Life cycle cost based procurement decisions: A case study of Norwegian Defence Procurement projects

A Norwegian Ministry of Defence publication states that when procurement decisions are made, systems that yield the lowest possible life cycle cost (LCC) for the Norwegian Defence must be procured, even if this means that initial procurement cost becomes higher. However, several projects within the community are still carried out and reviewed based on initial procurement cost alone. This study investigates four hypotheses, based on agency theory and earlier LCC work, in order to help explain why this is happening. A questionnaire was administered to all projects currently running in the defence community. Findings regarding project uncertainty, information symmetry, the project leader’s attitude and knowledge about LCC, as well as control variables are discussed both towards theory and in terms of managerial implications.