Total cost considerations for governmental procurement
Total cost considerations for governmental procurement

Total Cost Considerations

Are you relying on purchase price alone to make decisions? Consider life cycle cost instead. It takes maintenance, repair and fuel expenses into consideration, as well as trade-in and resale value. Endorsed by the National Institute of Governmental Purchasing (NIGP), the National Association of State Procurement Officials (NASPO) and other associations, it’s a simple calculation that lets you compare options from a total cost perspective.

To estimate life cycle costs:

  1. Begin with the initial purchase price (less trade-in value for old equipment).
  2. Add scheduled maintenance costs. Find information in the Operation and Maintenance Manual.
  3. Add expected repair costs. Information comes in the form of a quote for warranty or extended warranty.
  4. Add fuel costs. To improve data accuracy, share application information with all bidders and request fuel consumption data from historical records or on-board technologies.
  5. Subtract trade-in/resale value. Be cautious with guaranteed buy-backs as they are only exercised if you buy your next piece of equipment from the same vendor.

Initial Purchase Price + Maintenance + Repairs + Fuel - Trade-In/Resale Value = Life Cycle Costs

This calculation can be customized to include other factors such as productivity, uptime and downtime. The more factors you include, the more confident you can be in the evaluation process.

Life cycle cost calculator

Download Now
Life cycle cost calculator
Life cycle cost calculator

Life Cycle Cost Resources

Get the details on how to bring a total cost procurement approach to your agency.

Agency Support
of

How to build agency support for total cost procurement

Download Now
Total Cost of Ownership
of

What is total cost of ownership?

Read More
Points Award System
of

Points Award System — Sample point distribution for RFP scoring

Download Score Sheet
How To Implement The Points Award System For Your Agency's RFPs
of

How to implement the points award system for your agency's RFPs

Learn More
How To Purchase Equipment Using A Life Cycle Costing Approach
of

How to purchase equipment using a life cycle cost approach

Get tips
Total Cost of Ownership: Realizing Procurement's Full Potential In Value Creation
of

Total cost of ownership: realizing procurement's full potential in value creation

Read Whitepaper

FIND YOUR DEALER

Need help finding a Cat dealer near you? To use the Cat® dealer locator, simply enter your address and select the type of equipment you're looking for.

Go Now
Subscribe to our e-newsletter
Subscribe to our e-newsletter

GET THE LATEST CAT® NEWS

STAY UP-TO-DATE ON NEW DEVELOPMENTS IN PRODUCTION AND MANAGEMENT TECHNOLOGIES

SIGN UP