Easy Office
LCI Learning

Life cycle cost

This query is : Resolved 

23 September 2016 I heard that now a days considering lowest life cycle cost is best method that can be adopted in procurement. For example a person quotes a lowest life cycle cost and order is placed with out looking into the price he quoted for the machine. After final acceptance of and payment of full price the machine did not run as quoted. The buyer initially attended later on no response for the calls. This results into litigation etc. So theoretically may be true but practically not true.

23 September 2016 No I have not come across with such instance.....depending upon the stake involved, the buyer always follows the principle of "buyer beware"

23 September 2016 What I want to impress is it is good academically but not possible to implement on practical grounds. I had a similar situation but I could over come it in a different way. I have been asked to vet the fo




23 September 2016 I am continuing the above message. Asked to vet the Tender document when all things equal technically the bidder who quotes lowest cost of power generation will be awarded the contract on a Turnkey basis i.e., after successful commissioning the plant will be taken over by the buyer. Of course I could convince the people the approach is not correct.

23 September 2016 ok...that is right... buyer has to take care

23 September 2016 Life cycle cost concept is prevailing in power generation and mining industry. The approach is correct approach. Penalty will be levied for any cost deviation over the life of the plant.

23 September 2016 The above approach is not correct and I proved it .We have to consider the price quoted also otherwise we may go wrong.

23 September 2016 I understand NTPC follow the concept of lowest cost generation and when I talked to




23 September 2016 In continuation to above : some people they said generally they go with BHEL and when I put fourth my Argument he agreed and said need to be d

23 September 2016 looked into.

23 September 2016 I am sorry my reply is getting transmitted in middle because of my wrong typing of something on keyboard.

23 September 2016 Sri Amol , In a PSU once Tender is out we have to finalise on L1 basis and answer all agencies later and need lot of justification to cancel. If we put stringent clauses to take care of buyer's interest price quoted will be very high or results in less competition. In fact management it self do not agree with stringent clauses.




25 September 2016 "Quality based cost selection" is the underlying principle used in most of the tenders.
"Lowest is the best" policy is no more in vogue. In fact L1 has to justify why and how s/he can execute at L1 price without compromise in quality.

25 September 2016 How do we judge the quality with out buying. If it is our own money we can decide ourselves, but dealing with Public(govt.) money we have to doubly cautious and you can not go beyond L1. Against a Tender when the parties are qualified basing on documents submitted we have to place order on L1.Disqualifying a party also is not easy if the party submit all the required papers.

26 September 2016 Who said one can NOT go beyond L1?
The terms and conditions of tender specifically gives the authority to the Principal to accept or reject the tender without assigning any reason of whatsoever nature.
Even L1 is asked to give a presentation and justify the L1 rates and explain how the bidder is going to complete the contract at such an L1 price. (On top of that, if tenderer is able to justify the L1 rate, the question is raised as to who has prepared the TENDER rate...say Architect or some similar person... and the same is challenged...)
See the point is, if used properly, there are LOTs of LATENT powers in this.
Your views please




26 September 2016 Even Tender conditions prescribed principal can reject the Tender without assigning any reason can you please give one instance for my reference. Going beyond L1 is possible only in case fraudulent or some reason of that nature if we can establish.Majority of Tender terms are of one sided and they don't stand in court of Law.

26 September 2016 there are many instances......please go through the web site of world bank... They always come with new and innovative YET feasible ideas.
Procurement manual...also you can go through of world bank for ready reference

26 September 2016 OK thank you. I shared my experience.

27 September 2016 Same here. You are most welcome.



You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

CAclubindia's WhatsApp Groups Link


Similar Resolved Queries


loading


Unanswered Queries