Life Cycle Cost(LCC)
The total cost of owning, operating, maintaining, and disposing of a system or product over its entire useful life.
Overview
Life Cycle Cost (LCC) is the sum of all costs associated with a system from acquisition through disposal — including research, development, production, sustainment, upgrades, and decommissioning. The government uses LCC analysis to evaluate alternatives and make procurement decisions that consider long-term affordability, not just upfront price.
Why It Matters in GovCon
For complex systems — aircraft, ships, IT infrastructure — sustainment costs often exceed acquisition costs. Proposals that emphasize low life cycle cost through reliability, maintainability, and supportability can win over lower-priced competitors with higher operational costs. LCC is a common evaluation factor in major acquisitions.
Key Details
- Cost Elements: Development, acquisition, operations, maintenance, training, logistics, disposal.
- Time Value of Money: LCC models typically use net present value or similar techniques to compare costs over time.
- DoD Emphasis: DoD 5000 series and many agency guides require LCC analysis for major programs.
- Contract Implications: Some contracts tie award fee or incentives to meeting LCC targets.
Related Terms
- Total Cost of Ownership (TCO)
- Cost-Plus Contract
- Fixed-Price Contract
- Major Defense Acquisition Program (MDAP)
More Finance Terms
A guarantee submitted with a bid that ensures the bidder will enter into a contract if selected and provide required performance and payment bonds.
The government's internal estimate of what a procurement should cost, used to evaluate the reasonableness of contractor proposals.
The projected cost to finish remaining work on a contract or project based on current status.
Overhead costs that support the overall organization rather than direct contract performance.
Costs that cannot be traced to a single contract but are allocated across projects via indirect rates.
Costs that can be identified specifically with a contract or project but are not labor or materials — such as travel, subcontracts, or specialized services.
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