When is it appropriate to include pre-acquisition costs in the total cost of ownership (TCO)?

Including pre-acquisition costs in the total cost of ownership (TCO) is appropriate when the specifications for the asset have not yet been established. This is because pre-acquisition costs encompass expenditures incurred before making the purchase decision, such as costs for market analysis, feasibility studies, and assessments that help define what the organization needs. Without established specifications, organizations may not accurately assess the full scope of related costs that might be necessary to acquire the most suitable asset.

By calculating TCO with pre-acquisition costs at this stage, decision-makers are equipped with a more comprehensive view of what the financial implications will be. This holistic approach aids in evaluating prospective assets more effectively to ensure alignment with organizational needs and budget constraints.

In contrast, situations like a fixed purchase price, calculating TCO after the purchase price, or a previously owned asset do not inherently address the uncertainty of specification development important for comprehensive cost consideration.