EN 60300-3-3:2004

2003-01.Slovenski inštitut za standardizacijo. Razmnoževanje celote ali delov tega standarda ni dovoljeno.Zuverlässigkeitsmanagement -- Teil 3-3: Anwendungsleitfaden - LebenszykluskostenGestion de la sûreté de fonctionnement -- Partie 3-3: Guide d'application - Evaluation du coût de vieDependability management -- Part 3-3: Application guide - Life cycle costing21.020Characteristics and design of machines, apparatus, equipment03.120.01Kakovost na splošnoQuality in generalICS:Ta slovenski standard je istoveten z:EN 60300-3-3:2004SIST EN 60300-3-3:2007en01-januar-2007SIST EN 60300-3-3:2007SLOVENSKI
STANDARD
EUROPEAN STANDARD
EN 60300-3-3 NORME EUROPÉENNE EUROPÄISCHE NORM
September 2004 CENELEC European Committee for Electrotechnical Standardization Comité Européen de Normalisation Electrotechnique Europäisches Komitee für Elektrotechnische Normung
Central Secretariat: rue de Stassart 35, B - 1050 Brussels
© 2004 CENELEC - All rights of exploitation in any form and by any means reserved worldwide for CENELEC members.
Ref. No. EN 60300-3-3:2004 E
ICS 21.020
English version
Dependability management Part 3-3: Application guide –
Life cycle costing (IEC 60300-3-3:2004)
Gestion de la sûreté de fonctionnement Partie 3-3: Guide d'application - Evaluation du coût de vie (CEI 60300-3-3:2004)
Zuverlässigkeitsmanagement Teil 3-3: Anwendungsleitfaden - Lebenszykluskosten (IEC 60300-3-3:2004)
This European Standard was approved by CENELEC on 2004-09-01. CENELEC members are bound to comply with the CEN/CENELEC Internal Regulations which stipulate the conditions for giving this European Standard the status of a national standard without any alteration.
Up-to-date lists and bibliographical references concerning such national standards may be obtained on application to the Central Secretariat or to any CENELEC member.
This European Standard exists in three official versions (English, French, German). A version in any other language made by translation under the responsibility of a CENELEC member into its own language and notified to the Central Secretariat has the same status as the official versions.
CENELEC members are the national electrotechnical committees of Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland and United Kingdom.
at national level by publication of an identical
national standard or by endorsement
(dop)
2005-06-01 – latest date by which the national standards conflicting
with the EN have to be withdrawn
(dow)
2007-09-01 Annex ZA has been added by CENELEC. __________ Endorsement notice The text of the International Standard IEC 60300-3-3:2004 was approved by CENELEC as a European Standard without any modification. __________ SIST EN 60300-3-3:2007

- 3 - EN 60300-3-3:2004
Annex ZA
(normative)
Normative references to international publications
with their corresponding European publications The following referenced documents are indispensable for the application of this document. For dated references, only the edition cited applies. For undated references, the latest edition of the referenced document (including any amendments) applies. NOTE Where an international publication has been modified by common modifications, indicated by (mod), the relevant EN/HD applies. Publication Year Title EN/HD Year IEC 60050-191 1990 International Electrotechnical Vocabulary (IEV) Chapter 191: Dependability and quality of service
- - IEC 60300-3-12 - 1) Dependability management Part 3-12: Application guide - Integrated logistic support
EN 60300-3-12 2004 2) IEC 61703 - 1) Mathematical expressions for reliability, availability, maintainability and maintenance support terms
EN 61703 2002 2) IEC 62198 - 1) Project risk management - Application guidelines
- -
1) Undated reference. 2) Valid edition at date of issue. SIST EN 60300-3-3:2007

NORME INTERNATIONALECEIIEC INTERNATIONAL STANDARD 60300-3-3Deuxième éditionSecond edition2004-07 Gestion de la sûreté de fonctionnement – Partie 3-3: Guide d'application – Evaluation du coût du cycle de vie
Dependability management – Part 3-3: Application guide – Life cycle costing
Pour prix, voir catalogue en vigueur For price, see current catalogue IEC 2005
Droits de reproduction réservés

Copyright - all rights reserved Aucune partie de cette publication ne peut être reproduite ni utilisée sous quelque forme que ce soit et par aucun procédé, électronique ou mécanique, y compris la photocopie et les microfilms, sans l'accord écrit de l'éditeur. No part of this publication may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying and microfilm, without permission in writing from the publisher. International Electrotechnical Commission,
3, rue de Varembé, PO Box 131, CH-1211 Geneva 20, SwitzerlandTelephone: +41 22 919 02 11 Telefax: +41 22 919 03 00 E-mail: inmail@iec.ch
Web: www.iec.ch CODE PRIX PRICE CODE XB Commission Electrotechnique InternationaleInternational Electrotechnical CommissionSIST EN 60300-3-3:2007

60300-3-3  IEC:2005 – 3 –
CONTENTS FOREWORD.7 INTRODUCTION.11
1 Scope.13 2 Normative references.13 3 Terms and definitions.13 4 Life cycle costing.15 4.1 Objectives of life cycle costing.15 4.2 Product life cycle phases and LCC.17 4.3 Timing of LCC analysis.19 4.4 Dependability and LCC relationship.19 4.4.1 General.19 4.4.2 Dependability related costs.21 4.4.3 Consequential costs.23 4.5 LCC concept.25 4.5.1 General.25 4.5.2 LCC breakdown into cost elements.27 4.5.3 Estimation of cost.31 4.5.4 Sensitivity analysis.37 4.5.5 Impact of discounting, inflation and taxation on LCC.37 4.6 Life cycle costing process.37 4.6.1 General.37 4.6.2 Life cycle costing plan.39 4.6.3 LCC model selection or development.39 4.6.4 LCC model application.39 4.6.5 Life cycle costing documentation.41 4.6.6 Review of life cycle costing results.43 4.6.7 Analysis update.43 4.7 Uncertainty and risks.43 5 LCC and environmental aspects.47
Annex A (informative)
Typical cost-generating activities.49 Annex B (informative)
LCC calculations and economic factors.55 Annex C (informative)
Example of a life cycle cost analysis.61 Annex D (informative)
Examples of LCC model development.107 Annex E (informative)
Example of a product breakdown structure
and LCC summary for a railway vehicle.123
Figure 1 – Sample applications of life cycle costing.19 Figure 2 – Typical relationship between dependability and
LCC for the operation and maintenance phase.21 Figure 3 – Cost element concept.29 Figure 4 – Example of cost elements used in the parametric cost method.33 SIST EN 60300-3-3:2007

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Figure C.1 – Structure of DCN.63 Figure C.2 – Cost breakdown structure used for the example in Figure C.1.65 Figure C.3 – Definition of cost elements.71 Figure C.4 – Comparison of the costs of investment, annual operation and maintenance.89 Figure C.5 – Net present value (10 % discount rate).101 Figure C.6 – Net present value (5 % discount rate).103 Figure C.7 – NPV with improved data store reliability (5 % discount rate).105 Figure D.1 – Hierarchical structure.113 Figure E.1 – Vehicle system product breakdown structure.125
Table C.1 – First indenture level – Data communication network.67 Table C.2 – Second indenture level – Communication system.67 Table C.3 – Third indenture level – Power supply system.67 Table C.4 – Third indenture level – Main processor.67 Table C.5 – Third indenture level – Fan system.69 Table C.6 – Cost categories.69 Table C.7 – Investments in spare replaceable units.75 Table E.1 – Life cycle cost summary by Product Breakdown Structure.127
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INTERNATIONAL ELECTROTECHNICAL COMMISSION ____________
DEPENDABILITY MANAGEMENT –
Part 3-3: Application guide – Life cycle costing
FOREWORD 1) The International Electrotechnical Commission (IEC) is a worldwide organization for standardization comprising all national electrotechnical committees (IEC National Committees). The object of IEC is to promote international co-operation on all questions concerning standardization in the electrical and electronic fields. To this end and in addition to other activities, IEC publishes International Standards, Technical Specifications, Technical Reports, Publicly Available Specifications (PAS) and Guides (hereafter referred to as “IEC Publication(s)”). Their preparation is entrusted to technical committees; any IEC National Committee interested in the subject dealt with may participate in this preparatory work. International, governmental and non-governmental organizations liaising with the IEC also participate in this preparation. IEC collaborates closely with the International Organization for Standardization (ISO) in accordance with conditions determined by agreement between the two organizations. 2) The formal decisions or agreements of IEC on technical matters express, as nearly as possible, an international consensus of opinion on the relevant subjects since each technical committee has representation from all interested IEC National Committees.
3) IEC Publications have the form of recommendations for international use and are accepted by IEC National Committees in that sense. While all reasonable efforts are made to ensure that the technical content of IEC Publications is accurate, IEC cannot be held responsible for the way in which they are used or for any misinterpretation by any end user. 4) In order to promote international uniformity, IEC National Committees undertake to apply IEC Publications transparently to the maximum extent possible in their national and regional publications. Any divergence between any IEC Publication and the corresponding national or regional publication shall be clearly indicated in the latter. 5) IEC provides no marking procedure to indicate its approval and cannot be rendered responsible for any equipment declared to be in conformity with an IEC Publication. 6) All users should ensure that they have the latest edition of this publication. 7) No liability shall attach to IEC or its directors, employees, servants or agents including individual experts and members of its technical committees and IEC National Committees for any personal injury, property damage or other damage of any nature whatsoever, whether direct or indirect, or for costs (including legal fees) and expenses arising out of the publication, use of, or reliance upon, this IEC Publication or any other IEC Publications.
8) Attention is drawn to the Normative references cited in this publication. Use of the referenced publications is indispensable for the correct application of this publication. 9) Attention is drawn to the possibility that some of the elements of this IEC Publication may be the subject of patent rights. IEC shall not be held responsible for identifying any or all such patent rights. International Standard IEC 60300-3-3 has been prepared by IEC technical committee 56: Dependability. This second edition cancels and replaces the first edition published in 1996, and constitutes a full technical revision.
This edition expands upon the technical guidance in response to requests from practitioners.
The examples in particular have been enhanced. The bilingual version (2005-08) replaces the English version. SIST EN 60300-3-3:2007

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The text of this standard is based on the following documents: FDIS Report on voting 56/942/FDIS 56/962/RVD
Full information on the voting for the approval of this standard can be found in the report on voting indicated in the above table. This publication has been drafted in accordance with the ISO/IEC Directives, Part 2. IEC 60300 consists of the following parts, under the general title Dependability management: Part 1: Dependability management systems Part 2: Dependability programme elements and tasks Part 3: Application guide
The committee has decided that the contents of this publication will remain unchanged until the maintenance result date indicated on the IEC web site under "http://webstore.iec.ch" in the data related to the specific publication. At this date, the publication will be
• reconfirmed; • withdrawn; • replaced by a revised edition, or • amended. SIST EN 60300-3-3:2007

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INTRODUCTION Products today are required to be reliable. They have to perform their functions safely with no undue impact on the environment and be easily maintainable throughout their useful lives. The decision to purchase is not only influenced by the product's initial cost (acquisition cost) but also by the product's expected operating and maintenance cost over its life (ownership cost) and disposal cost. In order to achieve customer satisfaction, the challenge for suppliers is to design products that meet requirements and are reliable and cost competitive by optimizing acquisition, ownership and disposal costs. This optimization process should ideally start at the product's inception and should be expanded to take into account all the costs that will be incurred throughout its lifetime. All decisions made concerning a product's design and manufacture may affect its performance, safety, reliability, maintainability, maintenance support requirements, etc., and ultimately determine its price and ownership and disposal costs. Life cycle costing is the process of economic analysis to assess the total cost of acquisition, ownership and disposal of a product. This analysis provides important inputs in the decision-making process in the product design, development, use and disposal. Product suppliers can optimize their designs by evaluation of alternatives and by performing trade-off studies. They can evaluate various operating, maintenance and disposal strategies (to assist product users) to optimize life cycle cost (LCC). Life cycle costing can also be effectively applied to evaluate the costs associated with a specific activity, for example, the effects of different maintenance concepts/approaches, to cover a specific part of a product, or to cover only selected phase or phases of a product’s life cycle. Life cycle costing is most effectively applied in the product’s early design phase to optimize the basic design approach. However, it should also be updated and used during the subsequent phases of the life cycle to identify areas of significant cost uncertainty and risk.
The necessity for formal application of the life cycle costing process to a product will normally depend on contractual requirements. However, life cycle costing provides a useful input to any design decision-making process. Therefore, it should be integrated with the design process, to the extent feasible, to optimize product characteristics and costs.
60300-3-3  IEC:2005 – 13 –
DEPENDABILITY MANAGEMENT –
Part 3-3: Application guide – Life cycle costing
1 Scope This part of IEC 60300 provides a general introduction to the concept of life cycle costing and covers all applications. Although the life cycle costs consist of many contributing elements, this standard particularly highlights the costs associated with dependability of the product. This standard is intended for general application by both customers (users) and suppliers of products. It explains the purpose and value of life cycle costing and outlines the general approaches involved. It also identifies typical life cycle cost elements to facilitate project and programme planning. General guidance is provided for conducting a life cycle cost analysis, including life cycle cost model development. Illustrative examples are provided to explain the concepts.
2 Normative references The following referenced documents are indispensable for the application of this document. For dated references, only the edition cited applies. For undated references, the latest edition of the referenced document (including any amendments) applies. IEC 60050-191:1990, International Electrotechnical Vocabulary (IEV) – Chapter 191: Depend-ability and quality of service IEC 60300-3-12, Dependability management – Part 3-12: Application guide – Integrated logistic support IEC 61703, Mathematical expressions for reliability, maintainability and maintenance support terms IEC 62198, Project risk management – Application guidelines
3 Terms and definitions For the purposes of this document, the terms and definitions given in IEC 60050-191 and IEC 61703, together with the following definitions, apply.
3.1 life cycle time interval between a product’s conception and its disposal SIST EN 60300-3-3:2007

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3.2 life cycle costing process of economic analysis to assess the life cycle cost of a product over its life cycle or a portion thereof 3.3 life cycle cost LCC cumulative cost of a product over its life cycle
3.4 base date fixed point in time set as the common cost reference 4 Life cycle costing 4.1 Objectives of life cycle costing Life cycle costing is the process of economic analysis to assess the total cost of acquisition, ownership and disposal of a product. It can be applied to the whole life cycle of a product or to parts or combinations of different life cycle phases. The primary objective of life cycle costing is to provide input to decision making in any or all phases of a product’s life cycle.
An important objective in the preparation of LCC models is to identify costs that may have a major impact on the LCC or may be of special interest for that specific application. Equally important is to identify costs that may only influence the LCC to a very small extent. The more common types of decisions to which the life cycle costing process provides input include, for example: – evaluation and comparison of alternative design approaches and disposal options technologies;
– assessment of economic viability of projects/products; – identification of cost contributors and cost effective improvements; – evaluation and comparison of alternative strategies for product use, operation, test, inspection, maintenance, etc.; – evaluation and comparison of different approaches for replacement, rehabilitation/life extension or retirement of ageing facilities; – allocation of available funds among the competing priorities for product development/ improvement; – assessment of product assurance criteria through verification tests and its trade-off; – long-term financial planning. Life cycle costing can be used to provide input to integrated logistic support analysis. See IEC 60300-3-12 for detailed information on integrated logistic support analysis. SIST EN 60300-3-3:2007

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4.2 Product life cycle phases and LCC Fundamental to the concept of life cycle costing is a basic understanding of a product life cycle and the activities that are performed during these phases. Also essential is an understanding of the relationship of these activities to the product performance, safety, reliability, maintainability and other characteristics contributing to life cycle costs. There are six major life cycle phases of a product as follows: a) concept and definition; b) design and development; c) manufacturing; d) installation; e) operation and maintenance; f) disposal.
The appropriate life cycle phases, or parts or combinations of these phases, should be selected to suit the special needs of each specific analysis. In a general way, the total costs incurred during the above phases can also be divided into acquisition cost, ownership cost and disposal cost. LCC = Costacquisition + Costownership + Costdisposal Acquisition costs are generally visible, and can be readily evaluated before the acquisition decision is made and may or may not include installation cost.
The ownership costs, which are often a major component of LCC, in many cases, exceed acquisition costs and are not readily visible. These costs are difficult to predict and may also include the cost associated with installation. Disposal costs may represent a significant proportion of total LCC. Legislation may require activities during the disposal phase that for major projects, e.g. nuclear power stations, involve a significant expenditure. Figure 1 shows the life cycle phases of a product, together with some of the topics that should be addressed by a life cycle costing study.
60300-3-3  IEC:2005 – 19 –
Concept and
definition
Installation
Manufacturing
Disposal
Design and
development
Operation and
maintenance
•
New product opportunities •
Analysis of system
concep t and options •
Product selection •
Technology selection
•
Make/buy decisions
•
Identify cost drivers
•
Construction assessment
•
Manufacturability
assessments
•
Warranty incentive
schemes
•
Design trade-offs•
Source selection
•
Configuration and change controls
•
Test strategies
•
Repair/throwaway decisions
•
Performance tailoring
•
Support strategies
•
New product introduction
•System integration and verification•Cost avoidance/cost reduction benefits
•Operating and maintenance cost monitoring
•Product modifications and service enhancements
•Maintenance support resource allocation and optimization
•Retirement cost impact
• Replacement/re newal
schemes
•Disposal and salvage
value
Life cycle phases
IEC
715/04
Figure 1 – Sample applications of life cycle costing 4.3 Timing of LCC analysis Early identification of acquisition, ownership and disposal costs enables the decision-maker to balance dependability factors against life cycle costs. Decisions made early in a product’s life cycle have a much greater influence on LCC than those made later in a product’s life cycle. Experience has shown that by the end of the concept and definition phases, more than half of a product's LCC may be committed by decisions. The opportunity to perform trade-offs becomes increasingly limited as the product advances in its life cycle. Life cycle costing may address the whole life cycle of a product or only part of it. The life cycle costing should be tailored to suit a particular product/project in order to obtain the maximum benefit from the analysis effort. 4.4 Dependability and LCC relationship 4.4.1 General Dependability of a product is the collective term used to describe the product’s availability performance and its influencing factors, i.e. reliability performance, maintainability perform-ance and maintenance support performance. Performance in all these areas can have a significant impact on the LCC. Higher initial costs may result in improved reliability and/or maintainability, and thus improved availability with resultant lower operating and maintenance costs.
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Dependability considerations should be an integral part of the design process and LCC evaluations. These considerations should be critically reviewed when preparing product specifications, and be continually evaluated throughout the design phases in order to optimize product design and the life cycle cost. 4.4.2 Dependability related costs Costs associated with dependability elements may include the following, as appropriate: – system recovery cost including corrective maintenance cost; – preventive maintenance cost; – consequential cost. Figure 2 highlights some dependability elements translated into operation and maintenance costs.
Replaceable units, spares and facilities Availability
U
A
Maintainability
MRT
Reliability
MTTF
F
Failures
λ
,
z Repairs
Quantity x ((MPH × cost/h) +
(material cost per unit))Damage to image and reputation, loss of revenue,
service provision,
warranty cost, liability cost
Cost of
investment for
logistic support
Cost of preventive
maintenance
Cost of corrective
maintenance
Consequential
cost
Maint. support
MLD, MAD
Preventative maintenance
z
×
[(average cost of maintenance support per failure) + (MPHSITE
×
cost/h) + (MPHWORKSHOP × cost/h) + (average
cost
of spares per failure)] Dependability
IEC
716/04
Symbols and abbreviations apply in accordance with IEC 60050(191). Figure 2 – Typical relationship between dependability and
LCC for the operation and maintenance phase SIST EN 60300-3-3:2007

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4.4.3 Consequential costs 4.4.3.1 General When a product or service becomes unavailable, a series of consequential costs may be incurred. These costs may include: – warranty cost; – liability cost; – cost due to loss of revenue; – costs for providing an alternative service. In addition, further consequential costs should be identified by applying risk analysis techniques to determine costs of adverse impacts on the company's: – image, – reputation, – prestige, which in turn may result in loss of clients. Costs of recovering from, or mitigating against these risks should be included in consequential costs. In most cases, these costs are difficult to assess, but sometimes it is possible to quantify them. For example, these costs may be estimated based on publicity campaign costs and costs of marketing efforts or compensations in order to retain the clients. Where applicable, these costs should be accounted for. The unavailability of a product can significantly affect its LCC. Therefore, the availability performance of a product and associated life cycle cost needs to be optimized. With increasing reliability (all other factors held constant), the acquisition costs will generally increase but maintenance and support costs will decrease. The LCC is optimized when the incremental increase in acquisition costs due to reliability improvements equals the incremental savings in maintenance and support costs, and in consequential costs. At a certain point, an optimum product reliability, which corresponds to the lowest life cycle cost, is achieved. It should be noted that the results of LCC calculations might not match the actual/observed costs. This is because there are many influencing random factors, such as environmental conditions and human errors during operation, which cannot be accurately modelled in the calculations. Environmental issues, as well as traditional factors such as cost and time, have to be considered in LCC calculations. Therefore, methods have to be used to evaluate and rank environmental consequences of different activities. These evaluations can provide the bases for environmental planning and integrating environmental issues with decision making. 4.4.3.2 Warranty costs Warranties provide protection to the customers, insulating them from the cost of correcting product failures, in particular during the early stages of product operations. The cost of warranties is usually borne by the suppliers, and may be affected by reliability, maintainability and maintenance support characteristics of the product. Suppliers can exercise significant control over these characteristics during design and development, and manufacturing phases thus influencing the warranty costs. SIST EN 60300-3-3:2007

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Warranties usually apply for a limited period of time, and a number of conditions generally apply. Warranties rarely include protection against consequential costs incurred by the customer due to product unavailability. Warranties may be supplemented or replaced by service contracts whereby the supplier performs, in addition to any arrangements made by the customer, all preventive and corrective maintenance for a fixed period of time that can be renewed for any period up to the whole product lifetime. In the latter case, the suppliers are motivated to build an optimum level of reliability and maintainability into their product, usually at higher acquisition costs. 4.4.3.3 Liability costs A liability will arise where, for example, a supplier fails to comply with his legal obligations. The cost of compensating for a breach of the law needs to be considered as part of the LCC. This is especially important in the case of products that have a high potential to cause human injury and/or environmental damage. Liability costs are also important for new products for which risks involved may not be fully apparent and/or well understood. Where required, a risk analysis, together with past experience and expert judgement, may be used to provide an estimate of these costs. For guidance on risk analysis, see IEC 62198.
4.5 LCC concept 4.5.1 General An LCC model, like any other model, is a simplified representation of the real world. It extracts the salient features and aspects of the product and translates them into cost estimating relationships. In order for the model to be realistic, it should: a) represent the characteristics of the product being analysed, including its intended use environment, maintenance concept, operating and maintenance support scenarios as well as any constraints or limitations; b) be comprehensive in order to include and highlight all factors that are relevant to LCC; c) be simple enough to be easily understood and allow for its timely use in decision making, and future update and modification; d) be designed in such a way as to allow for the evaluation of specific elements of LCC independent from other elements. A simple LCC model is basically an accounting structure that contains mathematical expressions for the estimation of cost associated with each of the cost elements constituting the LCC. Examples are given in Annex D. In some cases, a model may need to be specifically developed for the problem under study, while for some other cases commercially available models may be used. Each LCC model has its own flexibility and application. Knowledge of the contents and the conditions under which they apply are important in order to assure adequacy of their use. Before selecting a model, the amount of information needed should be identified together with the results expected from using the model. Someone familiar with the details of the model is needed to review it so as to determine the applicability of all cost factors, empirical relationships, elements and other constants and variables in the model. Therefore, before using any existing LCC model, it should be suitably validated for the life cycle costing study under consideration. To do this, the cost factors and other parameters from a known example, along with the operational scenario, should be used to assess the extent to which the model provides realistic results. SIST EN 60300-3-3:2007

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Many products are designed to have a very long life, for example buildings or power stations. For such products, a number of costs, for instance for functional changes or product enhancement, will occur at intervals during the life of the product and techniques to deal with these should be incorporated in the model. LCC modelling includes: – cost breakdown structure, – product/work breakdown structure, – selection of cost categories, – selection of cost elements, – estimation of costs, – presentation of results. When applicable it may also include: – environmental and safety aspects, – uncertainties and risks, – sensitivity analysis to identify cost drivers. The cost breakdown structure presents a breakdown of costs incurred over the major phases (or phases of interest) of the life cycle of a product. Annex C includes examples of presentation of costs related to cost breakdown structure. The product/work breakdown structure is composed of a detailed breakdown of hardware, services and data identifying all major tasks and supporting work packages. Annex E gives an example of a product breakdown structure and LCC summary for a railway vehicle. Detailed expressions for costs for the different phases can be developed separately. The cost elements, factors, etc. should have unique identities. In a situation where analyses cover several phases, the identities of cost elements, factors, etc. should be unique in the total LCC model. It is normally an advantage to maintain the product/work breakdown structure unvaried for the particular study. 4.5.2 LCC breakdown into cost elements In order to estimate the total life cycle cost, it is necessary to break down the total LCC into its constituent cost elements. These cost elements should be individually identified so that they can be distinctly defined and estimated. The identification of the elements and their corresponding scope should be based on the purpose and scope of the LCC study. The cost element is the link between cost categories and the product/work breakdown structure. The selection of cost elements should be related to the complexity of the product, as well as to the cost categories of interest in accordance with the required cost breakdown structure. See the example in Annex C. One approach often used to identify the required cost elements involves the breakdown of the product to lower indenture levels, cost categories and life cycle phases. This approach can best be illustrated by the use of a three-dimensional matrix shown in Figure 3. This matrix involves identification of the following aspects of the product: SIST EN 60300-3-3:2007

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– breakdown of the product to lower indenture levels (i.e. the product/work breakdown structure); – the time in the life cycle when the work/activity is to be carried out (i.e. the life cycle phases); – the cost category of applicable resources such as labour, materials, fuel/energy, overhead, transportation/travel (i.e. the cost categories). This kind of approach has the advantage of being systematic and orderly, thus giving a high level of confidence that all cost elements have been included. Annex A identifies typical activities for which the costs should be addressed. An example of a product breakdown structure and LCC summary for a railway vehicle is presented in Annex E. Costs associated with LCC elements may be further allocated between recurring and non-recurring costs so that the total of all recurring and non-recurring costs equals LCC. LCC elements may also be estimated in terms of fixed and variable costs. The latter costs, for example, will vary with the number of copies of the product to be produced and put into use. To facilitate control and decision making, and to support the life cycle cost process, the costs information should be collected and reported to be consistent with the defined LCC breakdown structure. A database should be established and maintained to capture results of previous LCC studies in order to serve as a source of experience feedback.
Cost categories Product/work breakdown structure Life cycle phases Labour cost Power supply Manufacturing Example of
a life cycle cost element IEC
717/04
Figure 3 – Cost element concept SIST EN 60300-3-3:2007

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4.5.3 Estimation of cost 4.5.3.1 General Examples of methods that may be used to estimate the parameters of a cost element include: – engineering cost method; – analogous cost method; – parametric cost method. Examples of application of each method are given below. When carrying out life cycle costing analysis for a certain product, one or more of these methods, or other methods, may be used as appropriate. In order to reduce different types of uncertainties involved in the analyses, it should be possible to perform sensitivity analyses, for example by introducing minimum and maximum values to the parameters of the model into the cost estimation equations. 4.5.3.2 Engineering cost method When using the engineering cost method, the cost attributes for the particular cost elements are directly estimated by examining the product component by component or part by part. Often, standard established cost factors, e.g. the current engineering and manufacturing estimates, are used to develop the cost of each element and its relationship to other elements. Older estimates available may be updated to the present time by the use of appropriate factors, e.g. annual discounting and escalation factors. The engineering cost method can be illustrated by the following example concerning the cost related to a recurring cost element: The labour cost for the manufacture of a power supply is to be estimated. The following information is given: Product: power supply Life cycle phase:
manufacturing phase Cost category:
labour cost. According to detailed assessment of manufacturing steps provided by the manufacturing department, the time consumption for the production of one unit of the particular power supply is 38,80 person hours. Suppose the labour cost is currency unit (CU) 54,50/person hours. The total labour cost for the production of one unit is then 38,80 x 54,50 = CU 2 114,60. 4.5.3.3 Analogous cost method In this method, cost estimations based on experience from a similar product or technology are used. Historical data, updated to reflect cost escalation, effects of technology advances, etc. are utilized. This technique may be one of the least complex and least time-consuming methods. It is easily applied to components of the product for which there is some experience and actual data. SIST EN 60300-3-3:2007

60300-3-3  IEC:2005 – 33 –
The analogous cost method can be illustrated by the following example where an estimate of the cost for parts and materials for a power supply, using experience from an older power unit, is used. The following information is given: Product: power supply Life cycle phase: manufacturing phase Cost category: parts and materials. For a somewhat less complex power supply produced 4 years ago, the cost for parts and materials was CU 220. Overall cost escalation over 4 years is taken to be 5 %. The cost for additional parts will be about CU 50.
Therefore, cost for parts and materials for the new power supply unit is estimated to be Cost of parts and material for the old unit (1+0,05) + cost for additional parts = = 220 x 1,05 + 50 = CU 281. 4.5.3.4 Parametric cost method The parametric cost method uses parameters and variables to develop cost estimating relationships. The method might be used differently in other areas. The relationships are usually in the form of equations where, for example, person hours are converted into costs. An example of the parametric cost method used for a calculation of active corrective maintenance cost for a subsystem P14, is given in Figure 4.
Pmax
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P14
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P1 Cost element (CE): R7; P14Product breakdown structure (P) Cost categories (R) -
R2
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R5
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R7
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R10
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R12
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Rn IEC
718/04
Figure 4 – Example of cost elements used in the parametric cost method SIST EN 60300-3-3:2007

60300-3-3  IEC:2005 – 35 –
In Figure 4 R2
is the investment cost in test equipment, workshop (non-recurring); R5
is the investment cost in spares, workshop (non-recurring); R7
is the labour cost, site (recurring); R10
is the labour cost, workshop (recurring); R12
is the spares consumption cost, workshop (recurring); P14
is subsystem P14. Cost of active corrective maintenance for subsystem P14 for a 10 year period = Cost(R2;P14) + Cost(R5;P14) + {Cost(R7; P14) + Cost(R10; P14) + Cost(R12; P14)} x 10
(ignoring the effects of inflation, etc.) NOTE Active corrective maintenance time is defined in IEC 60050(191), see definition 191-08-07 and Figure 191-10. where, for example, the cost related to element (R7; P14) is calculated as follows: Cost(R7; P14) is the labour cost, active corrective maintenance at site for sub-system P14 Cost(R7; P14) = QP14 x ZP14 x CL x n x MRT cost/year where QP14
is the quantity or number of items, in this example QP14 = 1; ZP14
is the expected number of failures/year for subsystem P14; CL
is the labour cost/hour; n
is the number of persons required to carry out the repair; MRT
is the mean repair time in h/action. Assume: QP14 = one item /system
ZP14 = 0,3 failures/year CL = CU 50/hour n = one person MRT = 2,4 h/action. Then Cost(R7;P14) = 1 x 0,3 x 50 x 1 x 2,4 = CU 36/year. To calculate the labour cost over 10 years, the result should be multiplied by 10 (ignoring the effects of inflation, etc.).
If different factors, for instance inflation or discounting, have to be taken into account, this could be included in the estimation of cost related to each element or at a higher cost element level in the LCC model. Cost(R10; P14), etc. are calculated in a similar way. SIST EN 60300-3-3:2007

60300-3-3  IEC:2005 – 37 –
4.5.4 Sensitivity analysis In order to identify significant cost contributors, sensitivity analyses should be performed. Data m
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