Military Handbook- Life Cycle Cost in Navy Acquisitions

Keywords life cycle cost methods for life cycle costing military handbook navy acquisition

3.1 General
These economic and acquisition management related terms are context of system and equipment acquisitions and are general in nature. Reference to DoD Instruction 5000.33, DoD Instruction 7000.11, NAVFMAT P5241, and MIL-STD-881 will lead to more detailed information on cost terms and work breakdown structures. More specific definitions and explanations of technical terms used in discussing the different disciplines of cost analysis, logistics, and management can be found in the documents referenced in this handbook.

3.2 Product. As used in this handbook “product” refers to the system or equipment acquired or modified.

• 3.2.1 System. In this handbook “system” refers to a weapon system which is a composite of equipment, facilities, and services which make up an entity. The complete weapon system includes the prime and all support related equipment, materials, facilities, and personnel required for obtaining, operating, and maintaining the system (e.g. aircraft carrier, submarine, aircraft, missile, torpedo, etc.).

• 3.2.2 Equipment. In this handbook “equipment” refers collectively to an item, component, or subsystem procured for installation in a system or to support a system (e.g. sonar, radio, radar, teat set, periscope, engine, etc.).

• 3.3 Life cycle cost. LCC is the sum total of the direct, indirect, recurring, non-recurring, and other related coats incurred, or estimated to be incurred in the design, research and development (R&D), investment, operation, maintenance, and support of a product over its life cycle, i.e. its anticipated useful life span. It is the total coat of the R&D, investment, O&S and, where applicable, disposal phases of the life cycle. All relevant costs should be included regardless of funding source or management control.

Document identifier
MIL-HDBK-259 (Navy)
Date published
Document type
military handbook
Defines standard
Replaced/Superseded by document(s)
Cancelled by
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1.1 General.

This handbook provides information on the use of life cycle cost system and equipment acquisitions. It makes no attempt to develop a LCC standard but rather describes the general methodology and procedures which help make life cycle costing a productive in-house tool as well as a means a program or project evaluation. As inroads are made in the usage of LCC analysis, estimating and implementation techniques should improve, particularly in the operating and support (O&S) cost areas. To maximize their usefulness, LCC analyses should be tailored to the particular needs of an acquisition.

1.2 Purpose.

This handbook was developed by the Naval Material Command (NAVMAT) to meet the requirements of SECNAVINST 6000.31 “Life Cycle Costing”, which is a response to higher level instructions, directives, and policy guidance fostered in turn by the Defense Acquisition Regulation (section 1-335) which states:

“Since the coat of operating and supporting the system or equipment for its useful life is, substantial and, in many cases, greater than the acquisition cost, it is essential that such costs be considered in development and acquisition decisions in order that proper consideration can be given to those systems or equipments that will result in the lowest life cycle coat to the government”.

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