Issue 10 | LCC analysis
The basic idea of the lifecycle cost (LCC) concept is that the costs of a product, for example a railway vehicle, are not only determined by the initial investment costs (purchasing price) but also by all other costs that occur during the product's lifetime, especially operational and maintenance costs. This means that higher initial investment costs can be justified by reduced operational costs during the entire lifetime of the vehicle. In general, LCC analysis is the calculation of all possible costs of a product during its lifecycle. The LCC concept is especially relevant for railway rolling stock because of the usually long technical and economic lifetime (25-40 years or even longer).
The method of LCC analysis can also be a helpful instrument for introducing more energy-efficient railway rolling stock. Despite the prominent role of energy costs, it should be considered that new or additional equipment for saving energy can cause relevant changes for other operational costs, maintenance costs as well as for recycling and disposal costs. LCC analyses can be applied when procuring rolling stock or, although with reservations, when awarding rail services. In certain cases the PTA may offer a guarantee to re-use the rolling stock after the contract period even if the current TOC does not win the follow-up contract. This lowers the risk for the bidding TOCs, and the PTA can also benefit from lower costs. The following business cases are relevant:
- Procurement of rolling stock by the PTA
- Public Service Contract (PSC) with guaranteed re-use of rolling stock
- PSC without guaranteed re-use
- Economic assessment of components
LCC calculations are based on assumptions about the development of upcoming costs. The more we look into the future, the stronger the responsibility of the PTA or the TOC (compared to the responsibility of the manufacturer) will be and the higher the risk that the operational patterns will have changed. Possibilities for verification and the manufacturer's liability for the actual LCC are therefore limited, but certain options are discussed in the Guidelines.