Lifecycle Costing
A procurement evaluation approach that considers the total cost of ownership over an asset's entire lifespan — including acquisition, operation, maintenance, and disposal — rather than just the purchase price.
Lifecycle costing (also called whole-life costing or total cost of ownership) evaluates the true cost of a procurement decision by looking beyond the initial purchase price. It accounts for all costs incurred throughout the product or service lifecycle: acquisition, installation, training, operation (energy, consumables), maintenance, downtime, and end-of-life disposal or decommissioning.
This approach is particularly important for capital equipment, IT infrastructure, fleet vehicles, and facilities contracts, where the purchase price may represent only 20-40% of the total lifecycle cost. Procurement teams that evaluate only on purchase price often select options that cost significantly more over time.
Example: Two industrial printers are evaluated — Printer A costs €15,000 with €0.04/page running cost, Printer B costs €22,000 with €0.02/page running cost. At 500,000 pages over 5 years, Printer A's lifecycle cost is €35,000 while Printer B's is €32,000. The more expensive upfront option is actually €3,000 cheaper overall.