Discount Factor. In determining the present value of future expenditures the
appropriate discount factor (interest rate) is applied to each annual tabulated
expenditure. Discount factors are based on a 10 percent interest rate.
Economic Life. A maximum economic life of 25 years shall be used in cost
analyses of utility investments.
Uniform Annual Cost. The method of project accomplishment shall be the
alternative which has the lowest uniform annual cost. The uniform cost is determined by
dividing the total project cost by the factor in NAVFAC P-442, Table B, for the end year
of the project.
Factors to be Analyzed
Actual loads, such as electric, heat, refrigeration, etc.
Duration of loads.
Sensitivity of the establishment to hazards.
Permanence of the power plant.
Method of Satisfying Load Demands
Objective. Provide the necessary utilities such as electricity, steam, and
compressed air, at lowest overall owning and operating cost, with sufficient standby to
preclude irreparable loss to personnel or national security, or large financial loss.
Consider the following.
a) Interservice possibilities; for example, one power plant to service
more than one installation.
b) Only new or future costs of a project; "A sunk cost is a past
expenditure or an obligation already incurred, which must be ignored as having nothing
to do with a choice between two alternatives for the future." Grant. E. L, Principles
of Engineering Economy, Wiley & Sons, New York, NY.
Continuous integrity of utility service.
Past experiences with other power plants.
Consider all plausible, alternate methods of satisfying
the load demands, including: