Section 2. Basic Data

MIL-HDBK-1003/7

Section 2.

BASIC DATA

Economic Analysis. The economic analysis for all new or modified plant

2.1

construction projects shall consider all suitable alternative methods to determine the

most cost-effective method of accomplishment. All economic analyses shall follow the

policy and procedures as outlined in SECNAVINST 7000.14, Economic Analysis and Program

Evaluation for Navy Resource Management. For information, formatting, and guidance in

performing a detailed cost analyses refer to NAVFAC P-442, Economic Analysis Handbook or

National Bureau of Standards Handbook 135, Life-Cycle Cost Manual for the Federal Energy

Management Programs.

Present Value Analysis. All cost analyses for power plant investments shall

2.1.1

be computed by using the present value (discounting) technique. In this method all

benefits and costs accruing throughout the life of the facility are compared on a

present value basis. The cost investments for each year of the economic life of the

facility are converted to present values by applying a discount factor.

Cost Elements. The cost elements of an economic analysis will

2.1.2

include non-recurring (capital cost of construction) and recurring operational and

maintenance costs. The recurring costs which are tabulated for each year of the

facility useful life will include the sum of the following items:

a)

Fuel Costs.

Consider various fuels and fuel combinations.

b)

Electrical Costs.

c)

Water Costs.

d)

Chemical Costs.

e)

Operating and maintenance material costs (other than fuel).

f)

Operating and maintenance labor.

g)

Any other costs related to the facility.

Insurance is not charged because the Government is self-insured.

Taxes are

not charged because the Government does not pay taxes.

Analysis Format. The cost elements described above shall be summarized and

2.1.3

tabulated for each year of the economic life of the facility and should be prepared for

each alternative proposal under consideration. The annual costs shall then be

summarized to determine the total project cost for each alternative proposal.

2