Step 11 Estimate the Life Cycle Costs for PM Scenarios (Civil)

In addition to defining an Inspection Plan for your Civil Equipment, you can also use IMS to define Maintenance Scenarios. Your first step should be to define a number of alternative scenarios, and then estimate the Life Cycle Cost (LCC). Lastly you need to evaluate the Scenarios.

Methodology

The key question here is: “What are the anticipated costs for the alternative PM scenarios?”

Life Cycle Cost and Nett Present Value

The basis for comparing will be the cost over the Life Cycle of the asset. This Life Cycle Costing approach requires reducing costs at different points in the future to their Nett Present Value (NPV) to allow a comparison. This takes into account both interest rate and inflation in an annual discount rate. By applying an annual discount rate to the costs of the PM plan, it is possible to determine the present value of that plan in terms of “money of today”. In this way, the total costs of the maintenance scenarios can be compared on an equal basis, even though the actual expenditures occur in different years in the future. The net effect of using the NPV is that costs that are incurred further in the future become relatively cheaper in terms of “money of today”. A typical value used is 7%.

Life Cycle Period

The timeline for the cost profile typically runs from the year that the study is conducted to the Time Horizon for the Life Cycle. From a business perspective, the costs of a maintenance plan should be minimized (at acceptable risk level) over a certain time window or Life Cycle Period. The first year of this Life Cycle Period is called the Year of Maintenance Planning and the last year of this Life Cycle Period is called the Life Cycle Year.

This Time Horizon for the Life Cycle may be governed by business aspects such as expected life of the plant, expiry date of delivery contracts (e.g. for LNG terminals), duration of budget planning. This time horizon should be determined in agreement with plant management. A typical Life Cycle period that is used in refineries is 15-year.

Example: Cost Profile   

• The study is carried out in 2005
• The life cycle period is 11 years, hence the life cycle year is 2005+11=2016
• The total consequence cost of failure are estimated at USD 100,000
• Failure is expected in 2014
• PM Plan 1 is replacing the asset preventively in 2012, costing USD 60,000
• PM Plan 2 comprises a 3-yearly task that costs USD 10,000 each time.

The following figure gives the cost profile for the Base Case and 2 alternative PM plans.

Cost profile for the Base Case and 2 alternative PM plans.

To ensure the validity of competing PM scenarios analysis including the base case the user should be sure to evaluate the remaining risks of still having the failure scenario even after the PM task is employed.

Software

Reviewing Year-by-Year Costs for Tasks

To review the Task costs:

• Select a Scenario and click yearly costs.
• Review data.
• Repeat for other Scenarios.Review Scenario’s yearly costs

Calculating Life Cycle Cost

To calculate the LCC:

• Select the Overview tab to obtain the overview graph with cumulative life cycle cost.
• Click Edit.
• Review / enter the Investor Discount Rate (percentage that the costs are discounted on an annual basis). A typical value is 7%.
• Review / enter Year of Maintenance Planning (MP).
• Review / enter Test Year (this is the Life Cycle Year).
• Click Save to update the graph.

The cost profiles for the new Scenarios and the Base Case are shown on the graph.

Review and edit Investor Discount Rate, etc.  The cost profiles are shown on the graph.