Application Research Of Life Cycle Cost Theory In The Bidding Procurement Of Power Equipment

According to the Law of the People's Republic of China on Tenders and Bids, the construction project for power grid which legally requires the invitation of bids. Bidding evaluation is a critical point in procurement bidding. How to make the evaluation more scientific and effective that directly determines the product quality. Currently, there are two main methods for evaluation in the domestic electric power equipment bidding: one is traditional bidding evaluation method, and the other is method based on modern decision theory. Each method has pros and cons, which can be chosen sensibly in practice. However, both methods are overweight on the quoted price, but neglect the subsequent costs such as the cost in operation and maintenance. In fact, the cost of later stage is normally higher than the initial purchase cost, so the current evaluation method for the price factor is a short-sighted behavior which focuses only on immediate interests, but lack of overall, long-term perspective. Such behavior would tend to the result that damage the long-term economic efficiency of enterprises.This paper analyzes the current situation of bidding evaluation on electric power equipment, and compares main kinds of evaluation method. On the basis of the analysis, the Life Cycle Cost(LCC) theory is introduced into the bidding evaluation method to change existing price evaluation method. And build the LCC estimation model by regression analysis of historical data that will help the enterprises pay more attention to the long-term cost.The main researches in this paper are as follows: firstly, on the foundation of cost breakdown structure(CBS), the LCC and its sub-item cost static models are created by mean of reliability theory?theory of quality cost?statistics?engineering economics and other related knowledge. With take time value of capital into consideration, the LCC dynamic model is established, and sensitivity analysis is used to evaluate the stability of estimation results. Secondly, the concept of economic life is introduced to define the life cycle of power equipment. Then the economic life estimation model is build by the minimum average annual cost method. Economic life is the key point to estimate and compare LCC of electric power equipment. Finally, a bidding procurement case is given to illustrate the evaluation method based on LCC theory, and then simulate the result without changing other evaluation factors. After the comparative analysis of such different consequences, we can draw conclusions as follows: If give the time value of capital?economic life?LCC into considered, the purchase decision may change. Traditional price evaluation method easily leads to "short-sighted". Long-term benefit can be reflected by the evaluation model based on LCC theory, which also can help enterprises to maintain a favorable corporate image, and keep comprehensive advantages with higher efficiency and lower cost in the market competition.