The lowest bid is not always the best bid. The difference in service life of materials must be weighed against difference in cost. The additional cost of replacing limited-life sewer pipe must be taken into account as the initial investment is planned.

The following equation provides a method for making this comparison on strictly a monetary basis.

EC = P{1+[(1+I)/(1+i)]ⁿ}

Where:

EC = Total Effective Cost
P = Bid Price (Current dollars)
I = Inflation Rate over the period
i = Interest Rate over the period
n = number of years till replacement

Inflation Rate Used
This program uses historic inflation and interest rates together with life cycle analysis to provide an equitable cost comparison between various materials options over the service life of an installation. The inflation factor used is the average inflation rate from 1966-2015 (4.16%) as reported by US Inflation Calculator.

Interest Rates Used
Federal Project Rate - The average Market yield on U.S. Treasury securities at 30-year, constant maturity from 1977-2015 (available on the Federal Reserve Board's website). The current interest rate used is 7.14%.

State / Local Project Rate - The average of 20-year state and local bonds (available on the Federal Reserve Board's website). The current interest rate used is 6.14%.