Mar 07, 2022

Read Time IconRead time: 2.11 mins

Why Life Cycle Costing is Important

Facilities management plays a critical role in organisations today, impacting their strategy, structure, and processes. As a core component of management, this function is essential to budgeting resources, time, and people to meet your business’s strategic and operational objectives.

Watch Xolani Zuma, Guest Expert on the University of Cape Town Facilities Management online short course, explain the importance of life cycle costing and maintenance when considering buying new assets.

Transcript

Discover the importance of life cycle costing in South Africa

Life cycle costing is important because it then helps facilities managers appreciate the full or total cost of ownership of any equipment or asset even before they make the decision to procure it. I like using the example, the fact that something is reasonably cheaper procurement does not necessarily mean the effective life use of that equipment, that item, is going to remain that cheap. So the cost spent at procurement stage may be outweighed by the actual cost of running the equipment.

Identify the disadvantages of not using life cycle costing

The first critical risk here is when you make decisions to purchase any item or a facility, you’re literally flying blind — you have no sight of what the total cost of ownership of that asset is going to be. So you may find yourself falling into a very usual pitfall that most asset managers or facilities managers find themselves falling into, where you buy equipment today and you’re not able to, obviously, without sight of the total cost of ownership, you’re not able to budget properly for that asset going forward. So at a point you may find yourself where you don’t have funds to fund operation of that asset, operation of that facility, which then yields your deferred maintenance.

Filed under: Real estate