4/24/2019 Cost EstimatingLife-Cycle Cost Estimate (LCCE)

Cost EstimatingLife-Cycle Cost Estimate (LCCE)

acqnotes.com/acqnote/tasks/life-cycle-cost-estimatecost-estimate

A Life-Cycle Cost (LCC) is the total cost of a program from cradle to grave. (also refered to as
Total Ownership Cost (TOC)) LCC consists of Research and Development (R&D) 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 include 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. [1]

A Life-Cycle Cost (LCC) Estimate (See Cost Estimating) is the estimated cost of developing,
producing, deploying, maintaining, operating and disposing of a system over its entire lifespan. The
estimate is prepared for major program reviews to include Milestone A, B, and C. It’s used to
acquire funding for a system throughout its lifespan. The LCC is scoped around three (3) topics:

1. Work Breakdown Structure (WBS)

2. Cost Estimating Categories
3. Cost Element Structures

1. Work Breakdown Structure (WBS): A program WBS provides a framework for program and
technical planning, cost estimating, resource allocations, performance measurements, and status
reporting. The WBS should define the total system to be developed or produced; display the total
system as a product-oriented family tree composed of hardware, software, services, data, and
facilities; and relate the elements of work to each other and to the end product.

2. Cost Estimating Categories: There are 4 cost categories for LCC defined in DoD 5000.4-M
“Cost Analysis Guidance and Procedures”. These categories are:

1. Research and Development

2. Investment
3. Operating and Support
4. Disposal

3. Cost Element Structures: LLC are divided into the five major Appropriations Categories.
These categories are:

1. Research, Development Test and Evaluation (RDT&E)

2. Procurement;
3. Operations and Maintenance (O&M)
4. Military Construction (MILCON)
5. Military Personnel (MILPERS)

There are a number of cost estimating techniques that can be used to develop a LLC. The main
techniques are:

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 4/24/2019 Cost EstimatingLife-Cycle Cost Estimate (LCCE)

X Parametric
Analogy
Engineering Estimate
Actual Cost

The Cost Analysis Requirements Description (CARD) documents the ground rules and
assumption, the description of the system and operating concepts, cost estimating methods, data
sources and other topics for developing the LCC.

See Cost Estimating Section

See Total Ownership Cost (TOC)

AcqTips:

Life-Cycle Cost is also referred to as Total Cost of Ownership (TOC)

AcqLinks and References:

Defense Acquisition Guidebook (DAG)

OSD Operating and Support Cost Estimating Guide – March 2014

Updated: 6/18/2018

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