Apply costs to the various activities defined and scheduled in the first two steps. Common inclusions are procurement costs, day-to-day maintenance costs, expenses to address safety and operational requirements, cost of raw materials such as fuel, annual costs to replace spares, and more.
LCCA requires only costs that vary or differ, allowing the option to exclude expenses common to all alternatives, such as land cost. Best practices for the LCCA, however, requires including costs incurred by the agency holding the asset and costs to the user. For instance, a transportation project requires considering both costs incurred by the operators and costs incurred by the traveling public. This makes the analysis more complex, but more reliable and accurate.
One important consideration when estimating costs is the salvage value or remaining service life (RSL) of the asset at the end of the analysis period. Failure to incorporate such salvage RSL costs, or making wrong estimates of such costs can distort the estimates considerably.
The success of the analysis depends on accurate estimates of such costs. Ways to determine costs include referring to historical records, current bids, and making engineering or managerial judgments.