Life-cycle cost approach improves local governance and public investment

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life-cycle-cost-approach-training — Citizens' Representatives are learning life-cycle cost approach. Zavkhan. © GIZ

The life-cycle cost (LCC) approach takes into account all the costs that will accrue during a product’s life span. And it is an approach the joint SDC and GIZ Energy Efficiency Project (EEP) is promoting to build local capacity to make sound procurement and investment decisions.

The project is providing Citizens’ Representative Khurals, which are responsible for approving local investment budgets and overseeing procurement processes, with the knowledge and tools to adopt the LLC approach.

“Today, most contracts are still awarded to the lowest bidder without taking into consideration the lifetime costs, such as the costs of operations and maintenance,” said Mr Gombodorj, head of the Zavkhan Aimag Citizens’ Khural Representatives Secretariat, at EEP training held in Zavkhan and Khovd aimags in April. “The low direct investment costs sadly often include poor-quality materials and outdated technologies, revealing high operations and maintenance costs afterwards.”

Fifty-four local decision-makers learned how to calculate the indirect costs, the costs of future operations and maintenance, and replacement costs at the EEP training.

Mr Gombodorj said knowledge about LCC was important for decision-making on local procurements and investments.

The EEP has also retrofitted a number of public buildings to improve energy efficiency, which has had a positive impact on community health and local budget expenditure.

Ms Oyunbileg, principal of a retrofitted kindergarten in Khovd aimag, said energy-efficient technologies had halved the cost of heating during the 2015 winter.