Life-cycle costing is an important tool for asset-intensive organizations, such as Alaska Ferries. It is being used to analyze the on going operating cost, maintenance cost and capital cost of each ship. The outputs determine the best level of maintenance and the most appropriate time to retire and replace vessels. It is also provides a full cost and revenue model to generate detailed, long range, financial forecasts.
There are at least 5 steps in the life-cycle cost analysis of the ferry system:
- Determine model input values through research
- Assign a risk range around each input and use simulation techniques to account for uncertainty
- Incorporate service delivery options into model
- Validate assumptions and financial inputs
- Develop 10- and 30-year financial pictures
The consulting company HDR Inc. is doing the Life-Cycle Cost Analysis using a well-proven model. This same model will be used for the financial modeling of service options.