NBSIR 77-1212

Life Cycle Costing: An

Assessment of Practicability

for Consumer Products

S. Wayne Stiefel

S. Justin Kim

Howard Hung

Center for Consumer Product Technology

Institute for Applied Technology

National Bureau of Standards

Washington, D. C. 20234

December 1976

Final Report

Prepared for National Bureau of Standards

Department of Commerce

Washington, D. C. 20234

NBSIR 77-1212

LIFE CYCLE COSTING: AN

ASSESSMENT OF PRACTICABILITY

FOR CONSUMER PRODUCTS

S. Wayne Stiefel

S. Justin Kim

Howard Hung

Center for Consumer Product Technology

Institute for Applied Technology

National Bureau of Standards

Washington, D. C. 20234

Decmeber 1976

Final Report

Prepared for National Bureau of Standards

Department of Commerce

Washington, D. C. 20234

U.S. DEPARTMENT OF COMMERCE. Elliot L. Richardson, Secretary

Edward O. Vetter, Under Secretary

Dr. Betsy Ancker-Johnson, Assistant Secretary for Science and Technology

NATIONAL BUREAU OF STANDARDS, Ernest Ambler, Acting Director
Acknowledgments

The writers gratefully acknowledge the contribution of

John Donaldson, who provided valuable comments during the formulation

of basic concepts. Clare Goodman, Ruth Wamock, and Mary Abbott also

deserve thanks for their respective editorial and secretarial assistance

in the preparation of this manuscript.

11
SUMMARY

Background

Interest in the application of life cycle costing (LCC) to consumer

products has evolved with the growing national effort to provide com- parative product performance information for consumer products. Adequate information is not available at present to a purchaser of major

consumer durable products. Although the purchaser is aware of the

initial cost, he generally does not have a precise idea of the magnitude

of costs (including energy, operations, maintenance, repair, and disposal)

he is likely to incur during his ownership. Further, the purchaser

usually does not have a good indication of the relative benefits

(performance over time) that will be received from alternative brands

of a given product. Proposed legislation (Senate Bill S.643: Consumer

Product Testing Act of 1975) would have given NBS the responsibility for

"...the development of consumer product test protocols...." This

included the average annual cost of operation, durability, maintenance

requirements, frequency of repair, and other elements of LCC. The

Energy Policy and Conservation Act of 1975 (Public Law 94-163, Sec. 325)

and the Department of Commerce Voluntary Consumer Product Information

Labeling Program both provide the means for utilization of LCC analysis

and dissemination of results to consumers. Because of the continued

interest and need for consumer product performance and ownership cost

information, this project was initiated to address and assess the

difficulties encountered in the application of LCC to consumer products.

Objectives

The principal objective of this study was to develop an understanding in "life" performance measurement and cost characterization for

consumer products. This study was aimed at determining the practicability for applying LCC to consumer products. Additional objectives

were to assess the state-of-the-art in application of LCC and "life"

testing and to identify technical barriers to its application in order

to make recommendations for appropriate future NBS activities.

Technical Concepts

The products for which LCC or extended performance information are of potential value in aiding better purchase choices include those for

which:

(1) operating costs or servicing costs are significant compared

to purchase price,

(2) energy utilization per unit output varies over time,

(3) output performance deteriorates over time, and/or

(4) expected "life" varies for non- repairable products.

iii
The determination of the full cost characterization, that is, the

assessment of the LCC of a consumer product, is crucially dependent upon

the measurement of the performance of a product. The reason that

product performance plays such an important role in determining the LCC

is that many of the components in the LCC formula cannot be completely

specified unless the manner by which a product performs its intended

function throughout its "life"--that is the life cycle performance

(LCP)--is completely determined. Performance of a product is a measure

of a specific function or set of functions for which a product was

intended. As such, performance is measured in terms of the product's

output and the efficiency with which it transforms input to output.

Measuring performance over time has two elements: the first is measuring changes in the nature of the output, and the second is measuring

changes in the input-output transformation efficiency. Both changes can

be characterized as performance degradation that inevitably occurs to

manufactured products.

Maintenance and repair activities are intended to deal with . performance degradation. Maintenance is an action performed on satisfactorily operating equipment to keep it performing satisfactorily.

Repair is an action performed on an equipment showing performance failure,

restoring it to a satisfactory level of performance by fixing or replacing

parts. Both maintenance and repair affect LCP, because output and

input-output transformation efficiency are affected by such activities.

They also affect LCC since both activities entail the consumption of

economic resources. The repair activity necessitates the defining of

performance failure which is some threshold level of performance below

which the produced output is deemed unacceptable. In conjunction with

LCP, such a threshold level may be designated as the minimum acceptable

performance level (MAPL) . The immediate significance of MAPL is in

determining performance failure and the need for repair activities.

More significantly, however, MAPL acts as the basis from which the

concept of LCC is formulated.

With respect to a given LCP and its associated MAPL, LCC may be

defined as the initial purchase price and disposal costs plus whatever

monetary expenses incurred over time to maintain LCP above the MAPL.

Such expenses consist of cost for input (such as energy) plus maintenance and repair expenses. The above definition, however, is incomplete

since LCP can be maintained above MAPL indefinitely provided sufficient

cost is incurred. At best, LCC should be defined in terms of some prespecified time periods, say, 3, 5, 10, or 15 years.

Moreover, durable products, especially complex ones with many com- ponents, are repairable and hence can be kept serviceable indefinitely

if necessary repairs are made. When to repair and when to stop repairing

ultimately depends on relative costs of repairing and replacement. The

concept of useful life therefore embodies economic as well as engineering

considerations. For products which perform an "essential" function,

e.g., freezers and cars, the cost and inconvenience incurred from repeated

failures makes reliability also a consideration in the repair or replacement decisions.

IV
A requirement in expressing LCC is reconciling the stream of costs

incurred over different • time periods. The recognized method for comparing

expenditures occurring at different points in time is discounting to some benchmark period. The approach takes into account the time value

of money and converts all costs to a present value. Such LCC computations

provide a framework to compare alternative product choices.

The development of an LCC/LCP estimation methodology must account

for the factors affecting LCC and LCP in actual use. The conditions under

which products are used vary greatly and these conditions affect the

level of performance to varying degrees. It is impractical to attempt

to account for all possible contingencies associated with a product's use. One approach is to characterize, through careful field analysis, "normal"

use and environmental conditions which can be used to specify standard

test conditions. Also a functional analysis of the product would yield

important performance attributes. Based upon this information, laboratory

test methods can be developed which either simulate the use and environmental

conditions using manufacturer recommended maintenance procedures or can be correlated with actual field results.

The development of representative ownership costs is derived from

combining the technical outputs from the laboratory with the value of

necessary input requirements from field analysis. The cost estimation

framework may account for the variations in input costs across the nation

as well as conditions of use or environment, which could make aggregation

or average values misleading to consumers. The above discussion points

out the importance of considering the totality of a product's physical

characteristics, and the variations in use and environmental conditions

to make valid estimates of LCP and LCC for consumer products.

State -of- the -Art Assessment

There exists a well developed body of literature concerning the

statistical techniques for analyzing "life" test data. The test methods

from which the data are generated, however, are rarely reported in the

literature.

Many tests either exist or are being developed to measure how well

products perform their intended function. These tests are being developed

through such organizations as the Association of Home Appliance Manufacturers and the American Society for Testing and Materials. Life

testing is now being conducted by individual manufacturers for development, quality conformance and follow-up field evaluations. These test

methods, however, are generally unavailable to the public due to the

proprietary nature of these tests. Life testing is comparative and

often tests terminate when specific minimum goals are achieved, not

necessarily "end of life." For example, a component is replaced because

a less expensive substitute is found. If testing indicates the replacement lasts longer than its predecessor the test may terminate prior to

failure. Very few "life" test methods are agreed upon industry wide.

v
The General Services Administration presently uses a "LCC" criterion

for procuring selective consumer products. The LCC criterion includes

a projected energy cost plus an initial purchase price but not maintenance

and repair costs. While this may be a step toward including energy

conservation in a purchase decision, it is a strictly limited concept

of LCC.

The relatively advanced state of LCC analysis for weapons procurement by the military may be accounted for by the fact that rather stringent

and complete control can be achieved by the military on the operation,

maintenance, and repair activities associated with the use of weapons.

Because of such control, costs associated with operation, maintenance

and repair activities are predictable and controllable. Hence, planning

on the basis of LCC information becomes easily implementable. Similar

observations apply to industry's and government's uses of durable equipment: for example; the aircraft fleet by the commercial airlines, automobile fleet by the car rental companies, and police car fleet by the

various local police departments. A similar observation, however, can- not be applied to the use of consumer durables. The general absence of

control on activities and the resulting difficulty in predicting costs

make the LCC analysis of consumer durables a much more difficult topic

of research.

Observation of the state-of-the-art leads to a conclusion that the

application of LCC to consumer products is not immediately practicable.

Although the elements of technical knowledge are available for such an application, the total body of knowledge is insufficient. This can be

characterized by the availability of statistical techniques for testing

but the unavailability of standardized LCP test methods. The inability

to gain access to company test methods and field experience for consumer

products also hinders LCC development efforts. These data are needed

to correlate laboratory test results to actual field experience and to

establish the test conditions, based upon use and environmental conditions

in the field. Therefore, additional efforts are required to push the

state-of-the-art in order to make LCC practicable for consumer products.

Work to be Done

If LCC information is to be made available to consumers for new

products, there are a series of problems which must be addressed and

resolved. At the present time, elements of LCC available for consumer

products include initial purchase price and installation costs, a projection of maintenance costs (based upon manufacturers recommendations)

and for certain appliances energy costs when units are new. Factors in

the LCC formula which are ill-defined and for which information is lacking

include: product life, operating cost, repair cost, discount rate and

salvage value. Effort intended to provide manufacturers with a basis

for testing consumer products and estimating cost of ownership must

address both the definitions for the above factors and provide techniques for assigning values. The basic areas requiring future

vi
investigation in order to develop the capability to generate LCP and LCC

information include: information on consumer product use, laboratory

test development and validation, rules for test application, and techniques for cost estimation.

For the purpose of planning long-term research, both engineering

and economic disciplines must be utilized. Engineering research should

be oriented toward simulation of use and environmental factors, the

automation of test procedures and the development of a basis for accelerated testing. A successful program requires development of techniques

for gathering operational information relative to a product's use, use environment, maintenance, repair, and "life" for non- repairable products.

Economic research essential to the translation of LCP information

into LCC information is the valuation of the LCP input factors. Tasks

must be directed toward the development of procedures to yield cost

estimates for operating cost factors, repair requirements and consideration of the use of the discount rate for consumer product cost characterization. Another area for future research concerns the question of how

"best" to provide consumers LCC information. This question relates to

product selection, information content, complexity, format and the

vehicle for presentation of comparative LCC information, and impact

assessment

.

During the course of this study, it was not intended that any

laboratory based efforts be conducted. The information obtained was,

therefore, based upon observations of industry testing and available

literature, documenting statistical techniques for handling data, and

limited test method development. In order to obtain "first hand"

knowledge of the problems associated with LCP test method development

and LCC, it is recommended that laboratory and field data collection

efforts be initiated.

Two LCP demonstration projects are proposed: the first to integrate

into a test method user effects inherent in the operation of a small

hand-held product, and the second to characterize extended performance

for a larger consumer product. These research efforts relate directly

to the longer term engineering tasks and provide necessary experience

to gain additional insights into the problems of conducting LCP test

method development and LCC analyses for consumer products.

Vll
Contents

Page

Summary iii

Abstract 1

1. Introduction 1

1.1. Study Objectives 1

1.2. Background 1

1.3. Approach 4

2. Potential Application, Benefits, and Effects of an LCC

Program 4

2.1. Potential Application of an LCC Program 4

2.2. Industry Benefits and Drawbacks 5

2.3. Consumer Needs and Benefits 6

2.4. Public Costs and Benefits 7

3. Technical Concepts 7

3.1. Life Cycle Performance 8

3.1.1. Introduction 8

3.1.2. Concept of Performance 8

3. 1.2.1. Definition 8

3. 1.2. 2. Product Quality 9

3. 1.2. 3. Nature of Output 11

3.1.3. Concept of Life Cycle Performance 12

3. 1.3.1. Definition 12

3. 1.3.2. Effects of Reliability and Durability.. 12

3. 1.3. 3. Minimum Acceptable Performance

Level (MAPL) 13

viii
Contents (continued)

Page

3.2. Life Cycle Cost 15

3.2.1. General Expression of LCC Formula 15

3.2.2. Analysis of LCC Components 16

3. 2. 2.1. Greater Importance of the Variable

Cost Component 16

3. 2. 2. 2. Analysis of the Variable Cost Component.. 16

3. 2. 2. 3. Concept of Economic Life 17

3.3. LCP/LCC Estimation Methodology.../ 20

3.3.1. Discussion of Estimation Methodology 20

3. 3. 1.1. Factors Affecting LCP/LCC in Actual Use.. 20

3. 3. 1.2. Types of External Factors 21

3.3.2. Developing Standardized Laboratory Testing Methods. 21

3 . 3 . 2 . 1 . Reasons for Development 21

3. 3. 2. 2. Implications for Laboratory Testing

and Cost Estimation 22

4. State-of-the-Art 23

4.1. Literature Search 23

4.1.1. Scope of Search 23

4.1.2. Life Testing Literature 24

4.1.3. Accelerated Life Testing 26

4.2. Description of Industry Testing of Consumer Products 28

4.2.1. Purpose of Testing 28

4.2.2. Industry ’’Life” Testing 28

4.2.3. Performance Testing 30

4.3. Government Use of Life Cycle Costing 31

4.3.1. Military Use of LCC 31

4.3.2. General Services Administration (GSA) Use of

LCC 32

IX
Contents (continued)

Page

4.3.3.

Government Developed "Life" Test Methods 33

4.4. Summary and Observations 34

5. Work to Be Done 36

5.1. Areas Requiring Investigation 36

5.1.1. Basis for Laboratory Test Design 36

5.1.2. Laboratory Test Method Development 37

5.1.3. Laboratory Test Validation 37-

5.1.4. Rules for Test Application 38

5.1.5. Cost Estimation 38

5.2. Long-Term Research Goals 38

5.2.1. Engineering Goals 39

5.2.2. Economic Goals 39

5.3. Immediate Activities 39

Appendix A. Examples of Consumer Product Life Testing A-l

Appendix B. Industry Performance Test Methods for Consumer

Products B-l

Appendix C. General Research and Product Specific Tasks for an Operational LCP/LCC Program for Consumer Products.... C-l

x
LIFE CYCLE COSTING: AN ASSESSMENT OF

PRACTICABILITY FOR CONSUMER PRODUCTS

S. Wayne Stiefel

S. Justin Kim

Howard Hung

This report assesses the practicability for applying the

life cycle costing (LCC) approach to consumer products. The

report provides a basis for understanding: the potential for

application, benefits and effects of LCC; the basic concept of

LCC; its interaction with performance, and the state-of-theart of "life" testing as it relates to developing extended

performance test methods for consumer products. The report

reviews information now obtainable and barriers to labeling

consumer products with LCC information. An observation is

made that application of LCC to consumer products is not

iumediately practicable. The basic areas requiring further

investigation are identified, long term research goals are suggested and activities deserving immediate attention are described.

1 . INTRODUCTION

1.1. Study Objectives

The principal objective of this study was to develop an understanding

in extended performance measurement and cost characterization for consumer

products. 1 This initial study was aimed at determining the feasibility

of applying life cycle costing (LCC) to consumer products. In studying

the feasibility of LCC, additional objectives were to assess the state-ofthe-art in application of LCC and "life" testing, and to identify technical

barriers to its application for consumer products. Understanding the

problems inherent in application of LCC provides a basis for the formulation

of a long-term plan to develop the necessary resources for testing and

evaluating consumer products. Based upon project findings, recommendations

were to be made for future NBS activities in extended performance evaluation

of consumer products.

1.2. Background

The concept of LCC is not new; it has been used by industry for years

as a technique for evaluating alternative investment costs of equipment

and plant. The military likewise has been using it in comparing economic

characteristics of alternative weapons and transportation systems. The

lrThe term extended performance is used, throughout this report, to indicate

evaluation of a product's capability to continue its intended function

over time with use.
LCC technique takes into account the total costs of ownership and accounts

for the timing of cash outlays and the time value of money. However, the

application of LCC to consumer products is new. Interest in the application

of LCC to consumer products has evolved with the growing national effort

to provide comparative product performance information for consumer

products. A 1974 Massachusetts Institute of Technology (MIT) report

estimates that in 1972 there were nearly 115 million television sets and

330 million major appliances in use in the United States. 2 The retail

value of products shipped in 1972 totaled $5.4 billion for home electronics

and $7.5 billion for major appliances. Power costs for operating these

products are estimated to have been $5.0 billion. Repair and servicing

costs in 1972 are conservatively estimated to have been $1.5 billion for

radio and television repairs and about $900 million for appliance repair.

Adequate information is not available to a purchaser of major appliances

(freezers, room air conditioners, refrigerators, water heaters, etc.).

Although the purchaser is aware of the initial cost of competing

alternatives of major equipment, rarely does he have any idea of the

magnitude of costs he is likely to incur during his ownership of that

equipment (including energy, operations, maintenance, repair, and disposal

costs). Further, the purchaser rarely has any indication of the relative

benefits (performance over time) that will be received from different

equipment alternatives. This is not only true for consumers, but is also

usually the case with large volume purchasers, such as Federal, State,

and local government agencies and industry.

This perception of the need to provide consumers with comparative

performance and ownership cost information has resulted in several

legislative proposals, thus far unsuccessful, to provide a mechanism

to generate the needed information. Legislation proposed in the 94th

Congress supported the need for more and better information. Senate

bill S643 (Consumer Product Testing Act of 1975) , introduced by Senator

Magnuson; would have given NBS the responsibility for "...the development

of consumer product test protocols " This included the average annual

cost of operation, durability, maintenance requirements, frequency of

repair, and other elements of life cycle costing. The Federal Trade

Commission (FTC) had supported this bill and its chairman told the Senate

Commerce Consumer Subcommittee "that the bill would help alleviate the

problem of a lack of information by encouraging manufacturers to utilize

more comparable and informative advertising and would provide an incentive

for them to improve their products." 3

2 Center for Policy Alternatives, The Productivity of Servicing Consumer

Durable Products , Massachusetts Institute of Technology with the Charles

Stark Draper Laboratory, Inc., Report No. CPA-74-4, 1974, p. 7.

3 "FTC Supports Bill on Test Standards," The Washington Post, November 12,

1975, p. A23.

2
The national concern for energy conservation has resulted in legislation

requiring manufacturers to label appliances with the average annual cost

of energy consumed. 4 This concern for energy efficiency, however, has

led to a process which measures a product when it is new and does not

account for possible degradation or improvements (break-in) with use. If

projections are based upon initial values to generate average cost estimates

efficiency changes occurring during product use may cause misleading

information to be disseminated. Also, the trade-offs which may be taking

place are not readily evident to consumers. There are many unconfirmed

concerns relative to how product performance changes with use. Are products

becoming more prone to require repair? Do products change their relative

rank with use? How should consumers consider energy savings versus an increase in purchase price? Are other cost or performance factors being

masked?

In addition, manufacturers are responding to consumers’ interest in

product quality through increasing their use of advertising claims relating

to performance free from repair or at significant annual energy cost savings.

The basis for these claims are presumably those test methods and data

compiled by individual manufacturers, not standardized across the industry.

The FTC is responsible to assure the validity of such claims, and has

interacted with at least one industry (vacuum cleaners) to encourage development of standard test methods upon which to base their extended performance

claims

.

The Government Accounting Office has recommended the use of LCC

procurement by the Federal Government. 5 The General Services Administration (GSA) has responded by participating in the NBS sponsored Experimental

Technology Incentives Program (ETIP) and employing a modified LCC

technique to procure air conditioners, refrigerator/freezers, ranges and

water heaters. However, the LCC experiment of GSA/ETIP, while including

energy conservation in the purchase decision, falls short of the LCC

concept, since it neglects an essential element, i.e., how products

perform over time. State and local government purchasing officials have

expressed their interest in using the LCC technique for their procurements

as well.

The relatively advanced state of LCC analysis for weapon systems

and plant equipment by the military and industry may be attributed to

their control over operation, repair and maintenance activities. A

4 Public Law 94-163, Sec. 322, "The Energy Policy and Conservation Act of 1975."

Government Accounting Office, "Ways to Make Greater Use of the Life Cycle

Costing Acquisition Technique in DOD," May 21, 1973. While addressing

use of LCC in DOD, the report suggests civilian agencies could achieve

lower costs per unit of service life by using LCC.

3
similar observation cannot be made for consumer products. It is this

difficulty in predicting use conditions and their interactions with the

product which presents the challenge in application of LCC to consumer

products. The manufacturers who appear to have developed considerable

experience in "life" testing and gathering repair data for products are jealously guarding their knowledge as trade secrets.

The characterization of a product's LCC presents challenging

problems. Product characteristics are time -dependent (i.e., changes

occur as products are used and/or as time passes). Product use may be

carefree, require regular maintenance and frequent or occasional repair.

Use patterns and environmental factors introduced by the variation in

expected function or geographical distinctions further complicate

LCC characterization. These acknowledged variations must be considered

in any process for estimation of LCC, including test method development.

Therefore, laboratory test methods must include a set of standard

conditions which have been related to representative use patterns and

environmental conditions. In addition, decisions rules and procedures

for incorporating maintenance and repair actions during testing must

also be specified.

The Department of Commerce Voluntary Consumer Product Information

Labeling Program provides the means for utilization of LCC analysis

and dissemination of results to consumers. Because of the continued

interest and need for consumer product performance and ownership cost

information, this study was initiated to address and assess the difficulties

posed by the application of LCC to consumer products.

1.3. Approach

This study was initiated to objectively assess the practicability

of applying the life cycle costing approach to consumer products. The

major emphasis of legislative proposals has been on providing point of sale

information for new6 products in order to compare product characteristics

such as durability, operating costs, repair cost, and other elements of

LCC. In order to assess the difficulties in providing such information,

this project was directed at understanding: the potential application,

benefits and effects of LCC; the basic concept of LCC; its interaction

with performance, and the state-of-the-art of "life" testing as it relates

to developing extended performance test methods for consumer products

Based upon these combined assessments of LCC, extended performance and the

state-of-the-art of life testing; potential areas were to be identified

where further investigation would be warranted.

b Throughout this report the term "new" product is used to differentiate

a new product from a used product and does not refer solely to products

using a new technology.

4
It was not intended that any laboratory based efforts be conducted

during the course of this initial effort. Information was, therefore,

obtained from economic and technical literature documenting the use of

LCC, test methods, and statistical techniques for handling "life" data.

In addition, contacts and visits were made with trade associations,

universities, government agencies and manufacturers for test methods,

data or practices relating to measurement of consumer product performance

and/or estimated useful life.

2. POTENTIAL APPLICATION, BENEFITS, AND EFFECTS OF AN LCC PROGRAM

2.1. Potential Application of an LCC Program

An LCC program’s objective is to improve consumer purchase decisions

through the provision of extended performance and cost characterization

for selected consumer products for which present information is inadequate.

The products for which LCC or extended performance information are of

potential value in aiding better purchase choices include those where:

(1) operating costs or servicing costs are significant compared to

purchase price,

(2) energy utilization per unit output varies over time,

(3) output performance deteriorates over time, or

(4) expected "life" varies for non-repairable products.

Likely outputs might be labels giving average annual cost of ownership

information, and information indicating how a product will perform at

various intervals of use (or time as appropriate) . Such information

could be used to make comparative evaluations for competing products

as well as provide information for repair versus replacement decisions.

The information could be given on labels at point of sale, or alternatively,

booklets might be distributed by trade associations (such as the Association

of Home Appliance Manufacturers directory) or other public or private

organizations giving comparative data by manufacturer and model. Another

output, better maintenance policies enabling reduction of LCC, might

also result based upon testing and the inverse relationship of maintenance

to repair and operating costs.

2.2. Industry Benefits and Drawbacks

Companies not "life" testing their products could potentially

benefit from a test procedure generated by a program for extended performance testing of consumer products. The test results may yield a basis

for product redesign; either to reduce cost of production without affecting

performance, or perhaps to increase performance (a product improvement)

without increasing costs of production. Of course, the trade-offs between

performance and production cost are of major concern to manufacturers.

The tests might also provide a basis for modification of warranty provisions.

In the case of technologically new products or new designs, information

5
table from tests which offer good, prediction of actual field experience

is especially valuable. For manufacturers with products which are more

efficient or more durable, LCC information would facilitate their ability

to market their products for a higher purchase price. A potential benefit

from such a program is a reduction in consumer dissatisfaction, due to a better understanding of expected product performance. This could result

in dramatic cost savings through a reduction in returned products thereby

saving valuable economic resources.

Some industry drawbacks should also be discussed when contemplating

such a program. First, there are many costs manufacturers will have to

absorb or pass on to consumers. These costs are associated with the

plant space required to conduct tests and to equip test facilities.

Continuous costs for conducting tests are incurred from product destruction,

labor to conduct tests and analyze results, operating overhead (administrative,

record keeping, etc.), and information dissemination.

Another possible drawback is the effect upon the present marketplace. The

process of brand identification and advertising relating to corporate

image is very influential in terms of consumers’ making product choices.

The more complete the objective and quantitative information regarding a product the less important becomes the subjective images created by

advertising. Corporations having captured a large portion of the market

are reluctant to get into advertising "duels" comparing performance or

price. 7

2.3. Consumer Needs and Benefits

At the present time consumers seem to have a "temporal myopia,"

or indifference to the operating cost of products relative to the initial

purchase price. This condition can be explained by a combination of

factors including: the lack of exposure to quantitative representation

of operating and repair costs; and in this environment of inadequate

information, a further lack of education required to make proper use of

such information if it were to be provided. It must be recognized that

any program designed to provide such quantitative information (and break

the present buying pattern) must be coupled with a program to educate

consumers in how to use such information.

The information provided by an LCC information program could benefit

consumers directly by providing:

(1) a basis to compare (trade off) the initial purchase price

against the costs of ownership for alternative product choices

over a use period,

(2) information on maintenance policies resulting in lower costs

for repair and operation,

(3) a basis for evaluating the value of service contracts,

7A recent example is the amount of effort the manufacturer of a popular

over-the-counter drug expended in order to have a comparative advertisement

by a competing manufacturer removed or substantially modified.

6
(4) better product design resulting from increased industry testing

and product improvements perhaps without increased purchase

cost,

(5) a fair basis upon which to evaluate advertising claims about

extended performance or long-term cost savings, and

(6) increased consumer satisfaction, because information would

permit a better match between consumer requirements and product

capabilities

2.4. Public Costs and Benefits

A successful LCC program would require considerable Federal Government

resources. The previously mentioned educational program would require

development of appropriate educational material and its public dissemination,

through yet to be determined channels. Information dissemination could

be kept to point of sale material provided by manufacturers, however,

the formating of information requires research into how consumers could

best use such information. Alternatives to point of sale information

provided by manufacturers should also be explored. Test development and

cost characterization activities, discussed in other sections of this

report, require both technical and monetary resources.

In addition to direct benefits for consumers and industry, public

benefits should also be expected. One such benefit is the capability to

evaluate the trade-offs being made with regard to such public policies

as energy and materials conservation. It could lead to some aggregate

measures for relating, for instance, the energy conservation requirements

against durability, which has implications for materials conservation.

3. TECHNICAL CONCEPTS

As discussed in the first chapter, the principal objective of

this study is to develop an understanding of extended performance measurement and cost characterization for consumer products. The determination

of the full cost characterization, that is, the assessment of a consumer product, is in turn crucially dependent upon the measurement of

the performance of a product. The reason that product performance plays

such an important role in determining the LCC is that many of the components

in the LCC formula cannot be completely specified unless the manner by

which a product performs its intended function throughout its life- -that

is the life cycle performance (LCP)--is completely determined. In fact, one of the key reasons why LCC has been applied in various military and

industrial contexts, but only scarcely applied in the consumer field, is

that the manner by which products will be used, maintained, and repaired

is much more accurately known and controlled in the former compared to

the latter.

The arrangement of the subject material in this chapter is as follows: first appears a presentation of the definition of product

performance in general and a discussion of life cycle performance

7
specifically; second, the life cycle cost formula is presented and

discussed in some detail; and, third, the chapter closes with a discussion of LCP and LCC estimation methodology.

3.1. Life Cycle Performance

3.1.1. Introduction

In order to define life cycle performance (LCP) , it is necessary

to examine first the concept of performance. Performance is measured in

terms of the product's output and the efficiency with which it transforms

input to output. Life cycle performance is the performance measured over

the "life" of a product. Time, however, entails the consideration of

two additional product attributes: reliability and durability. Reliability

refers to the probability of performance nonfailure for a period of

time, whereas durability refers to the lasting quality of a product.

The measurement of product performance, reliability and LCC

necessitates the stipulation of the conditions under which measurements

are taken. Standard conditions are generally specified, based upon use and environmental factors, representative of the product's expected use

environment. Furthermore, since the determination of a failure is a key

element in reliability and LCC its clarification is important. The

minimum acceptable performance level (MAPL) will be defined as the lower

bound of the set of performance levels which are considered to be satisfactory under standard conditions. (This value may be based on requirements to meet some objective or may be selected arbitrarily. For some products it may be anything greater than zero: the product either works

or it doesn't.) Failure occurs when performance falls below the MAPL

threshold.

The following sections will discuss each one of these concepts in

greater detail.

3.1.2. Concept of Performance

3. 1.2.1. Definition

Product performance is an important product attribute. It is a measure of a function or a set of functions for which a product was designed and produced determined under standard conditions. The amount

of cool air generated by an air conditioner, the pneumatic support

provided by an automobile tire, and the impermeability of a raincoat to

water are some examples of consumer product performance. For a class of

consumer products, performance is a significant factor affecting a consumer's purchase decisions. Performance, however, is not the only

significant product attribute. Attributes like safety, aesthetic appeal,

status appeal, and style may affect consumers' purchase decisions as much or more than performance. Clothing, furniture, cosmetics, and even

automobiles are illustrative of this point.

8
An initial classification and segregation of consumer products

would sharpen the focus of the present discussion in view of the variation

in the relative significance of performance among consumer products. Two

independent classifications may be made: durable -nondurable on one hand

and active-passive on the other. The distinction between durable and non- durable products is a matter of degree although economists use an arbitrary

one-year period as the dividing line. For the present discussion, however,

products used over any length of time will be regarded as durables. Such

ambiguity in definition results from considering products such as vacuum

cleaners which on the average are produced to operate without repair

for about 500 to 600 hours. The actual ownership duration for vacuum

cleaners is several years because the actual operating time per use period

is short.

The active -passive classification is based upon the type of

output. Active products transform some input to physically different

output. For example, the input, electricity, is transformed to such

outputs as suction power for vacuum cleaners, cooling of air for air conditioners, light for light bulbs, and heat for electric ovens. Other

products, such as automobile batteries, undergo a chemical rather than

physical transformation of input to output. Passive products, on the

other hand, do not require physical transformation of input to output;

rather, they provide outputs by their presence. Automobile tires,

furniture, paint, and architectural glasses fall into this category.

Because both LCP and LCC analyses involve measuring performance

and cost over time, they apply only to the durable class of products. The

applicability of the respective analyses to the active and passive

products differs considerably, however. The difference is based oh the

presence or absence of the input-output transformation efficiency element;

this element applies only to the active class of products. The active

and durable class consists of appliances and similar equipment such as lawn mowers. For them, performance may be described through measurement

of both the product outputs and the efficiency of transforming the inputs

to the outputs. For the passive and durable class of products, only the

pattern of change in outputs is relevant. This means in turn that

for passive-durables the question of life cycle performance is of

interest, expecially the durability and reliability, but life cycle cost

becomes less important since the initial purchase price dominates LCC.

3. 1.2. 2. Product Quality

The understanding of the concept of performance and its

relationship to output and input-output transformation efficiency is

facilitated by studying the more basic concept of product quality which

may be defined as the summary expression of all attributes a product

imparts to a consumer. In general use, product quality represents the

"value" with which consumers assess the worth of products. The following

quote from the Wall Street Journal illustrates this point. 8

8Wall Street Journal , September 29, 1975.

9
Recession, inflation and the resulting tight budgets have

led consumers to put increased stress on quality. Is the

interest in quality likely to persist?...

This same price sensitivity has increased for consumers'

interest in quality. The consumer movement got under way

long before inflation reached double-digit territory, but the

upsweep in prices obviously hasn't made consumers any less

unhappy with shoddy products. Some appliance makers this

year have reported increased demand for the goods at the top

of their lines.

More formally, product quality is what affects a consumer's

utility function, or satisfaction, when he evaluates a product's worth.

Whether product quality can be objectively measured is not the main issue.

Whether measured or not, a consumer must base his judgment on what he

knows or thinks he knows. If his perception and judgment turns out to be

incorrect, he ends up purchasing products unsuited to his actual needs.

Product quality can best be conceptualized as a vector with

product attributes as its elements, as shown below:

output

input -output transformation efficiency

reliability

Product _ durability

Quality safety

style

ease of use aesthetic appeal

The conventional economic wisdom is that a consumer is knowledgeable about

these elements so that he can rationally assess the product's worth to him.

In reality, of course, the converse holds true especially for complex

products like consumer durables. The current interest in studying

performance of consumer products is based on accepting the fact that

consumers are ignorant of the nature and magnitude of many of the important

elements and that they have to be informed in order to make rationale

purchase decisions.

Although many of the elements in the product quality vector affect

performance and cost, the first four elements are of greatest importance to

the study of LCP and LCC. Whereas the first four elements affect performance

and cost directly the remainder do so indirectly through the first four.

Elements such as safety and style may increase cost. For example, the

Consumers Union's proposed safety standard for lawn mowers, if implemented,

is expected to raise the cost for safer lawn mowers substantially. The

10
various emission controls incorporated into automobile engines not only

increase operating cost but may increase maintenance and repair costs as well. The following discussions thus will focus on the four direct-effect

elements.

Among the four, the most critical attribute is the input-output

transformation efficiency. It is, in fact, the production function for

the active class of consumer products. Given the same amount and form of

input, the product with the more efficient production function will normally

generate more output. Typically for consumer products, input-output

transformation efficiency is described by a simple ratio. Two wellknown ratios are the miles -per- gallon (MPG) for automobiles and the

energy-efficiency ratio (EER = ^—) for room air conditioners. These ratios

are used to compare different brands or models of the same class of

product. Other things being equal, those giving more output- -miles

driven or heat removed- -for the same amount of input are deemed more

desirable. In this way, input-output transformation efficiency becomes

the most readily usable single descriptor of performance for active

consumer products.

3. 1.2. 3. Nature of Output

The output of a product, it may be recalled, is an element of

a product quality vector. One characteristic of a product's output is that

it is physically measurable. This applied not only to the active class of

products but also to the passive class. The insulating ability and

transparency of architectural glasses, supportability of chairs, and

protecting ability of paint are all examples of the outputs of passive

products that can be objectively measured. It is this objective measurability that forms the basis for translating output to performance.

Another characteristic of product's output is its multidimensionality.

Products often may have a single purpose and the description of how well

this purpose is accomplished provides the product's output. The incandescent

light bulb provides illumination, the television set receives and produces

a picture, and the clothes dryer removes moisture. These may be referred to

as the primary aspect of product output. The products, however, provide

other kinds of outputs. Besides illumination, the color of the light may

be of importance for light bulbs. Besides the speed of removing moisture,

the degree of wrinkle freeness may be of importance for clothes dryers.

The latter type of outputs may be referred to as the secondary aspect

of product output. For specific measurement purposes, the primary and,

in some instances, the secondary outputs are of importance to characterize

performance

11
3.1.3. Concept of Life Cycle Performance

3. 1.3.1. Definition

Life cycle performance of a consumer product is the performance

of the product measured over the entire life of the product. The elements

being introduced in this definition are: (1) time dependence of

performance, and (2) product life. The first element pertains to reliability

and the second to durability, both having been noted previously as elements

of the product’ quality vector. Reliability and durability will be discussed

in the following subsection.

Measuring performance over time has two elements: measuring

changes in the nature of the output, and measuring changes in the input

output transformation efficiency. Both changes can be characterized as performance degradation that occurs to manufactured products. The two

types of changes may, however, be discussed separately. Performance

degradation for outputs may occur to primary and/or secondary aspects of

output. Diminished amount of light .emitted by a light bulb is a primary

aspect degradation whereas an increase in wrinkles during clothes drying

is a secondary aspect degradation.

Performance degradation for input -output transformation efficiency

may also be divided into two categories. For the first case, more input

is required to produce the same output as before, and, for the second

case, more input cannot be provided and therefore remains constant while

the output level is decreased. Water heaters with lime deposits and

air conditioners with clogged filters fall into the first category

since more energy over longer duration is needed to generate the same

output. "Aged" light bulbs and vacuum cleaners with worn motors fall

into the second category since the voltage applied to a light bulb

cannot be controlled by the user and operating a worn vacuum cleaner

longer does not increase greatly the amount of dirt removed.

3. 1.3. 2. Effects of Reliability and Durability

The significance of reliability and durability is based on the

fact that they characterize the pattern of performance over time.

We have defined failure as performance falling below the MAPL underr

standard conditions. Reliability pertains to the probability of failure

in a given time period. The higher the probability of failure, the

lower the reliability, and vice versa. An example of performance failure

for a vacuum cleaner may include not only a complete breakdown but very

weak suction power insufficient to remove dirt. The precise setting of

a failure threshold is a subject to be taken up with respect to a specific

product and the conditions underlying its use and is of no concern in

the present discussion.

The concern over reliability necessitates two kinds of action

on the part of the consumer. These are maintenance and repair. Maintenance

is an action performed on satisfactorily operating equipment to keep it

12
performing satisfactorily. Repair is an action performed on an equipment

showing performance failure, restoring it to a satisfactory level of

performance by fixing or replacing parts. Both maintenance and repair

affect LCP, because output and input -output transformation efficiency

are affected by such activities. They also affect LCC since both

activities entail the consumption of economic resources.

Durability is the lasting quality of a product; it is the ability

to endure prescribed use conditions and environmental factors over the

useful life. It is important to distinguish between the concepts of

durability and useful life since they do not necessarily mean the same

thing. Durability is a quality possessed by a product when it is produced.

How long a product actually lasts depends not only on durability but also on the manner by which it is used and environmental factors associated with

its use. Moreover, durable products, especially complex ones with many

components, are repairable and hence can be kept serviceable indefinitely

if parts are available and necessary repairs are made.

When to repair and when to stop repairing ultimately depends on relative costs of repairing and replacement. The concept of useful

life therefore transcends that of durability. "Catastrophic failure"

or unavailable parts ends both useful life and durability. However,

there are many differences among use environments, consumers' maintenance

policies, preferences for newer products and the latest "gadgetry,"

budget constraints, etc. These may end the useful life of a product

under some conditions, but not necessarily the durability- -another owner

might use the same product for a much longer period. It can be seen that

useful life embodies economic as well as engineering considerations; as such, the discussion of useful life will be taken up later when LCC is

analyzed.

3. 1.3. 3. Minimum Acceptable Performance Level (MAPL)

It was noted in the preceding subsection that the concept of

reliability necessitates defining a performance threshold level below

which is the region of performance failure. In conjunction with LCP,

such a threshold level may be designated as the minimum acceptable

performance level (MAPL) . The immediate significance of MAPL is in

determining performance failure and the need for maintenance and repair

activities. More significantly, however, MAPL acts as the basis with

which the concept of LCC is formulated.

The relationship between LCP and MAPL for a product may be

depicted in the following figure.

13
In Figure 1, the portion of LCP below MAPL at represents performance

failure. The actual shape of LCP, of course, could be affected greatly

by maintenance and repair activities. The divergence of LCP^ and LCP^

at T, represents alternative maintenance activity which affects the

course of LCP. Although the figure represents MAPL as a single attribute

being measured, it may be desirable to designate more than one performance

attribute for tracking the determination of the MAPL. In such cases,

there may be several figures similar to the one shown here.

With respect to a given LCP and its associated MAPL, life cycle

cost (LCC) may be defined as the initial purchase price plus whatever

monetary expenses are incurred over time to maintain LCP above MAPL.

Such expenses consist of cost for input (such as energy) plus maintenance

and repair expenses. The above definition, however, is incomplete since

LCP can be maintained above MAPL indefinitely provided sufficient cost

is incurred. At best, LCC should be defined in terms of some prespecified

time periods, say, 3, 5, 10, or 15 years. A more complete discussion on

LCC must wait until the concept of LCC is analyzed in more detail, which

is the topic of the following section.

14
3.2. Life Cycle Cost

3.2.1. General Expression of LCC Formula

A basic LCC equation may be expressed as follows:

LCC = (Fixed Cost) + (Variable Cost) + (Disposal Cost)

Fixed cost consists of initial purchase price plus transportation

and installation cost (or logistics cost) , all of which constitute a sunk cost to the purchaser whether the product is used or not. Fixed

cost is incurred prior to the product ever being used. Disposal cost

may be a positive or negative value depending on particular circumstances.

If some scrap value can be salvaged, it becomes a negative cost; if the final

disposal incurs cost, positive. Both fixed and disposal costs refer to

one-time expenses whose values are independent of the generation of outputs.

It is the variable cost component which depends on the outputs

produced over time. The variable cost component consists of operating,

maintenance, and repair costs. These costs are interdependent. A higher

intensity of use resulting in a greater operating cost would call for

higher levels of maintenance and repair costs than otheiwise. Likewise,

a thorough and frequent maintenance program, resulting in higher maintenance

costs, would result in lower operating and repair costs than otherwise.

One necessary requirement in expressing LCC is reconciling the

stream of costs incurred over different time periods. (The time period

may be any prespecified unit although the most conventional and useful

period is a year.) The recognized method for comparing expenditures

occurring at different points in time is discounting to some benchmark

period. This approach takes into account the time value of money and

converts all costs to present value or to an equivalent annualized cost. 9 The full expression of the LCC formula then can be shown as follows.

N

[ i

LCC = PLC + Z 1

. [(OC). + (MTC) + (RC)J

t=l [(l+r)

r t t r

where,

LCC = present value of costs incurred during N periods,

PLC = consumer's initial price and logistics (i.e. , transportation

and installation) cost,

r = discount rate (per period)

,

OC = operating (energy, water, etc.) cost for specified maintenance,

repair, and use conditions,

MTC = maintenance cost,

RC = repair cost, and

DC = disposal cost (This item becomes negative if a consumer received

money when disposing of an old product.)

9 See Grant, E. L. and W. G. Ireson, Principles of Engineering Economy , 5th ed. , Ronald Press, New York, 197tT

15

(l +r) N

(DC)
Since the above LCC expression is quite general, specific forms of the

variable cost elements must be worked out for each specific product.

3.2.2. Analysis of LCC Components

3. 2. 2.1. Greater Importance of the Variable Cost Component

Although three distinct cost components comprise consumer

product LCC, it is only the variable cost component that requires detailed

analysis. The initial price and logistics cost component (PLC) as well

as the disposal cost component, which arise respectively at the initial

and terminal time points, represent given market data to a consumer. For

a consumer, the value of PLC, especially the initial price, is a given

datum which he can affect minimally. He may to some extent affect the

disposal cost, but its value is small relative to the overall LCC. Moreover, its value occurs in the future which is highly discounted so that

the disposal cost becomes an item of small significance in LCC analysis.

The variable cost component, on the other hand, can be affected by a consumer; therefore, his attempt at reducing cost becomes a meaningful

activity. The level of operating cost depends on his use patterns greatly.

The levels of maintenance and repair costs are affected by whom he relies on for such services, how frequently he uses them, and whether he himself

undertakes some or all of such service activities. Analysis of LCC thus

becomes, in effect, the analysis of its variable cost component.

3. 2. 2. 2. Analysis of the Variable Cost Component

The knowledge of input-output transformation efficiency, reliability, and durability affords a good basis for generating the variable costs,

viz., operating cost, maintenance cost, and repair cost. Since product

performance specifies the production of some specified level of output for

each consumer durable, operating cost is derived directly from the quantity

of input consumed and externally given input prices. The derivation of

life cycle cost (LCC) requires, however, that some specified performance

level, i.e., the minimum acceptable performance level (MAPL) , must be

maintained or exceeded throughout the life of a product. This means in

turn that maintenance and repair activities must be provided in order to

maintain the input -output relationship in such a way that the resulting

performance level stays above the MAPL. In short, operating, maintenance,

and repair costs are derivable from the time trace of inputs and outputs.

Unlike industrial durables a maintenance schedule may not be

rigidly specified or followed for most consumer durables. Hence, although

operating cost is incurred with use, and repair cost must be incurred when

performance failure occurs, maintenance cost is a discretionary item to a consumer. The nature of maintenance, however, is such that it has positive

relationship to performance efficiency and an inverse relationship to repair

frequency. That is, maintenance cost inversely affects both operating cost

and repair cost so that there exists possible trade-offs among the variable

costs of the LCC formula. This means that it is possible for a consumer to

arrange his operating, maintenance, and repair costs in such a way as to

16
reduce the overall variable costs and hence the LCC of a particular product.

An individual who conscientiously changes the crankcase oil of his automobile

at frequent intervals is behaving in such a manner.

3. 2. 2. 3. Concept of Economic Life

The concept of life is ambiguous as applied to consumer products.

Since products are repairable, they can be made serviceable indefinitely

(although parts may only be available for 10 or 15 years). This means

then that the distinction in the meanings of life and durability needs

further clarification.

It is desirable to distinguish the terms durability and life as they apply to consumer durables. Durability is a lasting quality of a product; it pertains to characteristics of a product incorporated at the

time of its production. Some may be built sturdily and some may not,

so given the same use conditions, the sturdily built product should

last longer. Life, on the other hand, is somewhat ambiguous in the

present context. Unlike living organisms, time per se contributes only

incidentally to a product's aging process --it is use frequency or use

cycle that causes wear, which eventually results in failure. Durability of

a product is thus determined by the efforts of manufacturers --what materials

are used, what designs are chosen, and what manufacturing and quality

control processes are employed. Life of a product, on the other hand,

is determined by the relationship between cost and performance. It is

based on the consideration of whether owning a product is economically

justifiable measured in terms of the LCC to maintain the MAPL.

The explanation of the concept of life of a product is facilitated

by an alternative presentation of LCC data. Rather than summing the present

and all future discounted costs to derive a single expression, costs for each

period may be examined individually. For any period, summing all costs

(e.g., PLC, operational, maintenance, and repair) arising in that period

results in the total costs for that period. If the total costs for each

period are summed successively, the resulting expression is the total

ownership cost. Finally, dividing the total ownership cost by successive

values of periods results in average ownership cost. The average ownership

cost for a given period represents the value of LCC applicable uniformly

from the first to that particular period. In the graphs below, the

total ownership cost is depicted in Figure 2 and average ownership cost

in Figure 3. 10

10 It is assumed in drawing the cost curves that operating cost remains

constant while maintenance and repair costs grow at an increasing rate

as a product "ages."

17
</> O

O

Z

PLC

i To Time

Figure 2. Total ownership cost

18
In Figures 2 and 3 minimum average cost is achieved at period T . The U-shaped form of average ownership cost curve is based on two general

0

observations. First, the initial price and logistics cost (PLC) , i.e.,

the fixed cost component, of consumer products is typically large relative

to the variable costs during the early phase of use. Second, as use frequency increases, maintenance and repair costs (the variable cost

component) become larger. The first observation accounts for the initially

falling average cost curve and the second observation to its subsequent

rise.

The point in time at which a consumer may decide to terminate

his use of a product can be examined in terms of a average ownership cost

curve. The average ownership cost curve indicates the average cost of

ownership at each point along the time axis. Other things being equal,

it pays for a consumer to use a product up to the point of minimum average

cost. This would be the case if a new product he purchases to replace

the old one possesses the same average cost curve. If not, his disposal

and replacement decision must reflect the differences in the average cost

curve of the new product. The average cost curves could differ in two

ways. First is a general price inflation which would push up the overall

cost curve so that the minimum level of the new curve is higher than the

minimum of the old one. In this case, it pays for the consumer to keep

using his old product until the average cost of the old product reaches

the minimum of the new product. This phenomenon appears to have taken

place recently with respect to purchasing new automobiles. The second

possibility is technological improvement that lowers overall cost curve

so that it now pays to replace the old one with a more efficient product

even though the former’s minimum cost has not been reached. This

phenomenon seems to apply to the replacement practices of color television

sets during the early Sixties as the initial purchase price came down

with newer technology.

The average ownership cost, then, may be used to define the

economic life of consumer durables. Unlike the durability characteristic

which may be an initial product attribute, a product’s economic life to a consumer can depend on economic conditions associated with subsequent

product use.

It is still not possible to determine a repairable product’s

life in terms of LCC since the concept of life in the conventional sense

19
is irrelevant. At best. LCC can be used to determine economic usefulness

of a consumer product, i.e., its economic life. 11

3.3. LCP/LCC Estimation Methodology

3.3.1. Discussion of Estimation Methodology

3. 3. 1.1. Factors Affecting LCP/LCC in Actual Use

A basic premise throughout the present discussion has been that

performance can be objectively measured. Performance has been defined

as outputs generated by a product where the outputs are physically quantifiable

entities. The generation of outputs consumes input or inputs whose prices

constitute use cost. LCP is the time trace of performance while LCC is

the total cost required to maintain LCP above the MAPL.

llrThe concept of average ownership cost may be used as a decision criterion

to choose among alternative products with similar function (or more

typically among competing brands of the same product) when none is

presently owned. Other things remaining the same, a prospective purchaser

would choose that product or brand having a lower minimum average ownership

cost value if the length of ownership is indefinite. If, however, the

length of ownership is specified, the product or brand having the lower

average ownership value at the specified point in time will be chosen.

In the graph below, product B will be chosen if no time restriction is

specified. If the length of ownership is specified at T , product A

will be chosen instead.

B

/

20
To assume that the only factor affecting a product’s LCP and LCC

is the product’s initial physical characteristics is an oversimplification.

The actual conditions under which consumer products are used vary greatly,

and these conditions affect the level of performance to varying degrees.

Because the initial physical characteristics of a product form the

intrinsic factor affecting its performance, the other factors will be

designated as external factors. The relationship between the intrinsic

and external factors can readily be illustrated by comparing the miles

per-gallon value associated with a new automobile as tested by the

Environmental Protection Agency and the gasoline consumption efficiency

variations achieved by the automobile in actual use.

3. 3. 1.2. Types of External Factors

Two types of external factors may be defined: use environment

and user characteristics. Use environment designates the physical conditions

associated with using a product. User characteristics, on the other hand,

designate the user's peculiar consumption patterns. Both the use environment

and the user characteristics can vary from beneficial to detrimental. For

example, a water heater may be used in a hard water area with or without a water softener, and the user may set the thermostat high or low and

consume a great deal or a little hot water.

The important point is that the various external factors must be

considered together with the product as a system. The external factors

may interact with the product to cause disturbances in the input -output

transformation taking place. The study of LCP and LCC thus may necessitate

as much emphasis on the analysis of the external factors as the initial

physical characterization of a product.

3.3.2. Developing Standardized Laboratory Testing Methods

3. 3. 2.1. Reasons for Development

The basic objective of this report is to examine the feasibility

of estimating LCP and LCC values which can be used by consumers for

their pre-purchase evaluations. If the product of interest has been in use without modification for a long while, the applicable LCP and LCC data

may be collected through a survey of actual users. Typically, however,

consumer products of an active and durable kind undergo steady evolutionary

modifications. Occasionally some new technology is introduced, such as the introduction of electronics technology to the consumer appliance field.

Because of these product changes, and because of the need to derive estimates

with a more precisely controlled environment, there is a need to develop

laboratory testing methods.

What is called for then is the development of standardized laboratory

test methods. Standardized methods, once developed, should enable both

manufacturers and other interested parties to objectively test and compare

their results, thus providing consumers with an objective basis for evaluating

21
and comparing products. The standardized test method to measure the

energy efficiency ratio of room air conditioners, for example, does

already serve such a function.

A more immediate cause for standardized test methods is the

sheer complexity involved in testing consumer durable products. Because

of the variability of the external factors that affect a product's

performance, the possible types of use simulation, and the institutional

diversity of the maintenance and repair service industry, some standardized

ground rules for testing must be predetermined. Otherwise, various test

results cannot be meaningfully compared.

3. 3. 2. 2. Implications for Laboratory Testing and Cost Estimation

The actual development of standardized test methods is outside

the purview of this report. What is of importance for this report is

listing the conditions that must be specified in order to develop such

test methods. Three such conditions may be listed: specification of the

external conditions, the technique for simulating use and environmental

conditions, and the ability to correlate laboratory test results with

actual use data.

It is impractical to attempt to account for all possible

contingencies associated with a product's use. One approach is to characterize through careful field analysis "noimal" use and environmental

conditions. The "normal" use and environmental factors can be used to

specify standard conditions for test. Also a functional analysis of the

product would yield important performance attributes. Based upon this

information, laboratory test methods can be developed using manufacturer

recommended maintenance procedures, which either simulate the use and

environmental conditions or can be correlated with actual field results.

The laboratory tests yield an indication of a product's potential for

performance as distinct from its expected performance or actual useful

life based upon actual surveys. The actual useful life is dependent

upon many factors. These factors include the design of the product, the

environment it is subjected to, the care of the owner in its use and

maintenance, the features and functions of the product relative to

newer models, and the economics of the repair or replacement decision.

A product can be burned up in a fire or dropped shortly after purchase

with virtually no use. But these events cannot be predicted by laboratory

testing. The laboratory tests provide objective results, based upon

the standard conditions stipulated in the test procedures, and indicate

a product's potential for use by consumers. The outputs of laboratory

tests are: (1) necessary input requirements, (2) measurements of

performance attributes, and (3) required repairs, all three related to

a time and use scale.

The development of representative ownership costs is derived from

combining the technical outputs from the laboratory with the value of

necessary input requirements from field analysis. The cost estimation

framework may account for the variations in input costs across the nation

as well as conditions of use or environment, which could make aggregation

or average values misleading to consumers . The above discussion points

22
out the importance of considering the totality of a product's physical

characteristics, and the variation in use and environmental conditions

to yield valid estimates of LCP and LCC for consumer products.

4. STATE-OF-THE-ART

This section describes the results of project efforts to: (1) search

the literature for documented test methods and statistical approaches

used to evaluate "life" performance for products, (2) characterize industry

"life" test methods for consumer products, (3) determine how the Federal

Government is using "life" testing and life cycle costing and (4) make

observations on what the present state-of-the-art suggests for development

of objective "life" performance test methods.

4.1. Literature Search

4.1.1. Scope of Search

The objectives of the literature search were to collect information

from the published literature about the state-of-the-art of life testing

for consumer durables, and to search for documented test methods for

consumer durables.

The following journals were searched; some were searched in part

and others were searched wholly:

Journals covered:

Transactions of the ASME: Journal of Engineering for Industry

Transactions of the Institute of Radio Engineers

IEEE Transactions on Reliability

IEEE Transactions on Industry Applications

Consumers' Research

Consumer Report

Industrial Engineering

Quality Progress

Quality Management and Engineering

Industrial Quality Control

Journal of Quality Technology

Journal of ^nerican Statistical Association

Technometrics

Operational Research Quarterly

Operations Research

1975 ASTM Annual Standards, Part 41

The Association of Home Appliance Manufacturers Standards

Appliance Manufacturer

Appliance 23
4.1.2. Life Testing Literature

The great emphasis on reliability of components and final assemblies

by the electronics industry has spearheaded the advancements of life

testing. At the present time life tests are an accepted practice of

manufacturers and are conducted by their engineers. In a life test, a number of similar components or assemblies are operated in a carefully

controlled environment until all or a preassigned number of the units

have failed. What constitutes a failure must be defined in advance. A

life test will generally be an expensive proposition in both time and

money. The units that are destroyed will not be eligible for repair in

many cases, and very reliable units will have to be run for very long

times before useful failure data become available. 12

There is considerable literature on the models and statistical

methods for life test, and over one thousand papers are referenced in

the bibliographies on life data analysis by Mendenhall and Govindarjulu. 1

3

’ 1

Davis and Goldsmith discussed some practical considerations of a life

test, and their paper is cited extensively herein because it discussed

the whole process of a life test. 15 The authors start out by stating that

the first step in designing or selecting a life-test plan is to review

and clearly define the objective (s) of the test. Life tests may be

generally classified as having one or more of the following purposes:

(1) exploration of product characteristics; (2) lot-by-lot product

acceptance; (3) qualification of a design and/or a process; (4) qualification of a manufacturer (skills and equipment) ; and (5) surveillance of

(3) and (4) above on a continuing basis. While a life test may have only

a single objective, it is evident that in many situations it would be

desirable to run tests for more than one reason. Accordingly, a given

life -test plan may be designed so as to embrace two or more of the general

objectives listed earlier.

12N. H. Roberts, Mathematical Methods in Reliability Engineering , McGraw-Hill Book Company, 1964.

13W. Mendenhall, "A Bibliography of Life Testing and Related Topics,"

Biometrika Vol. 45, 1958.

14 Z. Govindaraj ulu , "A Supplement to Mendenhall's Bibliography on Life

Testing and Related Topics," Journal of American Statistics Association

Vol. 59, 1964.

15H. J. Davis and B. P. Goldsmith, "Life Test--Some Practical Considerations."

Industrial and Quality Control , June 1961.

24
Methods of evaluating performance are:

(1) Functional tests under in-use conditions. Since actual

performance in field equipment is the final criterion of performance of

any component, life tests under actual use conditions would seem to be the

most desirable method of evaluation. Yet, the wide variety of conditions

to which identical types of equipment or systems may be subjected and the

variations introduced by operating personnel make field tests most

difficult to handle. Field life tests must be handled with great caution.

(2) Simulated functional test under in-use conditions. Since the

hazards of loosely coordinated field testing are so great, simulated

functional tests are often used. A far greater degree of control can

be exercised on such tests, because they are usually much more compact,

and subject to close supervision of the testing agency. One problem here

is to ensure that the simulated conditions do in fact represent field

conditions, so that conclusions drawn from simulated tests may reasonably

be extended to predict field performance.

(3) Accelerated functional test under in-use conditions. Because

of the long duration of tests necessary on components with low failure

rates, attempts are often made to accelerate the tests by increasing the

severity of electrical, mechanical, or thermal test conditions.

Here the desired objective is to get failure information which can be

correlated with field performance under more normal conditions.

(4) Environmental profiles. Specifications on many components

now call for tests under a variety of conditions, where the environment

is changed according to a predetermined pattern. This pattern usually

involves programmed changes in physical environment and electrical

conditions, over the domain of parameters to permit prediction of

performance in a broad range of field conditions. Environmental profile

tests may be considered forms of simulated or accelerated tests and

require all the caution in design and interpretation previously discussed

in this connection.

All life tests are dynamic with respect to test conditions and

environment as well as time. Some variations in test conditions and

environment are carefully programmed into the testing routine, e.g.,

heater cycling, vibration and fatigue tests, temperature and humidity

cycling, and thermal strain tests. Unintentional variations, however,

should be minimized to assure repeatability of test results. Examples

of unintentional variations are: poorly regulated electrical supplies

which may have a disastrous result on long-life performance, equipment

unwittingly exposed to thermal shock (open window near temperature

sensitive equipment), and rough handling.

25
4.1.3. Accelerated Life Testing

A recent survey paper by Nelson covered methods for planning and

analyzing accelerated life tests. 16 There is considerable literature

on accelerated testing, but most of the literature is narrow in scope

and presents test results on specific materials and products. Accelerated

testing has been applied to many materials and products. The following

short list indicates some of the varied applications. Work on temperatureaccelerated testing of electrical insulation is surveyed by Goba. 17

Specific applications of such testing are described by Hahn and Nelson,

and Nelson. 18 > 19 Examples of fatigue testing of metals are described

by Weibull. 20 An application of accelerated testing of solid state

electronic devices is presented by Peck. 21 An application to dielectric

breakdown of capacitors is given by Endicott, et al. 22 An example of

voltage -accelerated dielectric breakdown of insulating fluid is given by

Kaufman and Meador. 23 Test results for capacitors corresponding to

16W. Nelson, "A Survey of Methods for Planning and Analyzing Accelerated

Tests," IEEE Transactions on Electrical Insulation Vol. EI-9, 1974.

17 F. A. Goba, "Bibliography on Thermal Aging of Electrical Insulation,"

IEEE Transactions on Electrical Insulation Vol. EI-4, 1969.

18 G. J. Hahn and W. Nelson, "Regression Analysis for Censored Data--

Graphical Method. General Electric Research and Development Center,

Schenectady, N.Y. , TIS Rep. 70-C-294, 1970.

19W. Nelson, "Planning and Statistical Analysis of Accelerated Life

Tests- -Methods for Complete Data," General Electric Research and Development

Center, Schenectady, N.Y. , TIS Rep. 70-C-294, 1970.

20W. Weibull, Fatigue Testing and The Analysis of Results , Pergamon, 1961.

21 D. S. Peck, "The Analysis of Data from Accelerated Stress Tests,"

Reliability Physics 9th Annual Proceedings, 1971.

22H. S. Endicott, B. D. Hatch, and R. G. Schmer, "Application of the

Eyring Model to Capacitor Aging Data," IEEE Transactions on Component

Parts Vol. CP-12, 1965.

2

3

R. B. Kaufman and J. R. Meador, "Dielectric Tests for EHV Transformers,"

IEEE Transactions on Power Apparatus and Systems Vol. PAS-87, 1968.

26
increases in applied voltages and ambient temperatures are reported by

Levenback. 24 Stitch, et al., report the accelerated tests of microcircuits using both temperature and voltage as accelerated stresses. 25

A technique for accelerated life testing under study at the

Massachusetts Institute of Technology offers potential for relating

field failures to accelerated laboratory failures. 26 Using the technique,

some specimens were tested to failure under accelerated conditions,

while others were tested partly under normal conditions and partly under

accelerated conditions, and a graphical procedure was used to predict

"life" under normal conditions. Experimental test results were reported

for light bulbs, electric hand drills, electric motors, and ball bearings.

Many statistical methods for analysis of accelerated test data have

been developed for specific applications. However, most such methods

are general and may be used in other applications involving different

life distributions, other accelerating variables and other relationships

between life and the accelerating variables.

Accelerated test data are interpreted and analyzed in terms of a model. Such a model for product life consists of a life distribution

and relationships for the distribution parameters in terms of the accelerating

variables. Distributions commonly used to represent life are the log

normal, Weibull, and exponential distributions. Relationships commonly

used to represent the relationship between life and the accelerating

variables are the Arrhenius relationship and the inverse power law. 27

Three basic methods for analysis of accelerated test data are:

(1) Graphical methods. Graphical methods for analyzing data involve

two plots: (a) on probability paper for the assumed distribution; and

24G. J. Levenback, "Accelerated Life Testing of Capacitors," IRE Transactions

on Reliability and Quality Control PCRQC-10, 1957.

25M. Stitch, G. M. Johnson, B. P. Kirk, and J. B. Brauer, "Microcircuit

Accelerated Testing Using High Temperature Operating Tests," IEEE

Transactions on Reliability Vol. R-24, 1975.

26 E. Rabinowicz, et al., "A Technique for Accelerated Life Testing,"

Transactions of the ASME , August 1970, pp. 706-710.

27The Arrhenius relationship is the chemical kinetics equation which has

been used to calculate the effect of temperature on failure rate. The

inverse power law is used when the life of a component is an inverse power

function of the accelerating variable. The life equation 0 = KV

n

is

called the inverse power law, since the life value (0) is calculated by

multiplying a constant (K) by the accelerating variable (V) raised to

the inverse of the nth power.

27
(b) on appropriate plotting paper on which the assumed relationship

between life and stress is a straight line. The graphical methods are simple to use and are easy to understand and present to others;

(2) Maximum likelihood methods. Maximum likelihood methods are extremely versatile and may be used for almost any distribution and

relationship, but they are computationally laborious and thus for ease

require special computer programs, and

(3) Linear estimation methods. Linear estimation methods include

ordinary least squares regression methods for fitting a linear relationship

to data, that is, one which is linear in the unknown parameters in the

relationship. Linear estimation methods are also computationally

laborious, but they can be either programmed for computer assistance or computed manually.

4.2. Description of Industry Testing of Consumer Products

4.2.1. Purpose of Testing

Industry testing can be characterized as having three purposes,

development, conformance, and field evaluations, each being conducted

during different phases of product evolution. Development tests are conducted on prototypes of new products or on new components for current

products to ensure their meeting design goals. Conformance tests are performed on products off the production line to assure quality goals

being met. 28 And finally, field tests are conducted to reveal weak

components in products which should be improved in order to yield better

performance or to decrease frequency of repair. The field test results

could lead to product improvement redesign, which in turn would generally

require development type testing to assure product modifications improve

the product and introduce no new problems.

4.2.2. Industry "life" Testing

Industry wide test methods for consumer products to measure product

"life" were, with the exception of two products, not available. Incandescent

lamps and vacuum cleaners were the exceptions. Incandescent lamps are tested using a GSA test method accepted by the industry. 29 Canister

vacuum cleaners, following several years of work by ASTM Committee F-ll, can be tested using an approved ASTM standard method for life evaluation. 30

28James E. Murphy, "Reliability Conformance Testing of Commercial Products,"

Quality Progress , July 1973, pp. 15-17.

29The Interim Federal Specification, Lamp, Incandescent (Electric, Large

Tungston - filament ) , W-L-00101G, January 15, 1969.

30 See Appendix A (A. 5) for a more complete description of this test method.

28
Although not intended to measure product "life,” a significant

source of uniform life test methods accepted by industry involves

various safety related component tests. The Underwriters’ Laboratories

and the American Gas Association have many tests which are essentially

minimum performance standards. The intent is to assure that products

operate safely and, when they fail, fail safely. These tests define

minimum "life" criteria and may include "harsh" operating conditions to assure the long-term safety of products under severe conditions of use.

Apparently, the needed push to encourage a cooperative industry

development of life test methods for consumer products has not materialized.

Such cooperative efforts generally emerge when a powerful buyer desires

additional information about the product he is purchasing and many suppliers

are competing for the sale. Evidently, the appliance manufacturers have

been successful in demanding "life test" information from their suppliers,

e.g., components are advertised as having achieved satisfactory performance

for a stated number of hours. 31 Also, the Society of Automotive Engineers

has set standards for products which are used either in the production or

the operation of automobiles. These product tests provide information

concerning the minimum expected "life" operating at a satisfactory level

of performance under the test conditions. The manufacturers use this

information to select components with adequate reliability and to look

for alternative suppliers.

Advertising claims may provide another reason for joint cooperative

test method development. The claims made by manufacturers regarding the

performance of their products in advertising must be substantiated. The

Federal Trade Commission (FTC) has in the past required substantiation

of many claims. In the case of vacuum cleaners, the industry has joined

together through AS1M to develop test methods for many aspects of the

vacuum cleaner. Included among the information to be provided from

testing is the capability to remove dirt, the capability to perform

without requiring service, and the wear imposed upon carpets in the

process of cleaning. It should be noted that the hotel industry, a large

consumer for vacuum cleaners, encouraged the AS1M work. And subsequently,

the FTC has expressed their interest in test methods which would enable

cleanability and service life to be used as advertising claims rather than

the power rating of motors.

In addition to the effort to collect industry accepted test

methods, attempts were made to obtain company accepted life test methods.

Appendix A provides examples which demonstrate that "life" testing is an accepted practice for a variety of consumer products by industry. The

test methods described in Appendix A include automobiles, air conditioning

and refrigerator compressors , washing machines, television sets, and vacuum

cleaners. These test methods are being used both for.design and quality

31 Such advertisements to the appliance industry are found in Appliance

and Appliance Manufacturer , see for example Appliance , November 1976,

p. 59 and Appliance Manufacturer , November 1976, p. 33 and p. 99.

29
conformance. Although the problem of relating laboratory test results

to actual use by consumers is recognized, these tests demonstrate that

introducing untested products is considered an unacceptable practice.

The documentation for product-specific company- accepted test

methods for "life" testing was generally not made available to the project

team. Discussions with engineering managers for several companies indicated

two reasons. First, engineering judgment provides the basis upon which

test decisions are made. Often the tests may be developed by an engineer

for a specific purpose (generally to compare alternative designs). During

this process, the engineer uses his "best judgment" regarding how long to

test and his past experience regarding the relationship of the laboratory

test to expected results in field use. Such testing is intended to satisfy

the engineering department and other management personnel that basic

minimum requirements are being met prior to commitment to production

release. Although internal documentation may be required, there is no

reason to share the information with the public or competitors. Secondly,

test methods which have been developed to predict long term use of products

are valuable tools for product change evaluation. The ability to test

product improvements and cost reduction design changes and to estimate

their effect on performance, including warranty costs, provides competitive

advantage. Such test methods may have evolved from many years of testing

and relating test results to field experience. This combination of

engineering judgment coupled with field experience results in tests which

permit comparison of alternative designs for evolving products. The "base

line" for comparison is the previous model or component under test. This

does not necessarily allow for an objective comparison between competing

products of different manufacturers. The prevailing competitive atmosphere

together with the general lack of an objective means for interproduct or interlaboratory comparisons inhibits the general dissemination of companydeveloped test methods.

4.2.3. Performance Testing

The. Association of Home Appliance Manufacturers (AHAM) , the

American Society of Heating, Refrigerating and Air-conditioning Engineers

Inc. (ASHRAE) , the American Gas Association (AGA) , and the American

Refrigeration Institute (ARI) have published a number of performance

test methods for consumer products. These tests are intended to measure

product attributes. Some of the tests include "life" tests for components

of the products required to meet minimum life standards. 32

AHAM standards state that the purpose of the standard is to establish

a uniform procedure for determining the performance and rating of a product

under specified test conditions, and the standard is not intended to

preclude the exercise of ingenuity in testing or to prevent improvement

in product design and performance.

32 See, for example, Appendix B (B.7).

30
Of all the standards published by AHAM, only refrigerators,

freezers and room air conditioners have the follow-up voluntary

certification program to indicate the implementation of such standards.

Appendix B includes excerpts from existing performance measurement test

methods for air conditioners, refrigerators and freezers, water heaters,

clothes dryers and washers, dishwashers and electric ranges.

4.3. Government Use of Life Cycle Costing

The military has for the past decade experimented with use of LCC

in their procurements. The Federal Supply Service, on the other hand,

has only recently committed themselves on a limited basis to the use of

LCC as a procurement technique. This section will summarize how the

Federal Government is presently using LCC.

4.3.1. Military Use of LCC

The military has recognized the importance of considering total

systems cost when making procurement decisions. This came about through

a recognition that for a typical large weapon system operating costs

contribute approximately three-quarters of total systems costs. In the

case of the B-52 aircraft, as of 1972, research, development, and testing

accounted for 2 percent; acquisition accounted for 21 percent, and

operations accounted for 77 percent. 33 The effect of this increasing

burden of operating costs has been a reduction in the proportion of the

defense budget available for new weapon acquisition. "The decline of

real purchasing power for new weapon acquisition from 30 to 20 percent of

the defense budget in the past decade is generally attributable to the

gradual increase in that fraction of the budget devoted to operation and

maintenance and military personnel over this same period." 34 Therefore,

the military has been emphasizing the use of life cycle cost analyses for

both evaluation of alternative weapon systems, as well as redesign of

systems to lower life cycle costs. 35 The efforts also involve predicting

future costs for new systems.

3

3

Boeing Company, Life Cycle Cost/System Effectiveness Evaluation and

Criteria , Document No. D180-17648-1, p. 19.

34 Russel R. Shorey, "Managing Downstream Weapons Acquisition Costs,"

Defense Management Journal , January 1976, p. 10.

35 For examples of Department of Defense use of LCC models see Lawrence E. Daver, et al., "A summary and Analysis of Selected Life

Cycle Costing Techniques and Models," Air Force Institute of Technology,

Wright -Patterson Air Force Base, Ohio, August 1974, AD- 787 183,

Marco R. Fiorello, "Getting 'Real' Data for Life-Cycle Costing," Rand

Corporation, Santa Monica, California, January 1975, AD-A010 960, and

Thomas W. Otto, Jr., "Life Cycle Cost Model," U.S. Army Electronics

Command, July 1975, AD-A013 369.

31
In addition to projections of future costs, the military has also

used retrospective analyses to determine useful life based upon a minimization of average system costs. "The economic life of the M39A2

Series 5 Ton Trucks... has been assessed by determining the mileage at

which the average system cost per mile (costs associated with the acquisition,

shipping and maintenance of the truck) is minimized (truck economic life)." 36

The trucks are retired when they reach the mileage corresponding to useful

life.

Case studies of smaller scale Department of Defense purchases

using life cycle costing were also found. Examples include purchase of

replacement of siding on family housing, 37 aircraft tires, 38 lead acid

storage batteries, 39 and non-magnet ic diesel engines. 40

4.3.2. General Services Administration (GSA) Use of LCC

The Federal Supply Service (FSS) in cooperation with ETIP has

participated in a procurement experiment to use a modified LCC approach

for four consumer products. 41 ’ 42 The experiments are "to determine whether

it is feasible to stimulate the development, production, and marketing

of energy-efficient products through the use of Government purchasing

practices." 43 Of course, GSA's objective is also to save Government funds.

36 Raymond Bell, et al., 'Vehicle Average Useful Life Study for Truck,

5 Ton, 6x6, M39A2 Series" Technical Report No. 128, Army Materiel Systems

Analysis Activity, June 1975, p. 15.

37DOD Casebook Life Cycle Costing in Equipment Procurement, LCC- 2, July 1970,

Case 2.

38 Ibid. , Case 5.

39 GSA, Federal Supply Service, Life Cycle Costing Workbook, "Applying

LCC in the Federal Supply Service," December 1973, p. 1-1.

40 Ibid. , p. 1-13.

41 See P. Clare Goodman, "A Survey of Manufacturers' Views on the ETIP

Procurement Experiment, Volume One: Refrigerator-Freezers," NBSIR 75-954,

December 1975.

42 Ibid., Volume Two: Water Heaters, NBSIR 76-983, January 1976.

43 Ibid., Volume Three: Ranges, NBSIR 76-1027, February 1976, p. 1.

32
The basis for the FSS supplier selection uses a truncated version

of the general LCC formula. 44

where, LCC^

PLC

N

rC

LCC

l

= PLC + N

l

T=1

] c

(l +r)

T

= limited LCC

= purchase price + shipment cost

= most appropriate value for life

= most appropriate discount rate

= operating energy cost when new.

4.3.3. Government Developed "Life" Test Methods

This section summarizes two examples of Government developed

life test methods. The purpose and motivation for their development

differ. In the case of incandescent lamps, GSA uses the test method to

qualify manufacturers' products for procurement. In the case of automotive

tires, the National Highway Traffic Safety Administration (NHTSA) has

responded to a Congressional mandate to establish a "uniform tire quality

grading system" for the provision of objective information for consumers.

The following discussion relates for these two consumer products

the purpose of the test methods and the events which have transpired

in providing information on them in the marketplace. The test method for

incandescent lamps is used to check a randomly selected sample of lamps

from manufacturers requesting to be listed on the GSA Qualified Products

List. 45 * 46 Manufacturers once qualified can participate in the bidding

process for Government procurements. The test specifies test conditions

and procedures for measuring lamp performance for life, light output, and

power consumption.

The Federal Trade Commission (FTC) promulgated a trade regulation

rule, which went into effect in January 1971, for the sale of general

service incandescent lamps in commerce. 47 The regulation requires

disclosure of the electrical power consumed, the light output and the

44 See p. 14 for the general LCC formula.

45The Interim Federal Specification, Lamp, Incandescent (Electric, Large

Tungston- filament) , W-L-00101G, January 15, 1969.

46 See, for example, Federal Qualified Products List of Products Qualified

under Federal Specification WL-00101, Lamp Incandescent, February 29, 1972.

47 Federal Trade Commission, Trade Regulation Rule Relating to Incandescent

Lamps (Light Bulbs) : Disclosure of Lumens, Life, Cost and Other Data

(35 FR 11784), July 23, 1970.

33
average laboratory life on the sleeves or paper containers in which

bulbs are packaged. The FTC further specified these performance values

shall be obtained in accordance with the requirements of the GSA Interim

Federal Specification W-L-00101G for incandescent lamps previously cited.

The NHTSA, in order to aid the consumer in making an informed

choice in the purchase of passenger car tires, intends to establish the

Uniform Tire Quality Grading System. 48 The regulation would require

motor vehicle and tire manufacturers and tire brand owners to provide

information indicating the relative performance of passenger car tires

in the areas of tread wear, traction, and temperature resistance. The

tread wear test is conducted by operating vehicles on a specific roadway

course, approximately 400 miles in length.

The history of the Uniform Tire Quality Grading System indicates

some of the difficulties in implementation of such a scheme. Congress

set September 1968 as the date for the proposal of the rules with

regard to tire grading. The NHTSA has published proposals in the Federal

Register five times since 1971. The latest rules were published in

May 1975 to become effective on January 1, 1976. The tire industry

filed a suit against the rules in the sixth District Court of Cincinnati,

Ohio, in December 1975. The court has placed a stay on the rules since

that time.

4.4. Summary and Observations

There exists a well developed body of literature concerning the

statistical techniques for analyzing "life" test data. The test methods

from which the data are generated, however, are rarely reported in the

literature.

Many tests either exist or are being developed to measure how well

products perform their intended function. These tests are being developed

through such organizations as AHAM and ASTM. Life testing is now being

conducted by individual manufacturers for development, quality conformance

and follow-up field evaluations. These test methods, however, are generally unavailable to the public due to the proprietary nature of these

tests. Life testing is comparative and often tests terminate when specific

minimum goals are achieved, not necessarily "end of life." For example,

a component is replaced because a less expensive substitute is found. If

testing indicates the replacement lasts longer than its predecessor, the

test may terminate prior to failure. Very few "life" test methods are agreed upon industry-wide. The Underwriters' Laboratories and American

Gas Association have "life" tests designed to indicate if minimum

performance goals are achieved for safety related product components.

48 Federal Register, Vol. 40, No. 103, May 28, 1975, pp. 23073-23083.

34
The Federal Government has become directly involved in LCC in

three major areas:

(1) Establishing test methods for use by manufacturers to label

products with "life," e.g., incandescent lamps (operating hours) and

automobile tires (comparative tread wear measure)

,

(2) Using LCC criteria to set maintenance and retirement policies

for military products, and

(3) Using LCC criteria for procurement of large systems and some consumer products.

The GSA/ETIP LCC criterion now in use for consumer product procurements

is limited to inclusion of a projected energy cost plus an initial

purchase price. While this may be a step toward including energy

conservation in a purchase decision, it is a strictly limited concept of

LCC.

The relatively advanced state of LCC analysis for weapons procurement

by the military may be accounted for by the fact that rather stringent and

complete control can be achieved by the military on the operation,

maintenance, and repair activities associated with the use of weapons.

Because of such control, costs associated with operation, maintenance,

and repair activities are predictable and controllable. Hence, planning

on the basis of LCC information becomes easily implementable. Similar

observations apply to industry's and government's uses of durable equipment:

for example, the aircraft fleet by the commercial airlines, automobile

fleet by the car rental companies, and police car fleet by the various

local police departments. A similar observation, however, cannot be

applied to the use of consumer durables. The general absence of control

on activities and the resulting difficulty in predicting costs make the

LCC analysis of consumer durables a much more difficult topic of research.

Observation of the state-of-the-art leads to a conclusion that

the application of LCC to consumer products is not immediately practicable.

Although the elements of technical knowledge are available for such an application, the total body of knowledge is insufficient. This can be

characterized by the availability of statistical techniques for testing

but the unavailability of standardized LCP test methods. The inability

to gain access to company test methods and field experience for consumer

products also hinders LCC development efforts. These data are needed

to correlate laboratory test results to actual field experience and to

establish the test conditions, based upon use and environmental conditions

in the field. The GSA/ETIP LCC experiment falls short, since it neglects

the essential element of LCP, i.e., how products perform over time.

Therefore, additional efforts are required to push the state-of-the-art

in order to make LCC practicable for consumer products.

35
5. WORK TO BE DONE

If LCC information is to be made available to consumers for new

products there are a series of problems which must be addressed and resolved.

At the present time, elements of LCC available for consumer products include

initial purchase price and installation costs, a projection of maintenance

costs (based upon manufacturers recommendations), and for certain appliances,

energy costs when units are new. Factors in the LCC formula which are illdefined and for which information is lacking include: product life,

operating cost, repair cost, discount rate, and salvage value. Efforts,

intended to provide manufacturers with a basis for testing consumer products

and estimating cost of ownership, must address both the definitions for

the above factors and provide techniques for assigning values. This

section will identify areas requiring research, recommend long-term research

tasks and immediate tasks appropriate for NBS attention.

5.1. Areas Requiring Investigation

The basic areas requiring further investigation in order to develop

the capability to generate ownership cost information include: information

on consumer products use, laboratory test development and validation, rules

for test application and techniques for cost estimation.

5.1.1. Basis for Laboratory Test Design

Essential to the design of LCP laboratory test method are data

which relate how consumers use the product. This area of investigation

involves the process of gathering relevant user information to characterize

the use environment. A study to examine the consumer use patterns for

products must necessarily be specific to the type of product being considered.

Information must be obtained which relates the hours of use and mode of

use for a product per specified time interval, thereby providing

characterization of the "normal, " "multi-modal," or "extreme" patterns

of use the product is subjected to by consumers. Such information can be

collected through placing timers and counters in products and observing

large numbers of persons using products. The information would provide

a basis for realistic test methods to determine product performance under

simulated use conditions over time.

Environmental factors, external to the product, can be diverse and

their interactions with the product and use patterns very complex. An

understanding of the environmental conditions, e.g., voltage variations,

water quality, air quality, humidity, and temperature variations, is also

essential to designing a LCP laboratory test method.

Prior to developing a test method minimum levels of performance must

be specified. The nature of LCP testing requires the measurement of the

time trace of performance. LCP testing also requires that "acceptable"

performance be well defined. This becomes necessary in order to make

objective determinations for when to make repairs during a test. Such

specifications are subjective and with the exception of becoming inoperative

36
open to debate. Nevertheless, a means must be found to resolve this

difficulty. Also, identifying failure modes for the product prior to

test development provides information useful for assessing how well

tests replicate "normal” conditions.

5.1.2. Laboratory Test Method Development

The objective of a test method is to yield performance information

which can be related to field use. Even when use and environmental

conditions have been well defined there are limitations on the capability

to simulate them in a laboratory. Nor is it necessarily desirable to

attempt to simulate "all" conditions. Therefore, investigations must

concentrate on recognizing significant use and environmental factors which

affect performance. The less complicated the test conditions, the less

expensive the test and the more likely tests can be made reproducible.

The process of simulating use and environmental factors offers an additional area for investigation. Techniques for automating repetitive

loadings and incorporating the user effects in tests are challenging

activities.

Many major consumer products have service life expectancies

exceeding 10 years. 49 Obviously it is unreasonable to test products

for such long durations. Accelerated tests must be developed in order

to provide LCP information within reasonable time constraints and without

tying up test equipment indefinitely. Accelerated tests reduce the time

to failure by making use and/or environmental conditions more severe than

normal. Investigations must be initiated to ensure that failure modes

are not changing, that aging factors are taken into account and that

laboratory test time or cycles can be related back to field use.

5.1.3. Laboratory Test Validation

The process of validating a laboratory test method involves

relating the results from the laboratory test to observations made in

field use. Such correlations can be made using data routinely reported

by manufacturers, collecting field data directly from consumers or conducting controlled field experiments. Each of these methods have

both positive and detracting features. Investigation into which techniques

or combinations yield acceptable results are crucial to providing evidence

that the LCP test methods are acceptable for characterizing product

performance

.

49Marilyn Ruffin and Katherine S. Tippett, "Service-Life Expectancy of

Household Appliances: New Estimates from the USDA," Home Economics

Research Journal , March 1975, pp. 159-170.

37
5.1.4. Rules for Test Application

Once test methods have been developed and validated, rules must

be developed to guide manufacturers in their application. These rules

involve such issues as the criteria for when to stop a test. With the

exception of non -repairable products, products can continue to be

repaired and tested indefinitely. Since the LCC information is intended

for comparison of new products by potential first owners, one alternative

is to use the USDA distribution data for service life expectancy. It is

possible to stop testing at the age corresponding to perhaps the 90th

percentile of disposal (at this age 90 percent of first owners have

discarded the product)

.

Another issue relates to the number of products that must be

tested. This involves the degree of confidence that is required for the

values derived from the test. Variations in test results can be attributed

to two major sources: (1) the test procedures (repeatability) and (2) the

production process (quality control). Also not to be overlooked are

the costs for testing which include plant and equipment, personnel and

products destroyed during testing. All of these factors must be weighed

to ascertain a uniform method for determining how many products to test.

The question of how test results should be reported includes

documentation for testing. In cases where test results characterizing

LCP must be translated to LCC information the rules for such transformations

must be clearly delineated. The methods and formats for presentation of

LCC information to consumers presents an additional area for investigation.

5.1.5. Cost Estimation

The translation of LCP information to LCC information requires

estimates of cost for the input factors associated with the product's LCP.

Methods and procedures must be developed to assign costs to energy, repairs,

and other input factors. Also, because the LCC formula uses discounting

of future expenses to a present value, an appropriate or agreed upon

discount rate is essential prior to LCC computations. Its use for

consumer applications requires considerable thought.

5.2. Long-Term Research Goals

For the purpose of planning long-term research, both engineering

and economic disciplines must be utilized in order to advance the application

of LCC for consumer products. The general goals which are described below

are intended to provide potential research support for an operational

LCP/LCC program.^ 0

50 See Appendix C for a listing of the tasks required to implement an operational LCP/LCC program for consumer products.

38
5.2.1. Engineering Goals

The development of test methods to measure LCP can logically be

approached recognizing the diversity which exists among consumer products.

For appliances, the user interacts in different ways depending upon the

type of appliance. In the case of hand-held appliances the user plays

a more direct role. For example, using a hand-held mixer predominantly

for making fudge has a more adverse effect on LCP than predominantly

using the mixer for meringue. Therefore, although incorporating similar

tasks regardles* of the product, test method development for hand-held

products must account for the direct effect of users on LCP. For larger

consumer products the major concern involves their repair and degradation

of performance over time. The major emphasis for larger products should

be toward the process of developing methods to analyze and cause component

failures in the process of characterizing extended performance.

These research goals would incorporate research tasks which would

address themselves to the problems enumerated in the previous section.

Although this subsection has used an engineering title, a successful

program requires development of technique for gathering operational

information relative to a product’s use, use environment, maintenance,

repair, and indications of "life" for non -repairable products. More

engineering oriented is the research required to simulate use and environmental factors, to automate test procedures and to develop a basis for

accelerated testing.

5.2.2. Economic Goals

Essential to the translation of LCP information into LCC information

is the valuation of the LCP input factors. Tasks must be directed toward

the development of procedures to yield cost estimates for operating cost

factors and repair requirements and the selection of appropriate discount

rates

.

An important area for future research also concerns the question

of how "best" to provide consumers LCC information? This question relates

to product selection, information content, complexity, format, the vehicle

for presentation of comparative LCC information, and impact assessment.

5.3. Inmediate Activities

During the course of this study, it was not intended that any

laboratory based efforts be conducted. The information obtained was,

therefore, based upon observations of industry testing and available

literature, documenting statistical techniques for handling data

and limited test method development. In order to obtain "first-hand"

knowledge of the problems associated with LCP test method development

and LCC, it is recommended that laboratory and field data collection

efforts be initiated.

39
Two LCP demonstration projects are proposed: the first to integrate

user effects inherent in the operation of a small hand-held product, and

the second project to characterize extended performance for a larger

consumer product. These research efforts relate directly to the longer

term engineering tasks and provide necessary experience to gain

additional insights into the problems of conducting LCP test method

development and LCC analyses for consumer products. The demonstration

projects should follow the process tasks suggested in Appendix C (C.2).

40
APPENDIX A.

Examples of Consumer Product Life Testing

In order to demonstrate that "life" testing is an accepted practice

for a variety of consumer products in industry, the following examples

have been summarized. The test method descriptions illustrate that,

although the problems of relating laboratory based tests with actual

use by consumers are recognized, the alternative of "blindly" introducing untested products is considered a greater and generally

unacceptable risk.

A.l. Automobiles

During a recent conference Ford Motor Company’s David J. Barrett,

Assistant Chief Engineer - reliability, explained Ford's automobile

durability testing. 1

"Vehicle and component durability are confirmed through an elaborate series of laboratory and proving -ground tests. We

have the equipment and techniques to simulate long term customer

usage of a vehicle or its components in the laboratory in a matter of weeks. The durability of components is evaluated

through laboratory tests and on prototype vehicles while they

are under development, again at the pre-production level and,

finally, production parts are analyzed for compliance with our

ever higher acceptance standards

.

Prototype vehicles are subjected to thousands of miles of

"worst-case" testing at our proving grounds; they are operated

over cobblestones, square- edged potholes and other road surfaces

designed to bend, twist, stress, fatigue and wear out parts.

Problems which show up are corrected and the whole process is

repeated again.

In addition, we make extensive use of fleet testing to supplement the information gained at our own facilities. Newly designed

components are installed on fleet cars, (some of which accumulate

in excess of 800 miles a day) , to acquire actual service experience

on new parts prior to their release for production. Representative production vehicles are also tested on our proving grounds

to assure conformance to the same stringent requirements."

Barrett, David J., Automobile Durability , Workshop on Wear Reduction - Office of Technology Assessment February 23, 1976

A-l
A. 2 Refrigeration and Air Conditioning Compressors

A paper by Kalivada and Yun on life tests for air conditioning and

refrigeration compressors at Copeland Corporation was presented at the

1976 Annual Reliability and Maintainability Symposium. 2 The paper

describes the test plans and methodology which are being developed to

provide meaningful assurances that failure rate targets on air condition

ing and refrigeration compressors will be met or exceeded. The findings

of tests are utilized for production audit or design feasibility studies

Production audits for compressors are being conducted for regular as well as for special corrective action programs. Compressors are also

subject to qualification tests to meet various regulatory codes and

certify their safety and compliance for good design practice.

One of the first requirements perceived at Copeland was a need to

run statistically significant numbers of compressors for long periods

of time under controlled conditions. Sufficient test stands had to be

provided to handle the requirements of four readily identifiable groups

of compressors:

1. Development - new compressors and changes to existing ones.

2. Pre-production qualification.

3. Initial production audit.

4. Production audit.

For this reason, 252 new test stands were constructed in four

physical sizes, apportioned to handle quantities of compressors in proportion to production volumes. It was estimated that, depending on the

test requirements, these stands would be adequate to handle from 1,000

to 1,500 compressors per year. In each stand, pressure controls,

timers and temperature recorders are provided so that compressors can

be operated 24 hours a day, seven days a week.

One of the major concerns of the test program is to minimize the

failure rates of compressors in order to avoid the consequent problems

and the costs involved back to the customer and ultimate consumer. At the same time, the systems and applications are complex enough that

"zero defects" cannot be economically expected. Establishment of

failure rate targets was viewed as a multidisciplinary corporate

exercise with both the needs of the customer and the corporate warrantyfund requirements kept in mind. Performance of the product against the

goal is measured by analysis of in-warranty compressors returned from

customers. Returned compressors are carefully inspected on a sampling

2 Kalivoda, Frank and Kyung Woo Yun, "Modeling Mechanical System

Accelerated Life Tests," Proceedings 1976 Annual Reliability and

Maintainability Symposium , January 1976 (available from IEEE,

Piscataway, N.J.) pp 206-212

.
basis, classified into over 140 codified failure causes and summarized

by the computer information services group for corrective actions by the

appropriate corporate function. There is, however, a built-in time lag

in this information feedback system. With a warranty period of 20 months,

about two years are required after the end of a model year before the

data can be considered complete. This is a long time for a high volume

manufacturer, and it is the purpose of the accelerated test to bridge

this gap and provide the corporation with the assurances it needs.

Air conditioners, refrigerators and heat pumps are all based on

the vapor compression cycle. In this cycle, heat is effectively pumped

uphill from a low temperature zone to one of higher temperature. This

requires the addition of external work, a function performed in the

compressor. Since systems of this nature must have expected lives of

the order of 15 years, reliability must, therefore, be of prime concern

in the design and manufacture of the compressor. The large scale

manufacturer of these compressors cannot wait, of course, for the field

results for 15 years of production to establish the reliability of his

products. Thus some form of "accelerated" testing is required to

establish life characteristics in the laboratory.

The current effort in life testing at Copeland is to parallel

"normal" load tests with "accelerated" tests in order to obtain the

appropriate correlations to field data. This is necessary to insure

that no new mode of failure is introduced due to acceleration of the

test stresses. Thus, for example, an operating temperature beyond the

point of oil breakdown would yield invalid results . Most durable com- ponents are tested under an accelerated condition. This is true of

problems noted from field returns which often require reliability

engineering to identify and simulate the failure mechanism in the

laboratory to guide immediate corrective actions

.

Life tests under normal load conditions are viewed as basic in

establishing a product’s reliability level, and are, by nature, long

term. The only acceleration factor here is the fact that compressors

are run seven days a week, 24 hours a day or about 2,000 hours in

three months. Normal load tests are also necessary to verify the

validity of accelerated tests. The number of possible combinations of

compressor operating conditions is theoretically infinite. In field

use, this is indeed a fact. However, for the purpose of compressor

life testing, only finite numbers of operating modes can be used from

a practical standpoint. This approach can be rationalized since a compressor is expected to run without problem for 15 years unless a certain part is highly stressed due to an "unusual" event. In terms of

elevated stress on the various components of the compressor, basic tests

of these components are included in compressor life testing. A life

test plan may consist of one or all of these tests. The performance
of the compressor is generally measured before and after life testing to

determine any change. Finally, the compressors are disassembled and all

parts inspected.

A. 3 Washing Machines

An internal laboratory standing instruction on accelerated washer

life tests from a manufacturer is described below for illustrative

purposes. It should be noted that this manufacturer no longer produces washing machines. This test procedure was obtained subsequent

to the end of production.

The laboratory standing instruction covers the method of determining

the condition of an automatic washer upon receipt from the factory or model shop. It also provides a method of auditing the condition of

the washer at any time during its life.

The method of determining the condition of an automatic washer

includes pre-test observations and taking measurements. The pre-test

observations require thorough inspections of the wrapper top panel,

back splash, and spin tub and drive assembly for scratches, dents,

porcelain chip, missing components, poor workmanship and any other

defects.

Measurements to be taken are: maximum and minimum water levels in

the tub; wattage and speed of agitation; acceleration and deceleration

of spin, wattage and speed of spin; and low voltage operations in agitation and in spin.

All these inspections and measurements are performed for the purpose

of quality assurance such that the detection of any defect may start the

tracing of the cause of the defect. This standing procedure for

inspections and measurements is a part of the process of making sure

that the specifications of the product are met.

The life test is- carried out by operating the washing machine

continuously on normal wash cycle, hot water fill, normal speed and

with a 10 pound mixed towel load.

The standing procedure requires technicians to make daily inspection

of each machine and stop any machines that are apparently malfunctioning

(noisy, water leakage, oil leakage, erratic watt meter trace, etc.).

The routine inspection places emphasis on spin tub, agitator, and drive

assembly.

If a machine malfunctions or a part fails, necessary corrections,

repairs, or parts replacement are to be made to put the machine back

in operation.

A-4
The life test is performed 18 hours a day which can normally

complete 43 washing cycles. It is hypothesized here that a washing

machine performs 500 washing cycles a year. Thus, one laboratory

working day is equivalent to 0.09 machine years, and it required 116

laboratory working days to accumulate 10 years history of a washing

machine

.

A. 4 Television Sets

Sanford Thayer has reported on examples of reliability test methods

now in use in Japan observed during a visit to 19 manufacturing plants. 3 A manufacturer of television sets has correlated field repair requirements to accelerated laboratory test conditions to allow for rapid

evaluation of new designs. 'The results indicate that for each hour of

operation under 95°F, 951 R.H. they should expect about 16.8 hours of

operation under field conditions. Other conditions such as vibration

and cycling did not contribute to the prediction of field type failures."

A. 5 Canister Vacuum Cleaners

The ASTM organized Comnittee F-ll on Vacuum Cleaners in May, 1972.

The Conmittee has published an approved society standard "Standard Method

for Life Evaluation of Air Handling System of Household Canister Vacuum

Cleaners."4 The test provides an accelerated laboratory procedure for

determining service- free life in operating hours. End of service

free life is determined by either of two criteria, whichever occurs

first:

"Failure - Service-free life is limited by any failure

which is not normally repaired by a consumer in the home.

Carbon brush wearout is an example of such a failure.

Degradation of Performance - Service- free life is limited by

degradation of performance, due to the air -handling system

less hose, amounting to 251 reduction in air flow..."

Committee F-ll is also developing a method for life evaluation of

household upright vacuum cleaners.

3 Sanford B. Thayer, "Reliability Methods in Japan," Proceedings 1976

Annual Reliability and Maintainability Symposium , January 19/6, p. 77

4ASTM Designation: F411-75, June 1975
,

.
APPENDIX B.

Industry Performance Test Methods for

Consumer Products

The Association of Home Appliance Manufacturers (AHAM) has published

a number of test methods to measure performance for consumer products.

Other organizations also involved with establishing performance tests are the American Society of Heating, Refrigerating and Air-conditioning

Engineers Inc. (ASHRAE) , the American Gas Association (AGA) , and the

American Refrigeration Institute (ARI). This appendix includes excerpts

from existing performance test methods for air conditioners, refrigerators, and freezers, water heaters, clothes washers and dryers, dishwashers and electric ranges.

B.l Room Air Conditioners

(A) AHAM RAC-1 (Z234 . 1-1972) , An American National Standard

for Room Air Conditioners, Association of Home Appliance

Manufacturers, December 21, 1972.

Performance tests for cooling units include a cooling capacity test,

a moisture removal capacity test, a recirculated air quantity test, a ventilating air quality test, an exhaust air quantity test, an electrical

input test, a power factor test, a maximum operating conditions test,

freezing tests, an enclosure sweat test, and a condensate disposal test.

In addition to the tests for the cooling mode, performance tests

for heating -cooling units when operated in the heating mode include a heating capacity test, an electrical input test, an application heating

capacity test, a maximum operating condition test and an outside coil

de-icing test.

(B) ASHRAE STANDARD 16-69, Method of Testing for Rating

Room Air Conditioners, American Society of Heating, Refrigerating and Air-Conditioning Engineers, Inc., January 26, 1969.

This standard prescribes a method of testing for obtaining cooling

capacities and air flow quantities for rating room air conditioners.

Performance determinations on room air conditioners consists of

(1) quantitative effects produced upon the air in the space to be

conditioned such as cooling and dehumidification in Btu per hour and

air flow rates in cubic feet per minute under specified conditions;

(2) other data pertaining to the application of the equipment such as the current in amperes and the power input in watts under specified

conditions

.

B-l
B.2 Refrigerators , Combination Refrigerator- Freezers and Freezers

(A) AHAM HRF-2-ECFT, Test Procedure to Determine the Freezer

Temperature and Energy Consumption of Household Refrigerators,

Combination Refrigerator- Freezers and Freezers, Association

of Home Appliance Manufacturers, July 1975.

The purpose of this standard is to establish a uniform and repeat

able procedure or standard method for measuring the average freezer

temperature and the electrical energy consumption of household refrigerators, household combination refrigerator- freezers and household freezers

at specified conditions at an ambient temperature of 90°F.

(B) ASHRAE Standard 13-69 (ANSI B38. 1-1970), American National

Standard, Methods of Testing for Household Refrigerators,

Combination Refrigerator- Freezers , and Household Freezers,

Amrican Society of Heating, Refrigerating and Air-Conditioning

Engineers, Inc., 1970.

This standard includes methods of testing and methods of determining

volumes and shelf areas of freezing and storage spaces for household

refrigerators, combination refrigerator- freezers and household freezers.

This standard also describes procedures for determining the performance

of refrigerators, combination refrigerator- freezers, and freezers under

specified laboratory test conditions, and procedures for determining

the durability of various components as affected by use or environmental

conditions

.

The durability test procedures include: (1) handling and storage

test which determines the ability of the cabinet, when packaged for

shipment, to withstand handling and storage conditions in extreme (high

and low ambient) temperatures; (2) external surface condensation test

which determines the extent of condensation of water on the external

surface of the cabinet under ambient conditions of high relative

humidity; (3) internal moisture accumulation test which determines

under severe operating conditions the moisture accumulation within the

insulation spaces and on the refrigerated surface in the cabinet and the

effectiveness of defrost water disposal; (4) current leakage test which

measures the quantity of leakage current flowing through the entire

electrical insulating system under severe operating conditions; (5) en- vironmental cracking resistance test which determines the cracking

resistance of the plastic compartment liners, door liners and breaker

strips at operating temperature when coated with 50/50 mixture of oleic

acid and cotton- seed oil; and (6) bottom breaker strip (s) impact test

which determines the impact resistance of the bottom breaker strips at

operating temperature when coated with 50/50 mixture of oleic acid

and cotton- seed oil.

B-2
B . 3 Water Heaters

(A) Electric Water-Heaters, ANSI C72. 1-1972, American National

Standard for Household Automatic Electric Storage-Type Water

Heaters

.

The purpose of this standard is to establish a uniform procedure

for determining the performance of household automatic electric storagetype water heaters under specific test conditions and to establish

certain minimum requirements. Three major performance tests are thermostatic temperature control test which determines the performance

of temperature controls; service performance tests which include standby perfoimance test and service efficiency test, and diffusion test

which determines the degree of mixing of incoming cold water with stored

water, a continuous depletion test is also made.

(B) Gas Water Heaters, ANSI Z21. 10. 1-1975, American National

Standard for Gas Water Heaters, Volume I, American Gas Association.

This ANSI standard specifies test methods for 30 different tests

for measuring performance of various characteristics/ components of a gas water heater. Among these tests are a combustion test, a burner and

pilot operating characteristics test, a pilot burners and safety shut-off

devices test, a heat required to supply daily quota of hot water test, a quantity and temperature of hot water test.

B.4 Clothes Dryers

(A) AHAM HLD-1, Performance Evaluation Procedure for Household

Tumble-Type Clothes Dryers, Association of Home Appliance

Manufacturers, June 1974.

The purpose of this standard is to establish a uniform procedure

for evaluating the performance of automatic, semi-automatic and non- automatic home laundry clothes drying equipment. This standard applies

to both electric and gas dryers. The standard specifies clothes load,

test conditions and methods of loading. The three performance tests are:

the moisture removal test which determines drying time and drying

efficiency; the clothes temperature measurement test which provides a procedure for measuring the fabric temperature in dryers; and the

wrinkling test which evaluates garment wrinkling in a finished dryer

load.

(B) HLD-2EC, Standard Method of Measuring Energy Consumption of

Household Tumble-Type Clothes Dryers, Association of Home

Appliance Manufacturers, August 1975.

B-3
The purpose of this standard is to establish a uniform procedure

for measuring the energy consumption of household gas and electric

tumble- type clothes dryers. Through this standard it is intended that

dryers can be evaluated with respect to the energy consumed to dry a standard load under standard conditions. The monthly energy consumption

is based on 43 cycles per month.

B. 5 Clothes Washers

(A) AHAM HLW-1 (Z224. 1-1971) , An American National Standard,

Performance Evaluation Procedure for Household Washers, Association of Home Appliance Manufacturers, December 1971.

This AHAM standard specifies clothes load, washer setting, water

condition (temperature, level, hardness and quantity), and other test

conditions. The seven performance tests are: the soil removal test

which evaluates the ability of household washers to remove insoluble

and heavier- than-water soils from clothes and washing area; the whiteness

retention test which evaluates the performance of household washers in

maintaining the whiteness of fabrics in relatively unsoiled areas while

removing soil in relatively soiled area; the rinsing effectiveness which

evaluates the rinsing effectiveness of washers; the water removal test

which evaluates the performance of household washers in extracting

water from the clothes load; the tangle- free action test which evaluates

the degree of clothes tangling among themselves or with any part of the

machine caused by the action of washers.

(B) AHAM HLW-2EC, Test Method for Measuring Energy Consumption

of Household Clothes Washers, Association of Home .Appliance

Manufacturers, December 1975.

This AHAM Standard, HLW-2EC, is supplemental to American National

Standard Z224. 1-1971 and encompasses test methods for determining the

energy consumption of washers. The results reported from this test

method are considered to be representative of consumer use of this product

with regard to energy consumption.

B.6 Dishwashers

AHAM DW-1 (A197. 5-1975) American National Standard, Household Dishwashers, Association of Home Appliance Manufacturers, August 1975.

This standard includes definitions , methods for testing and evaluating

performance, safety and sanitation characteristics of household dishwashers.

The standard methods are intended to provide a means by which different

brands and models of dishwashers can be compared and evaluated with respect

to characteristics of significance in the use of the product. A principal

objective of the test method is to measure the washing performance of

dishwashers. Procedures are specified for preparing the test load

(dirtying the dishes with food) and evaluating cleaning performance

(inspecting the dishes)

.

B-4
B.7 Electric Ranges

AHAM ER-1 (C71.-1972), An American National Standard, Household

Electric Ranges, Association of Home Appliance Manufacturers,

January, 1972.

The performance and durability- requirements test for surface

units are heating time and efficiency, time-to-boil , and durability.

All surface units have a minimum life of 3,500 hours "on" time.

The performance and durability requirements tests for ovens include heat loss, thermostat calibration and linearity, baking/browning

performance, broiler heat distribution, oven life, thermostat life,

and rotisserie performance and endurance. The oven life test specifies

that the oven and its component parts and accessories shall show no observable deterioration after 30 days of continuous operation at an average temperature of 260°C (500°F) . The thermostat life test

specifies that oven thermostat or combination oven thermostat and

switch shall have minimum life of 30,000 cycles.

B-5

APPENDIX C.

General Research and Product Specific Tasks for an Operational

LCP/LCC Program for Consumer Products

The following tasks identify research areas and related subtasks

which might be addressed prior to imp 1 mentation of an operational LCP/LCC

program. These tasks have been divided into general and product specific

areas for research. The general research tasks are intended to provide

methods directly applicable to product specific LCC, while the product

specific tasks describe the processes required to derive LCC for

consumer products.

C.l General LCP/LCC Research Tasks

Task 1: Develop, adapt or standardize methods to measure performance

over time of consumer products.

Subtasks : (a) Examine means for determination of minimum levels

of performance , below which repairs or maintenance

are required to define parameters for life testing

of products.

(b) Translation of data on consumer use patterns into

test conditions to simulate use of products.

Develop procedure to evaluate and characterize

consumer use patterns as related to influence

on LCP.

Classify products according to:

• degree and type of consumer interaction

• type of use- -intermittent vs. constant

• other factors

• interaction with other consumer products

Based upon product classifications, specify scheme

for ascertaining consumer use patterns via:

• mail survey

• timers and meters in home

• consumer kept log

• observation of use under controlled conditions

• observation of use in home environment

Determine circumstances where each scheme or combination should be used.

C-l
(c) Translation of data on environmental factors into

test conditions to simulate use of products.

Determine critical environmental factors which

influence the LCP of products, such as electrical

energy characteristics, water quality, humidity,

temperature, etc.

Identify information source data on critical factors:

• utility companies- -public service commissions

• measurements in homes

• literature surveys

• manufacturers records

• FPC/EPA

(d) Examine means for evaluating LCP in the laboratory.

Determine or develop means to simulate use and

environmental factors including need for:

• special environmental chambers, other facilities

• incorporation of user effects

• automation of cyclical loading

• accelerated testing

Establish guidelines applicable to rules for test

application to address such questions as:

• number of products to be tested

• how long to test

Task 2: Determine means of imputing monetary costs to elements of LCP

Subtasks: (a) Examine alternative economic forms for expression of

sales and test data in monetary terms - Develop and evaluate cost estimation models which

incorporate initial installation, maintenance, repair

and energy costs.

(b) Develop methods for establishing monetary costs

associated with servicing appliances including repairs,

maintenance and parts by

• monitoring service charges for selected products

• searching records of service agencies willing to

participate

• examining recoimended fee schedules for repairs/

service, parts catalogs and suggested price lists and

• examine use of the discount rate as applied to consumers

purchases

(c) Develop methods for establishing monetary costs associated

with energy.

C-2
Task 3: Develop program to disseminate LCP/LCC data through mix of

channels to include specification of format, complexity, content

and amount of information.

Subtasks: (a) Examine literature and conduct surveys to evaluate

effectiveness of existing dissemination channels

including

• product point-of-sale materials

• retail sales personnel

• print or broadcast advertising media

• public or private consumer educational programs

• consumer rating publications

(b) Use various "test vehicles" to ascertain (by market

purchasing segments) how people react, who influences

purchase and how they accept "test vehicle."

Task 4: Develop framework for impact analyses for consumers, producers

and society.

Subtasks: (a) Develop cross-sectional surveys on consumer purchase

patterns to be distributed prior to and after distribution

of LCP/LCC data to assess program effectiveness. Examine

data to ascertain:

• changes in consumer purchase patterns

• whether consumers are using LCP information

• potential "program" changes which could aid

consumers to use of LCP/LCC information.

(b) Determine producer survey activities necessary

to characterize product performance, quality control and

production costs and competition and pricing structure

prior to introduction of LCP/LCC data to enable evaluation

of impacts

.

(c) Examine the data presented for LCP/LCC to assess its

influence over:

• trade offs, e.g, performance level vs. durability

• quality control and production cost

• pricing, competition, sales and changes in market

structure.

Determine the degree and extent of producer participation

in the LCP "program."

C-3
(d) Examine the potential impact of LCP/LCC data to

consumers relative to positive and negative effects on

• rate of inflation

• energy and materials conservation

• employment (especially geographical redistribution)

• consumer expenditures

Task 5: Devise method for selecting products and attributes for test

method development and value specification.

Subtasks: (a) Adopt and develop approach similar to proposed Senate

bill S643 (Consumer Product Testing Act of 1975)

.

(b) Develop procedure for use of sounding boards and

other consumer representation channels.

(c) Incorporate assessment of technical and economic

feasibility.

C. 2 Product Specific LCP/LCC Process Tasks

The tasks which follow are necessary in order to develop LCP/LCC

information.

Task 1: Identify performance attributes important to LCP/LCC.

Task 2: Establish use and environmental conditions/distributions

Task 3: Determine critical set(s) of use and environmental factors

influencing LCP/LCC.

Task 4: Identify common in-use failure modes.

Task 5: Develop operational simulation which results in failure

modes similar to field failure modes.

Subtasks: (a) Determine measurements required to provide adequate

documentation.

(b) Establish criteria for failure.

Task 6: Correlate test failures to field failures including relationship

and range of stresses for which relationship holds.

Task 7: Establish LCC estimation framework.

Task 8: Collect field cost data for translation of LCP to LCC including

energy, service, parts, etc.

Task 9: Perform LCC analyses.

C-4
NBS-1 14A (rev 7-73)

U S. DEPT OF COMM. BIBLIOGRAPHIC DATA

SHEET

1. PURER A 1 ION OK l< I PORT NO. NBSIR 77-1212

2. Gov’t Accession

No.

4. TITLE AND SUBTITLE

Life Cycle Costing: An Assessment of Practicability

for Consumer Products

3. Recipients Accession No.

5. Publ ic at ion Dan

6 . Performing Organization ( odi

7. AUTHOR(S) . , . ,, S. Wayne Stiefel, S. Justin Kim and Howard Hung

9. PERFORMINCi ORGANIZATION NAME AND ADDRESS

8. Performing Organ. Report No.

NATIONAL BUREAU OF STANDARDS

DEPARTMENT OF COMMERCE

WASHINGTON, D.C. 20234

10. Project/Task/Work Unit No. 4410133

11. Contract /Grant No.

12. Sponsoring Organization Name and C omplete Address (Street, City, State, ZIP)

Same as 9

13. Type of Report & Period Covered

Final - July ’75-Sept,

14. Sponsoring Agency Code

'U

15. SUPPLEMENTARY NOTES

16. ABSTRACT (A 200-word or less factual summary of most significant information. If document includes a significant

bibliography or literature survey, mention it here.) This report assesses the practicability for applying the life cycle costing (LCC)

approach to consumer products. The report provides a basis for understanding: the

potential for application, benefits and effects of LCC; the basic concept of LCC; its

interaction with performance, and the state-of-the-art of "life" testing as it relates

to developing extended performance test methods for consumer products. The report

reviews information now obtainable and barriers to labeling consumer products with

LCC information. An observation is made that application of LCC to consumer products is not immediately practicable. The basic areas requiring further

investigation are identified, long term research goals are suggested and activities

deserving immediate attention are described.

17. KEY WORDS (six to twelve entries; alphabetical order; capitalize only the first letter of the first key word unless a proper name; separated by semicolons

)

Accelerated testing; consumer products; cost estimation; life cycle costing; life

cycle performance; life testing, and performance testing

18. AVAILABILITY Unlimited

Eor Official Distribution. Do Not Release to N'l IS

! Order Erom Sup. of Doc., U.S. Government Printing Office Washington, D.C. 20402, SD < at. No. <

1 }

[ X Order From National Technical Information Service (N I IS) Springfield, Virginia 2 2 I S I

19. SECURITY CLASS

(THIS REPORT)

UNCL ASSIFIED

20. SECURITY CLASS

(THIS PAGE)

UNC 1. ASSIFIED

21. NO. OF PAGES

65

22. Price

$4.50

U SCOMM- DC 29042-P74