The principles of life-cycle analysis

Decisionmakers representing government agencies must balance competing objectives when deciding on the purchase and sale of assets. The goal in all cases should be to make prudent or financially {open_quotes}cost-effective{close_quotes} decisions. That is, the revenues from the purchase or sale of assets should exceed any out-of-pocket costs to obtain the revenues. However, effects external to these financial considerations such as promoting environmental quality, creating or maintaining jobs, and abiding by existing regulations should also be considered in the decisionmaking process. In this paper, we outline the principles of life-cycle analysis (LCA), a framework that allows decisionmakers to make informed, balanced choices over the period of time affected by the decision, taking into account important external effects. Specifically, LCA contains three levels of analysis for any option: (1) direct financial benefits (revenues) and out-of-pocket costs for a course of action; (2) environmental and health consequences of a decision; and (3) other economic and socio-institutional effects. Because some of the components of LCA are difficult to value in monetary terms, the outcome of the LCA process is not generally a yes-no answer. However, the framework allows the decisionmaker to at least qualitatively consider all relevant factors in analyzing options, promoting sound decisionmaking in the process.