Life Cycle Costing-2: A Practical Project Feasibility Example

In an earlier simpler example ,we have worked out the PV (Present Value) of two  possible cash flows for decision making.
The example presented in this blog further works out two scenarios side by side and calculates the Payback period of an expenditure as well. As usual, one need to consult Subject Matter Experts and get the advise on the inputs.

Problem Statement

Decision is required whether to replace Sodium Vapour  Lights with LED Lights.

Cash Flows are created on the basis of expert inputs which may be provided or obtained from Facility Management, Procurement and  Electrical Engineering Departments. Risk Management part may also be deliberated  with Accounts, Finance and Legal Departments and can also be reflected into the cash flow.
The Excel workbook has been set in  a user friendly setup and may be understood by even a casual Excel User.


The following risk factors (not covered in the simulation) are also worth considerations/ evaluation. The scope of analysis should further be extended for a full scale Cradle to Grave and Cradle to Cradle LCA.
Performance Risks: Measurable performance requirements are required to be fixed during the procurement process. Like, “the Lux levels after the 3 year warranty period shall be more than 95% of the initial performance and power consumption during the warranty period shall not be more than 2% of the rated power”
Financial Risks: These can be mitigated by asking the contractor to provide The Facility Management  an FD or BG for the claimed warrantee period.
You might also like to consider our risks against accidental breakages and or thefts etc. Please discuss if any other consideration/ risk omission should be included in the excel simulation.

Comments

  1. Dear Ashutosh
    I navigated to the blog through address given in your mail. I am truly impressed by what you do. Please do keep it up. However life never poses such simple questions and one is forced to make or take decisions while being on the go. Not the the right thing but that is how currently the sector is structured.
    Keep it up!

    ReplyDelete
    Replies
    1. Thank You Sir for encouraging me.
      I am trying to address (i.e. Simulate) all possible situations in my ensuing blogs. Your comments and suggestions would be most helpful and provide the conversation the right direction.

      Delete
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