Communicate clearly on LCC benefits

Practitioners may resist using LCC tools due to higher upfront investment costs that an LCC-efficient solution may require, and the greater exposure to the risk of a legal challenge. Indeed, solutions that are cheaper over their lifetime often are more expensive to purchase. To overcome these concerns, the benefits of LCC need to be communicated and promoted clearly.

Keep tools simple & provide guidance

Practitioners need simple tools that reduce the complexity of LCC calculations to overcome the barriers related to LCC implementation. For instance, ready-to-use spreadsheet formulas for calculating net present value are considered valuable by
users. However, even a simple tool needs to be accompanied by clear guidance on how to make the best use of it. Guidance materials need to include an explanation of the cost parameters applied.

Build core expertise

Given the complexity of LCC, contracting authorities need to set up core expertise for LCC, particularly for complex procurements. Relevant profiles include economists, product experts, environmental experts, but also users and operators.

Offer full transparency of LCC cost parameters to economic operators

It is important to communicate transparently about cost parameters used for LCC to ensure that economic operators are informed on the methods used to evaluate their bids, and to reduce the likelihood of legal challenge.

Risks in setting the calculation parameters

Setting calculation parameters is challenging, as a number of parameters may be misjudged, which have a large impact on the calculations. This is the case for instance for the energy price, usage time, and discount rate. In this respect, the most important is
for all stakeholders to be clearly informed about the parameters used.

Apply penalties for not delivering on performance

To avoid abuse of LCC with companies making empty promises (e.g. on environmental performance), supplier’s claims related to costs and environmental performance should be incorporated into their contractual obligations. This allows contracting authorities to
include a mechanism to sanction economic operators for failing to deliver on the stated environmental or cost performance, e.g. minimum energy performance.

Quantify environmental costs

The challenge in including external environmental costs in procurement is the difficulty in verifying these effectively. Indeed, the award of the contract has to be based on quantifiable and verifiable information to guarantee an objective evaluation, which requires environmental costs to be expressed in monetary terms.

Reduce the risk of litigation

The 2014 Procurement Directives open up opportunities for the use of LCC, but at the same time bring a degree of uncertainty. There is a greater risk of litigation of rules that have only been applied for a relatively short time. For instance, the concept of data
to be provided “with reasonable effort by a normally diligent operator” is likely to lend itself for a challenge in court.