After having read the article “What is guaranteed Maintainability?” by Joel Levitt, Springfield Maintenance (http://www.reliabilityweb.com/art06/guaranteed_maintainability.htm), I wonder if users of this forum have comments about their own company’s philosophy?

A friend of mine recently transitioned from maintenance/reliability engineering into an Engineering Procurement Management firm (don’t ask me why ), and he finds that most, if not all, customers want the lowest cost bid with only minimal regard to maintenance and reliability needs. The customers may only specify certain manufacturers components and some layout requirements as a part of the scope, but there is little regard for anything else mentioned in the article by Joel.

The firm he works for supplies to large oil and gas companies. The firm recently had a focus group discussion with their competitors and customers to see how EPM firms could add more value to their services. The customers responded they would be happiest if they could turn the EPM outputs into a commodity driving prices and delivery times down further.

We had a conversation after this focus group discussion and acknowledged from our own experiences that few companies focus on life cycle costing. Perhaps this is a result of:
•Lack of trained resources (a subset of lack of resources)
•Executives not viewing this approach as a lever to improve corporate performance or executives considering that too long a time lag exists (low corporate ROI/NPV or low value advertisement material)

1)I wonder if others see the similar “lack of interest” from their projects group?
2)I wonder if there is a measurable loss by not performing to the article?

Where I work I have an example of where analysis was performed: we have a corrosion issue that was known in the projects phase, but the ROI of the project was greater by performing the maintenance and replacement of corroded components after the fact (obliviously the expected timeframe of when to act on the corroded components will play a big role in the ROI calculation).

If there is value in performing the initiatives in the article then I assume the value must be measurable. Making selections of those initiatives in the article should be based upon value captured (as in the corrosion example). A company might only “cherry pick” the best initiatives. If there is value capture available then the performance measurements for projects groups will need to be aligned to these opportunities and not just cost/time.

There must be some tax benefits (don't ask me I'm not an accountant) to minimising capital expenditure and instead improving or upgrading on R + M.
As an example we seem to undersize our fan motors and when they burn out up size on the R + M> Seems queer?

Mike

If maintainability aspects are not included, won't be more expensive if these are to be provided in the operations & maintenance phase?

Mike66 and Josh,

I'm starting to think the situations are dependent upon time and the value of money to the company. If the "pain" is felt a long time after startup then the return on investment could be greater than the benefits of doing it right at the project phase. If however there is immediate pain and costly redesigns or maintenance costs then performance in the project phase would be crucial.

Its the value of money today versus the value of money tomorrow.

For example Mike - how long did the inital fan motors operate for? What was the original cost in the project (any package deals?) and what is the cost of replacing the motors today? Do you know what your company values money at 10%, 12% 15%, etc.? Was there any production or environmental losses associated with the fan motor failures?

Jaz,
There are two issues here. The first as you point out relates to the cost of money.

1. $1 today is worth $1.63 after 10 years at 5%, $1.96 at 7%, $2.59 at 10%, $3.11 at 12% and $4.05 at 15% interest rates after a period of 10 years. If the Equipment life is say, 25 years, the corresponding numbers are $3.39, $5.43, $10.83, $17.00, $32.92. What this means is that if you earn $33 after 25 years, it has the same value as $1 today at an interest rate of 15%. So there is a tremendoud pressure to keep initial costs as low as possible. Life cycle costs are easy to convince investors when interest rates are low. As soon as they exceed 7-8%, they become hard to justify.
2. Project managers generally dont have to manage Plants. Their responsibility ends once the Plant starts up and performs to specifications. maintenance costs are not their concern, so if it costs more that is a matter for the maintenance manager! High future costs can be shown to matter little today, so the Finance boys are also happy. here is a case where financial returns do not make good business sense. 20 or 25 years from now, the future maintenance manager has to justify the high costs THAT YEAR, not today, why he is spending so much. But that is not today's Project managers concern.

This might explain such disconnected thinking.

This message has been edited. Last edited by: Vee,

I guess those are the reasons why some key project personnel are retained for the operations & maintenance phase.

However, even if we want to incorporate lifecycle cost or total cost of ownership in the design & procurement, not many are aware of or properly trained in this idea. Should the procurement or engineers or both be trained to push for this agenda?

I heard the idea of lifecycle costing is very popular in the US defence dept when procuring defence equipment and ships. Any case studies to prove the actual results conform to the expected lifecycle cost?

To all,

It is very apparent the knowledge base within this community is substantial – it has both depth and breadth.

Vee,

Your first point is where I was headed. I wonder if you would be interested in giving more of your thoughts with respect to questions I have regarding your second point?

My comment or question is this:
Are historical organizational hierarchies and goals an Achilles heel to asset management – i.e. if we want to have more systems based thinking or see the larger picture do we need to change the mindsets that have been created by past practices? Do we need to change our executives’ ideas about maintenance and in this particular case project management and finance to better leverage our knowledge in asset management.

For example Joel has provided a great opportunity with his list. The goals and rewards of proper project management should encourage a review of this list at the initial stages of a project; not to waste time and money on a ostensibly long winded review, but to see if there are simple opportunities that can be documented as value-added (financially prudent). However we find disconnects where it is the responsibility of the “maintenance manager” to review and make the case as opposed to the project manager’s job. Would it not be ideal to have the project manager receive reward for not only a cost effective and timely project, but one that would have him/her review asset management opportunities? The role of the review may still fall on the maintenance manager, but the responsibility of encouraging proper analysis would be that of the project manager.

Do we have to change the way capital projects are managed? Do we have to change how "run and maintain industries" are optimised – remove the old hierarchies and place shared responsibility on personnel to operate and maintain their assets? Do we need break down the walls that separate responsibilities into projects, finance, operations, and maintenance? Is this already happening? Is this the core competence of the successful capital intensive companies?

I guess that U got look at which direction the baord/CEO wish to move to and the nature of the project and the business climate and outlook.

Each "trade" will have their own vege patch of interests and all of these need to be considered in a balanced way for the project.

Over engineering will kill a good project.

The financials are very dependent upon costs etc.

However, safety aspects, capability and robustness must not be overlooked and the experts must stand up and be counted here and not accept marginal or weak designs. The plant will suffer more than high maintenance costs over the long run. Value engineering and TCO will show this up.

Cheers


James