STEM help / Calculation framework

10.3.7 Cost Trends and Age Factors

If Cost Trends are used, costs are entered by specifying the precise figures in one year – the Calibration Period – and then giving them a trend which STEM uses to calculate figures for all other years. By default, global trends are also applied, but this can be suppressed for a particular Resource by setting Use Global Trends to No. The Calibration Period can be specified separately for each Resource and Service.

Alternatively, costs may be defined as time-series in their own right.

The following equation shows how the unit cost, Ci,n, is calculated for age i of a Resource in year n. In effect, both Resource and Global trends are normalised so that they represent the relative increase/decrease of a cost over time.

where

Cc = calibration unit cost

gn = value of the global Cost Trend in year n

gc = value of the global Cost Trend in the Calibration Period

rn = value of the Resource Cost Trend in year n

rc = value of the Resource Cost Trend in the Calibration Period

ai = value of the age factor for Resources of age i.

Examples

Having Cost Trends that can be applied globally, or to individual Resources, enables the user to have considerable flexibility in establishing costs.

For example, whereas items of equipment might cost less to maintain as engineers become more familiar with them, the cost of the engineers themselves might increase. This could be modelled by setting a reducing Maintenance Cost Trend for an individual Resource, together with an increasing global Maintenance Cost Trend.

Another example might be an expected general decline in Rental Cost for all leased lines, modelled by a global Rental Cost Trend, together with a special arrangement for a certain type of leased line modelled by a Rental Cost Trend for an individual resource.

 

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