Life-Cycle Costs in Public Procurement 2026

Life-cycle costs (LCC) in public procurement: total costs of a product over its entire useful life as an award criterion in public contracts.

Definition: Life-cycle costs (LCC) in public procurement comprise all internal and external costs incurred in connection with a product, works or service over its entire life cycle – from procurement through operation to disposal – and serve as a comprehensive evaluation criterion in the award decision.

Last updated: January 2026 · Legal basis: Art. 68 Directive 2014/24/EU, § 59 VgV, § 79 BVergG 2018

What are life-cycle costs?

Life-cycle costs are the totality of all financial expenses a public contracting authority must incur for a procurement item over its entire useful life – far beyond the mere purchase price. The concept of life-cycle costs has gained considerable practical importance through Directive 2014/24/EU and its national implementation: contracting authorities can and should no longer make awards solely on the basis of the lowest bid price, but determine the most economically advantageous tender on the basis of overall costs over the useful life.

Components of life-cycle costs

Life-cycle costs consist of internal costs and – where they can be monetised – external costs.

Internal costs (direct costs)

Acquisition costs: Purchase price, delivery costs, installation costs
Operating costs: Energy, water, consumables
Maintenance and upkeep costs: Regular inspections, repairs, spare parts
Personnel costs: Operation and handling
Insurance costs: Insofar as contract-related
Disposal costs: Dismantling, recycling, landfill

External costs (societal costs)

Art. 68 (1) lit. b of Directive 2014/24/EU permits the inclusion of external environmental costs, provided that:

They can be expressed in monetary terms and verified
All bidders are treated equally

External costs include in particular:

Greenhouse gas emissions (CO₂ equivalents, calculated according to standardised methods)
Pollutant emissions (NOₓ, particulate matter, etc.)
Noise and resource-consumption costs

Legal basis

The inclusion of life-cycle costs as an award criterion is expressly regulated in Art. 68 of Directive 2014/24/EU and implemented in national law.

Legal system	Provision
EU	Art. 68 Directive 2014/24/EU
Austria	§ 79 BVergG 2018
Germany	§ 59 VgV; § 7c VOB/A

For road vehicles, Directive 2009/33/EC (Clean Vehicles Directive, last amended by Directive 2019/1161/EU) provides a special methodology for calculating life-cycle emission costs and makes this mandatory for certain vehicle types.

Calculation and methodology

Life-cycle costing requires a traceable, non-discriminatory methodology which must be transparently set out in the procurement documents.

Key steps:

Define the period under consideration (e.g. 10, 15 or 20 years)
Identify all relevant cost items
Estimate quantities (e.g. energy consumption in kWh/year)
Cost the quantities using recognised unit prices or emission factors
Discount future costs to present value (net present value)
Sum to a total cost figure per bid

Contracting authorities can develop their own methods or use standardised calculation models (e.g. CEEQUAL, BREEAM for buildings or the EU methodology for vehicles).

Practical significance

Life-cycle costs have a particularly strong steering effect in energy-intensive procurement (buildings, vehicles, IT infrastructure).

Concrete fields of application:

Vehicle procurement: LCC comparison between electric, hybrid and combustion vehicles
Building construction and renovation: Comparison of insulation materials, heating systems
IT procurement: Energy consumption of servers and end devices over the useful life
Lighting: LED vs. conventional lighting

Related terms

FAQ

As a contracting authority, must I always calculate life-cycle costs? No – except for certain vehicle categories under the Clean Vehicles Directive, LCC consideration is optional. For energy-intensive procurement, however, it is recommended on economic grounds.

How do I handle uncertain future costs? Uncertain costs (e.g. future energy prices) can be estimated based on forecasts or scenarios. The methodology must be transparently disclosed in the procurement documents.

Can external costs actually be used as an award criterion? Yes, provided they are demonstrably methodologically sound and calculated equally for all bidders. The calculation method must be announced in advance.

Last updated: January 2026 All information provided without guarantee. For legally binding advice, please consult a law firm specialising in public procurement law.