The Lowest Price May Not Be the Lowest Cost
Purchase price is only one part of the total cost. Maintenance, support, upgrades, and downtime can materially change long-term value.
In technology and technical procurement, the quoted purchase price is usually the easiest number to compare. However, it does not necessarily represent the total amount the organization will ultimately spend.
A solution with the lowest purchase price can become significantly more expensive when evaluated across its full operating life.
Purchase Price Is Only the Beginning
- Purchase price
- Installation
- Integration
- Licensing
- Subscription
- Maintenance
- Support
- Spare parts
- Consumables
- Upgrades
- Training
- Energy
- Downtime
- Replacement
- Decommissioning
Together, these costs form part of the Total Cost of Ownership (TCO).
A Simple Example
Option A
Purchase price: THB 8 million
Five-year operating and support cost: THB 9 million
5-Year Cost = THB 17 million
Option B
Purchase price: THB 10 million
Five-year operating and support cost: THB 3 million
5-Year Cost = THB 13 million
Look for Hidden Cost
- Integration
- Interfaces
- Software modules
- Licenses
- Travel
- Preventive maintenance
- Replacement parts
- On-site support
- Upgrades
- Additional training
Before comparing prices, proposals should be normalized so the underlying scope is comparable.
Downtime Also Has a Cost
A system failure may cause production loss, service interruption, overtime, manual workarounds, customer impact, and safety exposure.
What Should Be Compared?
Purchase + Implementation + Operating + Maintenance + Support + Upgrade + Risk Exposure + End-of-Life Cost
Capability + Performance + Reliability + Supportability + Risk
Conclusion
The procurement objective should not simply be “buy at the lowest price.” A better objective is to invest at an appropriate total cost and risk level while achieving the outcomes the organization actually needs. Lowest Price does not necessarily mean Lowest Total Cost—and Lowest Total Cost does not automatically mean Best Value.