Cycle Cost Category Definitions
3.1.3.1. Research and Development Costs
3.1.3.2. Investment Costs
3.1.3.3. Operating and Support (O&S) Costs
3.1.3.4. Disposal Costs
3.1.4. Implications of Evolutionary Acquisition
3.1.5. Total Ownership Costs
3.1.6. Fully Burdened Cost of Delivered Energy
3.1.1. Introduction
Both DoD Directive 5000.01, The Defense Acquisition System, and DoD Instruction 5000.02, Operation of the Defense Acquisition System, make reference to life-cycle cost and total ownership cost. This section of the Guidebook explains the meaning for each of these terms. The terms are similar in concept but somewhat different in scope and intent. For a defense acquisition program, life-cycle cost consists of research and development costs, investment costs, operating and support costs, and disposal costs over the entire life cycle. These costs include not only the direct costs of the acquisition program but also indirect costs that would be logically attributed to the program. In this way, all costs that are logically attributed to the program are included, regardless of funding source or management control.
The concept of total ownership cost is related but broader in scope. Total ownership cost includes the elements of life-cycle cost as well as other infrastructure or business process costs not normally attributed to the program. Section 3.1.5 defines and describes this concept in more detail.
Program cost estimates that support the defense acquisition system normally are focused on life-cycle cost or elements of life-cycle cost. Examples of cases where cost estimates support the acquisition system include affordability analyses, establishment of program cost goals for Acquisition Program Baselines, independent cost estimates, or estimates of budgetary resources. However, for programs that are pre-Milestone A or in the Engineering and Manufacturing Development Phase, cost estimates that are used within the program office to support system trade-off analyses, such as evaluations of design changes or assessments of energy efficiency, reliability, maintainability, and other supportability considerations, may need to be broader in scope than traditional life-cycle cost estimates to support the purpose of the analyses being conducted. Moreover, for mature programs (in transition from production and deployment to sustainment), cost estimates may need to be expanded in scope to embrace total ownership cost concepts in order to support broad logistics or management studies.
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