Cost Phasing of Initial Investment Costs

Cost Phasing Schedule
Initial capital costs may be phased in over a Planning/Construction or Installation (P/C/I) Period. BLCC5 discounts from the date shown in the schedule to the base date the portion of Initial Cost allocated to any year in the P/C/I Period.

Cost Adjustment Factor
If initial capital costs are phased in over a P/C/I Period, the Cost Adjustment Factor is the average annual rate at which the Initial Cost of this component is adjusted to its value in any year of the P/C/I Period. The Cost Adjustment Factor can, for example, be a contractual rate (sometimes equal to zero) or a rate determined by the agency. It may be different from the general Rate of Increase that represents the escalation to be expected during the Study Period for the purpose of calculating the residual value of the component. If the study is performed in constant dollars, the Cost Adjustment Factor should not include general inflation but instead reflect only real rates of change during this period. If the study is performed in current dollars, the Cost Adjustment Factor should include general inflation.

Note to MILCON analysts: If the Beneficial Occupancy Date is later than the Base Date, the Initial Project Cost may be entered at the Midpoint of Construction. This procedure is suggested in the DoD Memorandum of Agreement on Criteria/Standards for Economic Analysis/Life-Cycle Costing for MILCON Design, March 1994. However, the US Army Corps of Engineers in its web site Economic Analysis Reference Guide  recommends that DD 1391 Front Page total request should equal the initial construction costs in the analysis; also, these costs should be evenly divided throughout the lead or construction time. The BLCC5 cost adjustment feature accommodates either method.