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Analyzing Costs - For What Timeframe?

Q. For what period of time do costs need to be assessed? (e.g., how many months or years of cost data do you need to generate?)

When developing a cost analysis, the period of time over which your analysis spans is very important. For multi-year analyses in particular it is important because you need to take into account the time-value of money. In essence, the time-value of money is simply the recognition that a dollar today is worth more to people than a dollar next year. Loan companies charge an interest rate to people and companies that want to borrow money, and these people are willing to pay that fee in order to have the money today instead of in the future. When conducting a cost analysis for digital curation, this principle holds for all parties: the repository, the staff hired, the funding agencies or grantors, and the vendors that provide goods or services that allow the repository to engage in curation of digital objects.

 

Read

  • Levin, Henry M. and Patrick J. McEwan.Cost-Effectiveness Analysis: Methods and Applications. Thousand Oaks, CA: Sage Publications, Inc., 2000.

    Chapter 5, "Analyzing Costs" (88-102) discusses ways to analyze costs over multiple years and also discusses the way in which one can begin to think about risk within a cost analysis.
  • Michel, R. Gregory. Cost Analysis and Activity-Based Costing for Government.Chicago: Government Finance Officers Association (GFOA), 2004.

    Chapter 5, "Time and Cost" (59-80) discusses how to assess the time-value (or net present value) of money when conducting a cost analysis.
  • Venkataraman, Ray R. and Jeffrey K. Pinto. Cost and Value Management in Projects.Hoboken, NJ: John Wiley & Sons, Inc., 2008. Especially Chapter 6, "Cash Flow Management" (127-148).

    Chapter 6, "Cash Flow Management" (127-148)  presents the idea of a "discount rate" and discusses how to calculate the time-value of money for analyses that span multiple time periods.

Last updated on 08/26/13, 9:26 pm by callee

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