LCC is being applied by an increasing number of public authorities across the EU and in a range of sectors.
Under the 2014 EU procurement rules a contract must be awarded based on the most economically advantageous tender (MEAT). A number of different approaches are available under this general heading, some of which may be considered appropriate for GPP. Cost or price will form part of the assessment of any procedure, and is usually one of the most influential factors. Costs may be calculated on the basis of a product’s life-cycle. But how do you define the cost?
When you purchase a product, service or work, you always pay a price. Purchase price, however, is just one of the cost elements in the whole process of purchasing, owning and disposing. Life-cycle costing (LCC) means considering all the costs that will be incurred during the lifetime of the product, work or service:
LCC may also include the cost of externalities (such as greenhouse gas emissions) under specific conditions laid out in the directives. The current (2014) directives require that where LCC is used, the calculation method and the data to be provided by tenderers are set out in the procurement documents. Specific rules also apply regarding methods for assigning costs to environmental externalities, which aim to ensure that these methods are fair and transparent.
LCC makes good sense regardless of a public authority’s environmental objectives. By applying LCC public purchasers take into account the costs of resource use, maintenance and disposal which are not reflected in the purchase price. Often this will lead to ‘win-win’ situations whereby a greener product, work or service is also cheaper overall. The main potential for savings over the life-cycle of a good, work or service are:
For further details on how LCC approaches can be used as part of public procurement procedures see Article 68(2) of Directive 2014/24/EU and Article 83(2) of Directive 2014/25/EU.
The European Commission is in the process of developing a series of sector specific LCC calculation tools which aim to facilitate the use of LCC amongst public procurers.
Computers and Monitors
LCC tools for the following sectors will be available soon: