Significance of life cycle cost analysis in the procurement process for government motor vehicles (a case study of MoWT).

Abstract

In recent years, the state of economy, budget, limitations and other factors have created an increasing awareness of asset management costs. This trend towards cost consciousness has resulted in the increased emphasis on life cycle cost analysis before asset acquisition. However, Uganda as a nation has not yet embraced the need to consider lifecycle costs before acquiring assets. Procurement methodologies that are used to acquire assets and services, try to minimize initial investment at the expense of future operating costs. Life cycle cost analysis is used as a benchmark against which options can be measured for “value for money” during acquisition process, bearing in mind that the greatest opportunities to reduce lifecycle costs occur during the early phases of procurement, and does not stop until the most economical alternative has been identified. This study sought to devise ways to enhance the current government vehicles procurement procedure by considering LCCA in order to achieve value for money. Data collection was done at the Ministry of Works and Transport where selected vehicles were considered for the research; In this research, observation, Surveys (questionnaires), interviews, secondary data analysis, benchmarking and content analysis methods were used in order to demonstrate how to arrive at the different lifecycle costs. The results of this research show that different vehicle models inflict different lifecycle costs on the user. Some vehicles had very low acquisition costs and high lifecycle costs while others had very high acquisition costs but very high lifecycle costs. This study recommends that LCCA should become part of public expenditure policy and should be incorporated in policies and regulations governing acquisition and procurement of Government vehicles. By using and understanding lifecycle cost analysis, lifecycle cost savings or surcharge that will be incurred in the future will be understood before making a procurement decision.