The growing use of life cycle cost techniques has brought to the surface some misconceptions and apparent conflicting approaches. Examined in this paper is the underlying basis for the two general approaches of selecting discount rates and dealing with inflation. The opportunity cost approach is endorsed as being the most effective in allocating resources. Suggestions are provided on how to evaluate the differential interest-inflation approaches being offered. Sensitivity analyses are used to show the relative insignificance of variations in design life, salvage value, and rehabilitation cost assumptions on results. By clarifying and putting these issues in a common sense perspective, the reader should be able to use least cost analysis techniques wit improved confidence. In this paper the cost data used are intended to be realistic in their proportions, and represent typical competitive market conditions between corrugated steel pipe and reinforced concrete pipe.
Abstract