User Guide To The Life Cycle Costing Tool - European Commission

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User Guide to theLife Cycle Costing Toolfor Green Public Procurement ofComputers and Monitors

The LCC Tool for Computers and MonitorsThe LCC Tool for Computers and MonitorsWhat is the LCC tool for?For which products can this tool be used?The purpose of the tool is to encourage andfacilitate the wide application of life cyclecosting (LCC) among public authorities in theEuropean Union, so that organisations canmake more cost-effective decisions in theirprocurement processes for computers andmonitors.This user guide contains the basic information tostart using LCC in the procurement of computersand monitors, specifically the following productsas defined in the EU GPP Criteria for computersand monitors:Purchasing price is only a small fraction of allcosts of any given product or service.Calculating life cycle costs allows you to beaware of future expenditure and select morecost-effective solutions. To do so, the LCCtool allows you to consider:- Portable computers: Notebooks, Two-In-OneNotebook, Tablets, Portable Thin Client andPortable All-In-One Computer.-Initial acquisition costs (purchase andinstallation),-Operating and maintenance costs(especially energy given that computersare energy consuming products withconsiderable operating costs),-Other costs (such as residual value), and-Costs of environmental externalities,namely those associated with climatechange/CO2 emissions due to the energyconsumption during their operation.This guide provides you with the keyaspects to consider when using LCC inpublic procurement, especially during thepreparatory and tendering stages, andintroduces briefly the main sections andelements of the LCC tool itself.Who is this tool intended for?The LCC tool has been developed forprocurementpractitionersinpublicorganisations in the European Union. It isdesigned for procurement both below andabove the thresholds for application of the EUprocurementdirectives(Directives2014/24/EU on public procurement and2014/25/EU on procurement by entitiesoperating in the water, energy, transport andpostal services sectors). However, it can alsobe used by private sector purchasers andeven the general public.- Desktop computers incl. Integrated DesktopComputers and Thin Clients.- Computer monitors.The tool does not cover workstations or smallscale servers.When to use the tool?The tool has been designed to be used duringtendering processes. However, that is not theonly stage in a procurement process when itcan be applied. You can use the tool:BEFORE TENDERINGTo assess the LCC of the current situation androughly evaluate different solutions to help guidepre-tendering market engagement activities, orto narrow down different technological solutions.DURING TENDERINGTo compare offers during the evaluation andaward of contracts, as foreseen in Directives2014/24/EU on public procurement and2014/25/EU on procurement by entitiesoperating in the water, energy, transport andpostal services sectors.AFTER TENDERINGTo evaluate the performance of the awardedsolution in comparison to the previous situationor other offers, to monitor and communicateresults and help prepare future tenders.1

I. Prior to the tendering processI. Prior to the tendering processBefore starting the tendering process, it is important to know what your real IT needsare, what solutions exist to cover them and which have lower life cycle costs. To do soyou need to involve internal stakeholders and consult with the market.Not all cost drivers are easily included in LCC; you should be aware of that and decidewhich elements to include in the LCC and which to consider separately as additionalcriteria, to select the best solution for your needs and for the environment.Determine your needsAn organisation’s need in relation tocomputers is not the computers themselvesbut the capacity to process data, exchangeinformation, etc. Each work position hasdifferent needs, so prior to a tenderingprocess, it is important to clarify what needsand requirements each post has and whatother needs exist, to better define thespecifications for possible solutions.For example, overspecifying -e.g. asking fora too powerful machine for what is neededcanproduceunnecessarycosts.Underspecifying –e.g. asking for a computerwith limited performance- causes workinefficiencies that will have also negativeconsequences such as an earlier need forupgrade or replacement of the equipment.Identify solutions for those needsThere are many options to cover your needsin a cost-effective manner when you takeyour time to evaluate the options instead ofjust tendering by inertia based on what youpreviously did. Consultation with internalstakeholders and the market is key.Do we really need to acquire new products?Consider whether you can extend the life ofall or part of your existing computers byupgrading them (e.g. increasing their RAM,investing in cloud storage, re-installing theoperating system, streamlining software, etc.)and, if needed, relocating them to work postswith lower computing needs.Are desktop computers the only solution?For most of your needs a laptop can performas well as a desktop computer, but with alower energy consumption and greaterflexibility (for trips, meetings, etc.).Thin Clients also have smaller environmentalimpacts and costs compared to desktops,especially when considering software licenses,maintenance and lifespan of the equipment(see Fraunhofer Institute (2008).Environmental Comparison of the Relevanceof PC and Thin Client Desktop Equipment forthe Climate).Do we need more than just equipment?Consider whether to just buy equipmentthrough a supply contract or to choose aleasing or other mixed contract if you requireongoing services. Clauses for the upgrade andreuse of equipment could be included if no inhouse services are available; and other typesof innovation such as energy efficiency auditscould also be fostered.2

I. Prior to the tendering processIdentify relevant cost drivers andparametersDifferent solutions have different coststhroughout their life cycle, analysing theexpenses and organisational changes of eachof them at this preliminary stage will help youhave the full costs picture and s from an economic point of view.Some cost drivers can be easily included inLCCcalculations,suchasenergyconsumption. Others -such as durability,robustness or higher performance aspectsmight be relevant from an economic point ofview but are more difficult to quantify interms of how much they increase theproduct’s lifespan. Consider such aspects atthe start and use them to define tenderspecifications (more in section II).LCC evaluation periodTo calculate life cycle costs, it is necessary todefine the expected lifespan of the product orsolution to be acquired, based on which thecalculations will be done. Selecting theappropriate LCC evaluation period is key toobtaining meaningful results.If you are purchasing computers and monitors,the LCC evaluation period should be theaverage life expectancy of such products inyour organisation.If you are acquiring the IT equipment througha leasing contract and you do not plan onbuying them at the end of the contract, theLCC evaluation period would be the durationof the contract, given that at the end of suchcontract, you will replace the equipmentthrough a new contract.When identifying cost drivers, make sure toprovide clear and objective definitions andrefer to industry-acknowledged standards tofacilitate acceptance of the process and theprovision of data by bidders (the EU GPP andEcolabel criteria can be a good starting pointfor this). If you are unsure about any of them,usetheconsultationwithinternalstakeholders and/or the market to find out.In addition to the cost drivers, you will alsoneed to define the basic parameters for theLCC (evaluation period, discount rate, yourelectricity cost, etc.). Ask your internalstakeholders for that information.3

I. Prior to the tendering processConsult with relevant partiesIt is important to involve and enter intodialogue with other departments of yourorganisation, end-users and suppliers in thisprocess.Internal departments can help identify andprioritise cost drivers and define theparameters for the LCC calculations (i.e.usage patterns, appropriate discount rate,electricity cost and CO2 emissions from yourenergy contract if you include externalities,etc.).Users will be able to identify any real needsand concerns in changing systems, forexample how certain products might affectwork procedures.Suppliers will be helpful in identifying theproduct types and solutions on the market,determining how to best meet your needs,and especially the type of information andstandards available for the different costdrivers and parameters you want to considerin your procurement. Consulting withsuppliers in advance also helps to ensure theiracceptance of the use of LCC in the call fortenders.Data needed from other departments andunitsBefore using the LCC tool for procurement youmust liaise with other departments or unitswithin your organisation in order to gather alldata needed for the LCC tool, as not all of itwill be automatically available to you. In somecases, you may also need to consult otherpublic sector bodies.For example, if you are a government agencyoperating in a building managed by the centralgovernment, you might need to identify theperson in charge of the electricity supplycontract to obtain the information on the costof electricity (to be able to calculateoperational costs) and associated CO2emissions of your electricity (if you plan toinclude the associated externalities in the LCCcalculation).Use all of this information in your decisionprocess to select the type of solution youwant, the criteria to consider and how LCCwill be used in the tendering process.Using LCC prior to tendering processThe LCC tool can be used at this stage to help you select the type of solution to purchase, bycomparing different solutions, in different columns of the tool, using preliminary data gatheredin the consultation process.4

II. How to use LCC during the tendering processII. How to use LCC during the tendering processIf in your tendering process you plan to use life cycle costs instead of pure acquisitionprice to evaluate economic offers, state it clearly in the tender documents, provide theLCC Tool with the common parameters to ensure transparency, ask for the data thatyou need for the LCC calculations and make sure to provide clear definitions andstandards to ensure the comparability of offers.Reflect on what additional environmental criteria to consider, to select the bestsolution, from an economic and environmental point of view.Decide your LCC parametersDefine it clearly in the tenderdocumentsThe LCC Tool has been designed to allow youto consider different cost categories and, ata preliminary stage, it is important to havethe full costs picture for better planning.However, you do not need to include all thesecategories in the tendering process if there isa good reason to exclude them. If a costdriver is difficult to quantify and no referencestandard exist, you may choose to exclude itfrom the LCC but use it as a technicalspecification, award criterion or contractclause instead (see below).Be transparent on how you will evaluate theoffer, especially on how the economic offerwill be evaluated and then weighed againstother award criteria. Inform bidders in thetender documents that you will evaluate theeconomic offer using a life-cycle costingapproach and include the LCC tool to betransparent and simplify explanations. Thetool should include the parameters definedby the contracting authority for the LCCcalculations (section A).For each parameter, define in the tenderdocuments exactly what is included and, ifrelevant, what standard they have to complywith, to obtain comparable offers.Cost drivers included in the LCC tool and used to Other aspects to include in the tender as technicalevaluate the economic offers in the contract award specifications, award criteria or contract clauses Acquisition costs Service requirements Delivery and installation costs Maintenance/service costsTechnical specifications of the products(hardware and software) Operation costs (Energy consumption) Fees, taxes and other costsMinimum energy efficiency (lower energyconsumption is evaluated as part of the LCCoperation costs linked to energy consumption) Externalities (CO2 emissions linked to energyconsumption) Other environmental criteria (e.g. noiselevels, exclusion of toxic substances,recyclability, durability) Packaging and end of life management, etc.Note: Based on Directive 2012/19/EU on waste electrical and electronic equipment (WEEE), producers are responsiblefor financing the collection, treatment, recovery and environmentally sound disposal of electric and electronic waste.It is assumed that all products include, in their purchase price, those waste management costs and, therefore no endof life costs have been included in the tool.5

II. How to use LCC during the tendering processThe standard for energy consumptionThe EU GPP Criteria for computers and monitors require that all equipment comply with the energyrequirements of the latest version of the Energy Star standard (currently version 6.1 for computers and7.1 for monitors). This is the most widely available standard in the sector for energy efficiency andgiven that it is an international market, its use is deemed still relevant even though the agreement tocoordinate energy labelling of office equipment between the EU and the US Government has expired.In a green procurement where you plan to use LCC to evaluate the economic offer, you should specify inthe tender documents that all equipment must comply with the energy requirements of the Energy Starstandard and require bidders to provide the annual energy consumption of the equipment (ETEC value) orthe power requirements in off, sleep, long idle and short idle modes as defined in the Energy Starstandard, for the calculation of operational costs in the LCC Tool. This way you ensure a minimumenergy efficiency and consider lower energy consumption in the award process through LCC.As a means of proof, bidders may provide the Energy Star certificate or the products’ specifications ortechnical sheet where this information is provided. According to Commission Regulation (EU) nº617/2013 on ecodesign requirements for computers and computer servers, from 1 July 2014manufacturers have to provide in the technical documentation and make publicly available on freeaccess websites certain information, including the energy consumption and power requirementsmentioned above. You can also find this information in the Energy Star certified products database.To facilitate data input in the tool, requestbidders to present the appropriateinformation through the “Bidder responsesheet” of the tool, making sure that, for eachcomputer and monitor there is a column forthe bidders to input their data.If the tender is divided in lots, you will needto provide a tool for each lot, including therelevant products in each of them.Bidders have to provide all the required datain order to calculate LCC and be eligible foraward the contract. Making suppliers awareof this as part of preliminary marketengagement and in the tender documents isimportant for a successful tender.Include other environmental criteriaIn the LCC Tool energy consumption isincluded as an operational cost, but youshould include additional environmentalcriteria (e.g. on durability, recyclability,noise, toxicity, etc.) beyond what isconsidered directly in the LCC to ensure thatthe acquired products or solutions areenvironmentallypreferable.Thisisparticularly relevant for environmentalaspects that affect product lifespan and thuscosts, but that are difficult to quantifyfinancially.Purchase vs LeasingThe tool has been designed so that bothpurchase and leasing contracts can beevaluated. To allow this, some costparameters might not be relevant in one orthe other case. In the following table wesummarise what costs linked to the economicoffer should be asked for in each type ofcontract. Make sure you state this clearly inthe tender and in the tool by hidingunnecessary rows.In a purchase tender- Acquisition costs- Installation costs (including delivery andstart up)- Service costs (only if support services areincluded in the tender)In a leasing tender- Service costs (this should include all thecosts of the leasing contract including thecost for the equipment, installation andsupport services defined in the tender)- Purchase costs at the end of the contract(only if foreseen in the tender)6

II. How to use LCC during the tendering processEU GPP Criteria for computersUse the EU GPP Criteria for computers and monitors (available in all EU official languages) to identifyrelevant environmental criteria when buying new IT equipment: gpp criteria en.htmHow to consider quality, performance and durability criteriaProducts with higher quality, performance and durability are expected to have a longer useful life. Thelonger you can use equipment, the later you will need to replace it, thus its life cycle costs will belower; and so will its environmental impacts in terms of use of resources and waste generation. Highquality products can also have a higher resale value, contributing to lower LCC.However, even though there are standards to test the durability of computers and monitors, such as IEC60068, there are no standards or agreed references to transform those qualities into expected longerlifespan. For this reason, durability and performance considerations have not been included in the LCCTool. Nevertheless, these aspects are important for the overall environmental impact of IT equipmentand should be included in the tender as technical specifications or award criteria.Can we define other award criteria linked to energy consumption?As computers and monitors are energy-consuming products, operation costs based on energyconsumption have been included in the LCC Tool.As energy consumption in usage will be included in the LCC and thus considered as part of the costsaward criterion, this should not be duplicated elsewhere in the award criteria. However, it is perfectlypossible to combine LCC with technical specifications which set minimum requirements for energyefficiency, for example those based on Energy Star which are included in the EU GPP criteria. It is alsopossible to combine LCC with award criteria based on other aspects of environmental performance,such as durability, recyclability and end-of-life considerations.Should we consider CO2 externalities in the LCC or as a separate award criterion?The procurement directives make it clear that LCC can include costs of environmental externalities, aswell as costs directly incurred by the owner or user. To do this, it must be possible to determine andverify the cost of the externality – and this is the case for CO2eq emissions based on energyconsumption.You can choose whether to include the cost of CO2eq emissions in the LCC, or whether to apply aseparate award criterion for it.If you choose to include them in the tool, the externality cost of CO2eq emissions will have to bespecified. At the EU level, Directive 2009/33/EC on the promotion of clean and energy-efficient roadtransport vehicles provided a range between 30-40 EUR/tonne CO2eq (in 2007 prices). In a more recentreport for DG Transport on the “Update of the Handbook on External Costs of Transport” by Ricardo-AEAfrom 2014, they propose a central value of 90 EUR/tonne (in 2010 prices) from a range between 48-168EUR. In some countries, the Government might provide other figures. Therefore, practitioners will needto specify the costs for the climate change externality making sure that the figure they use is in linewith the requirements defined in article 68.2 of Directive 2014/24/EU on public procurement. In thetool, it is proposed to use 90 EUR/tonne.If you apply a separate award criterion based on CO2eq emissions, you may assign a higher weighting tothis than it would have had if considered within the LCC. This approach may make sense if you areparticularly concerned about the environmental impact of IT products you purchase.7

II. How to use LCC during the tendering processEstablish contract clausesInclude penalties in the tender documents inthe event that the contractor does notcomply with the tender requirements and theproducts do not conform to the declaredinformation, to keep contractors accountablefor their products’ performance.Consider including a clause to provideexternal test reports on energy consumptionfor the supplied products based on thestandard specified in the tender documents,as real-life consumption will differ fromstandardised test results.Evaluate offersWith the information provided in the bids,you can evaluate the economic offers basedon the life cycle costs calculated with theLCC Tool.Each bidder will complete the LCC tool withtheir information in the “Bidder responsesheet” and the LCC tool will calculate theresults automatically for each productincluded in the tool (i.e. by column) and alsoin total (i.e. by aggregating the results ofeach column), to have the total LCC for thetender or lot.Once you have the LCC results for each bid,you will need to calculate the cost score foreach bid based on the cost award criterionweighting and formula indicated in thetender documents. By combining this withthe other award criteria established in thetender documents, you will be able to selectthe most economically advantageous tender.The tool allows you to see the results byproduct graphically (in the "Graphic results"sheet), but you can use that tab to comparethe results of up to 10 different offers too. Todo so, copy the answers of each bidder into asingle version of the LCC tool.8

II. How to use LCC during the tendering processSteps to complete and use the LCC Tool1Decide the cost categories to be included in the LCC and the offers’ structureThe tool has been designed to consider different cost categories and options. If for someof them, namely “other costs” you do not have the appropriate data, exclude them fromthe calculations. Also decide what energy data must be provided to evaluate operationalcosts due to energy consumption and decide if you will include the environmentalexternalities or not. Based on those decisions, hide (don’t delete) the unused costcategories.Also, based on the tender lots structure - e.g. if each lot is for one specific product or ifa lot is composed of several products – define how each offer should be presented, sothat bidders know where to input their data and how it will be aggregated if severalcolumns of the tool are used for the same offer.2Complete Section A (green box) of the LCC Tool with your parametersThe tool will use data provided by the bidder and parameters provided by you, thecontracting authority, to calculate life cycle costs. Based on the cost categories decided,fill in section A of the “Inputs and Results” sheet of the tool with your parameters (e.g.evaluation period, discount rate, electricity costs). This will be the basis for thecalculations and should be included in the tool provided in the tendering documents, toensure transparency.Make sure to protect all sheets of the tool except the “Bidder response sheet”, so thatbidders cannot tamper with them accidentally, but can still input their data in theappropriate cells and see their results.3Request bidders to complete the “Bidder response sheet” of the toolIn the tender documents, require bidders to present the appropriate information throughthe “Bidder response sheet” of the tool and to protect that sheet when sending theiroffers to ensure that no data manipulation can happen during the evaluation process.The information in this sheet is linked to the “Input & Results sheet” so it is importantto keep the provided structure to ensure the correct calculation of LCC results.4Use the LCC results to evaluate the cost award criterionAs different formulas and weightings are used by contracting authorities to evaluatecosts, the LCC tool does not itself calculate a score for each tender – but provides thecost values to be included in this calculation. Calculate the cost score for each bid basedon the LCC results and the cost award criterion weighting and formula indicated in thetender documents.By combining this with the other award criteria established in the tender documents,you will be able to select the offer with the best overall results.9

II. How to use LCC during the tendering processTool functions overviewThe LCC Tool contains six sheets, but the main one is the “LCC Inputs and Results” where the LCC parameters and information is compiled and results presented.12345678As a public authority, you have to complete section A - green box.Brief explanations and recommendations are provided in pop-up comments toguide you on the information to be provided in each parameter included in thetool. Hover over the cell to read the comment.Click on the [ ] sign at the top to show or hide more product columns and onthe left to hide or show certain cost parameters.If not all cost parameters are relevant for your calculations, hide thecorresponding lines to avoid inputting data. When relevant, hide them alsofrom the “Bidder response sheet” to ensure coherence. This might be the casein purchasing contracts were no maintenance or services are required or if youdecide not to include the environmental externalities.Energy consumption of computers and monitors should be calculated based onthe latest Energy Star specifications (as required in the EU GPP Criteria). Insome case, you might want to calculate it based on your own use patterns ineach user mode. If so, define that in the tool.Data provided by bidders through the “Bidder response sheet” areautomatically copied and shown in section B - turquoise box.Click on the [ ] sign to show or hide them.Costs and other data to be provided by bidders require appropriate definitionsin the tender documents to ensure comparability of offers. Make sure thatthese are properly included (e.g. the tasks to be included in the service costsor the energy standard for computers and monitors).LCC costs are presented in section C - black box - by cost category.The formulas used to calculate the final life cycle costs are explained in the“Definitions and Formulas” tab of the LCC tool. The graphic representation ofresults is provided in the "Graphic results" tab in the form of a bar chartshowing the contribution of each cost category to the total LCC of eachproduct included in the tool.The tool also provides you with the estimated total energy consumption andCO2 emissions of each product for the duration of the evaluation period.10

III. After the tendering processIII. After the tendering processMonitor compliance with the tender requirements and performance levels promised bythe contractor; apply sanctions if needed; identify lessons for future tenders;communicate results to motivate internal acceptance and buy-in and promotereplication by other stakeholders.If LCC was part of the tenderCommunicate resultsEnsure that your contract explicitly mentionsthe performance levels included in the bidderresponse sheet as part of the terms. Monitorperformance during contract management toensure compliance with claims made bycontractors – for example in relation tomaintenance frequency and costs, if includedin the tender, or regarding the energyperformance of equipment by testing themaccording to the standard defined in thetender specifications – and apply sanctionswhen non-compliance is found (in line withArticle 70 of Directive 2014/24/EU on publicprocurement).Use all this information to communicateresults and plan measures for future tenders.This is especially important if you changedthe type of products acquired and the resultscan help to motivate acceptance, buy-in andfurther improvements.If possible, share your experience (successes,draw-backs and lessons) with otherauthorities to encourage replication. Oneway to share your results at the Europeanlevel is through the European Commission’scollection of GPP Good Practices, publishedregularly in the EC GPP News Alert.Use this stage to record relevant informationfor the next tender (e.g. if there was enoughcompetition, if bidders provided all relevantinformation in the appropriate way, etc.).This will allow you to improve results infuture similar calls for tenders.If LCC was not included in thetenderIf LCC was not used during the tenderingprocess but you requested information for allrelevant parameters (especially related tooperation and service costs), use the LCCTool to estimate the life cycle costs of thedifferent offers – including the awarded one and compare between them and to thecurrent situation, if data was identified in thepreparatory stage. This will help you developa baseline of data to inform contractmanagement and future tenders.11

Background and acknowledgmentsThis guide has been developed for theEuropean Commission by Ecoinstitut SCCL andICLEI – Local Governments for Sustainability,supported by Public Procurement Analysis(PPA) and A. Geuder, under Contract Nº07.0201/2017/767625/SER/ENV.B.1.As set out in the Communication "PublicProcurement for a Better Environment"(2008), the European Commission isencouraging public authorities to green theirpurchasing decisions. In this context, lifecycle costing is considered as a useful toolthat could deliver financial savings as well asreductions in the environmental impact ofpurchases made by public authorities.The European Commission would like tofacilitate the wide use of LCC by providingtools that can help the application of LCCamong public authorities in the EuropeanUnion and commissioned this work.During development of the LCC tool, fiveauthorities piloted the Tool and User Guideinter

start using LCC in the procurement of computers and monitors, specifically the following products as defined in the EU GPP Criteria for computers and monitors: - Desktop computers incl. Integrated Desktop Computers and Thin Clients. -Portable computers: Notebooks, Two -InOne Notebook, Tablets, Portable Thin Client and Portable All-In-One Computer.

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