Case study of an equivalent annual cost model for economic lifetime for construction vehicles under cost uncertainty

Mohamad Zarean, Ahmad Reza Sayadi and Amin Alah Mousavi

The Engineering Economist, 2022, vol. 67, issue 1, 75-93

Abstract: Whereas the practical importance of the Economic Lifetime (EL) is well-known, selecting the proper process has always been a dilemma. In this respect, classical methods dating back to one century ago are generally favored, but using them in a data-driven approach still has particular shortcomings. This paper aims to present a Life Cycle Cost (LCC) model determining the EL of a truck while fluctuation in historical data deepens through its lifespan. The equivalent annual cost of LCC is developed based on Operating and Maintenance (O&M) costs along with the resale value. The O&M cost was estimated deterministically and stochastically using regression analysis and Brownian-Motion-based simulation. The resale value was modeled by employing a genetic algorithm. The model capability was evaluated using real data of a seven cubic-meters truck hauling rock-fill materials in a dam construction project. The optimal EL was estimated on average 105 months in deterministic condition, while it was 88-145 months at the 70% confidence level using non-deterministic approach.

Date: 2022
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DOI: 10.1080/0013791X.2022.2028048

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