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What is Life Cycle Cost (LCC) Analysis? A method of calculating the cost of a system over its entire life span.
Evaluate the economic effectiveness of different mutually exclusive investment alternatives over a certain period Identify the most cost-effective alternative
Analysis Period
A time frame that is sufficiently long to reflect differences in performance among different strategy alternatives.
Rehabilitation strategy analysis period beginning at the end of original pavement performance period
Selection of analysis period for alternatives with common performance period, but different performance
The least common multiple of the performance periods of all the alternatives The shortest of the performance periods among the alternatives The longest of the performance periods of the alternatives Some other time period
For relatively longer performance periods, use of least common multiple of the performance periods can result in an extremely long and unrealistic analysis period. The use of shortest performance period may adversely affect those alternatives with better long-term performance and favor those with short performance periods. The longest performance periods is recommended as the analysis period.
Alternatives having different performance periods, which are expected to be able to keep the pavement condition above the minimum acceptable level for different lengths of time.
The analysis period is recommended to be no less than the performance period of the longest surviving alternative. Using a shorter analysis period (equal to the performance period of one of the shorter-lived alternatives) would not fully capture the anticipated differences in performance.
Comments
One or more of the alternatives may have a follow-up rehabilitation performance period which extends beyond the end of the analysis period. FHWA recommends an analysis period of at least 35 years for all projects (new construction as well as rehabilitation)
Discount Rate
Refers to the rate of change of true value of money over time, considering fluctuations in both investment interest rates and the rate of inflation. Discount rate is approximately equal to the interest rate minus the inflation rate.
The rate at which governments can borrow money is felt to be appropriate for evaluating highway improvement projects.
User Costs
Costs associated with the alternative that are incurred by the users of a roadway over the analysis period, which can be expressed in monetary terms.
Delay costs
- due to reduced speed and/or use of alternate routes
Crash costs
- damage to the users/other vehicles, public/private property, as well as injuries
Delay Costs
Costs associated with the value of time. Vary by vehicle class, trip type and trip purpose. A function of demand for use of the roadway with respect to roadway capacity. Work zone user delay costs may be significantly different for different rehabilitation alternatives.
Crash Costs
In-service crash rates for different roadway functional classes and crash severities are well known. Work zone crash rates may differ significantly for different rehabilitation alternatives.
Salvage Value
The residual value that can be attributed to the alternative at the end of the analysis period. The value that the item would have in the market place. Must be defined the same way for all alternatives.
Compare Strategies
Present Worth Equivalent Uniform Annual Cost Future Worth Internal Rate of Return External Rate of Return Benefit/Cost Ratio Payback Period Capitalized Worth