Examples of Projects Decisions
Here are some examples of decisions being made by using Life-Cycle Costing.
Construction: Suppose, you need to build a shed. You've created a precedence diagram for the project. One of the activities in the project is to procure wood. Take a step back here and ask yourself, “How long do I want the shed to last?" Depending on your answer, you may consider using Wood Plastic Composites (WPC) because they are more environmentally friendly, more durable, and require less maintenance compared to solid treated wood. Therefore, if you take these benefits into account, then WPC is the material to construct the shed with. If, however, you just want the shed to last a couple of years, then maybe you’d opt for cheaper material.
As you can see from this example, Life-Cycle Costing goes beyond the development of the project. It compels you to consider the larger picture first and accordingly make decisions.
Software Development: Suppose you are planning to deploy a Learning Management System (LMS). To get to the Life-Cycle Costs associated with this decision, you would end-up seeking answers to questions like:
- What are the costs of developing the system ourselves versus purchasing one?
- What are the costs of hosting the LMS in internal severs versus a vendor server site?
- How much do we need to operate the new software? Do we need additional staff?
- What are the associated training costs?
- If we host it internally, can our existing application support group maintain it? If no, should we outsource the maintenance?
As you can see, the answers to such questions can give you a clearer picture to the cost of the LMS. Life-Cycle Costing enables you to make more informed decisions. You can also use decision trees along with Life-Cycle Costing to factor in the Expected Monetary Value (EMV).