One of the best kept secrets about sustainability is the fact that it can save money. Sustainable products are often more durable and efficient, which could mean a higher purchase price, but a significant cost savings to the County over the life of the product.
Total Cost of Ownership (TCO) refers to the sum of all costs incurred throughout the lifetime of owning or using an asset. This means considering costs beyond the original purchase price.
TCO enables decision makers to look at asset procurement in a more strategic way, beyond the lowest bidder. It levels the playing field when choosing among competitive bids where the lowest priced bid may or may not be the least costly asset to procure.
The following steps help determine the TCO analysis to perform when choosing a product for which you want to request a bid.
1. Cost of purchase:What is the purchase price?
2. Prediction of useful life:is the purchase for a short project? If yes, then what will happen to the product once the project is completed? If borrowing or leasing is not possible, what is the predicted life of the product? Does it come with any warranties?
3. Training and other personnel costs:What will the training or personnel costs be? Be sure to consider training required to maximize the product’s resource efficiency. Perhaps this training will need to occur more than once throughout the life of the product.
4. Cost of auxiliary products:Calculate the cost of any consumable auxiliary products. Examples include ink, toner cartridges, or special trash can liners.
5. Maintenance costs:Calculate any maintenance costs including how often service is anticipated and the cost of a maintenance contract.
6. Operational Factors:Calculate any operation costs over time such as water or energy usage.
7. Product disposal, reuse or resale:Include any additional costs associated with the disposal of the product. Alternatively, reduce your total cost sum by any costs savings incurred from re-use or a vendor take-back program.