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OCR for page 514
life cycle costs are being prepared for comparative evaluation, then out-year costs do not
require translation to present value. The reason is Fat out-year cost can equally be evaluated in
out-years such as yearly maintenance cost and yearly operations cost. Since the dollars are being
expended in the specific out-years, this is an "apples to apples" evaluation. To convert future
dollars to current dollars involves the formula:
Where: P = Present value
F = Future cost
i = Interest rate
n =
Interest period
P = F
(1
1
For instance, assuming yearly maintenance cost of a communications system at We 5-year mark
is $100,000 and the interest rate is projected to be 7.5%, then present value is $69,655.
Similarly, if We maintenance cost in the 5th year is defined as current cost, We fixture cost if
given by:
F = P (1 ~ iffy, where if = inflation rate
For the example given, if maintenance cost is given in current dollars and the average inflation
rate is 3.5%, then future cost is projected to be $1 18,769. Thus, interest rates and inflation
factors may be used to adjust cost to a common comparative basis as needed.
A.5.4 Measures of Effectiveness for Communications Technology
Measures of effectiveness for a commun~cadons system include:
· Ability to meet infonnabon distribution needs (geographic points serviced).
Ability to meet bandwidth needs:
Current requirements wig reserve (bps)
Future projected requirements wig reserve (bps);
ONCE NCHRP 3-51 · Phase 2 final Report A5-16
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Ability to support networking functional needs:
· Point-to-mulUpoint
Point-to-group(s)
Point-to-point
Standard ~nternet protocol support;
Ability to support multimedia needs:
· Data
· Voice
· Video;
· Ability to meet information distribution reliability needs (effective bit error rate);
Ability to meet communications availability needs;
Compliance with open standards;
Provisions for open network management standards;
Latency of the network versus latency requirements, as defined by time synchronization and
response time needs;
t
Ability to meet maintainability objectives:
.
Built-~n self test and test reporting
· Repair level and confidence factor
· Network management standards compatibility
· Hot swap-out of changeable electronic modules; and
· Time synchronization, and system synchronization requirements (accuracy and resolution).
Over factors Mat may be important include:
· Limited installation space in a data closet;
.;~NCHRP~.rp ~NCHRP 3-51 · Phase 2 Final Repot 17
OCR for page 516
.
.
Limited floor loading support capability in a data closet;
Limited power availability in a data closet (power budget);
Limited head management within a data closet (maximum heat dissipation); and
Specific interface requirements.
The above may be converted to a definitive set of communications needs. This includes
information routing table with geographic coverage communication loads, media requirements,
and network standards requirements. Thus, magnum acceptable values may be defined.
~ evaluating technologies to meet these requirements, a nominal life cycle cost may be
established based on lowest cost compliant bid. The excess cost over lowest compliant bid may
Men be allocated to excess features and performance. Thus, a definitive value may be assigned
to a feature such as increased data rate. Features may then be evaluated on a cosVbenefit basis.
For instance, if Me basic bandwidth requirement was for a 4-term~nal OC-3 network (155.51
Mbps) urge a cost of $30,000 per terminal or $120,000 for the network (cost of 719 x 10-
$/bps), an OC-12 (622.08 Mbps) communications network was proposed at an added cost of
$6,000 per SONET terminal; then, the cost per bit/second of increased data rate is 5.! x 10-5
$/bps or $24,000 for 46~56 Mbps of additional communications capability. This represents a
savings of 15.! times in $/bps. The benefit can be evaluated in terms of known, future data rate
requirements. If Me cost of modular expansion from OC-3 to OC-12 in Me future is $20,000 per
terminal ($80,000), Men Me cost savings of lineal purchase is $56,000. Current value of
$56,000 is five years at 7% interest rate or $39,927. Thus, the effective savings in current
dollars is $15,927.
Performance parameters can be compared and a cost placed on the performance. Where future
need can be defimtively identified, filture additions versus current procurement can be quantified.
In Me above example, it is very clear Cat a cost savings is denved by additional data rate
capacity. In fact, if the $80,000 per terminal update is considered to be in current dollars, as
quoted by a manufacturer, an additional value may be derived based on inflation. AssuIIiing 3%
inflation, Me $80,000 would be $92,742 in five years. The cost savings would be $64,919
~:WCHR~' NCHRP ~51 · Phase 2 final Report
A5-18
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future value. Considering fixture value, the savings current value would be $46,286 at 7%
interest rate.
Generally Me need for additional capability can be weighted based on probability. A 100 percent
future need probability identification would provide the highest weighting. A 50% probability of
need would reduce the value by the probability factor.
Growth rate trends can be used to project future needs for communications. If a metropolitan
network is growing at the rate of one DS-3 commu~iicadons channel per year, Ten a 10-year
linear projection would indicate We need for an OC48 SONET network in 10 years and an
OC-12 network in four years. What is usually experienced is an exponential growth in
communications bad needs caused by:
Expansion of PCS and Local Area Networks ~ANs);
Integration needs of LANs from various sites;
· Advent of digital multimedia over a common network;
Trend toward Vader bandwidth network devices such as ATM switches operating at OC-3
and OC-12; and
Trend toward switched hubs with 0th band interconnecting hubs (such as switched 10
Base T ETHERNET hubs with 100 Base T ETHERNET backbones).
Thus, linear projections of band needs are generally too conservative.
In summary, requirements can be quantified for procurement purposes and a qualitative value
given to exceeding requirements based on probable needs and comparative costs. If He
procurement approach allows value to be placed on exceeding requirements, then He best
cost/value selection can be made. A single step REP with published evaluation criteria is He
best procurement approach for evaluation of proposed co~nmunicadons solutions and costs.
Exceeding base requirements does have value which can be compared and evaluated.
~,,z,pt NCHRP3-51 · Phase2FmalRepoIt AS-19
Representative terms from entire chapter:
data closet
