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Forces of Retirement

Any factor that impacts the life of an asset. In other words, the Replacement Drivers. The four primary forces of retirement are: 


A. The Six Forces

1.  Physical

Some of the forces of retirement are controllable (such as misuse & abuse) and others are not (such as the weather). The primary physical forces of retirement are organized into two broad categories and listed below.

      Uncontrollable
        Controllable
  • Misuse and Abuse
  • Quality of Maintenance
Physical deterioration includes, for example, the blisters on a roof assembly (“P”) and the eventual leaks (“F”) are mapped along the P-F Interval to help owners find an appropriate balance of time-based maintenance and condition-based maintenance strategies during the pre-P and post-P periods.

Many building owners have the misguided  impression that it is necessary and prudent to replace their tangible capital assets, such as roofs and boilers, at an optimal interval (“just-in-time”) before their physical condition has deteriorated beyond a certain minimally acceptable level. Physical degradation, however, is just one facet of a multi-faceted story that presents owners with myriad opportunities.



2.  Financial
Some of the primary financial forces are retirement of assets are listed below:
Economic obsolescence includes the arrival of more efficient  products in the local market (“P”), such as pumps with variable frequency drives and the pre-emptive steps to receive approval from the local utility to implement energy efficiency measures and receive a rebate through a product incentive program before funding expires (“F”). The paper identifies classes of assets (the defenders) that are susceptible to this form of obsolescence and some of the alternatives (the challengers).


3.  Legal
Some of the concepts associated with the legal forces of retirement of assets are listed below.
Legal obsolescence is legislation, or other directive, issued by an authority having jurisdiction, resulting in the prohibitive use of certain assets.  To illustrate this force, the paper reviews how the announcement of a recall (“P”) of a certain deficient asset, such as certain sprinkler heads, leads to the negative impact on insurance coverage (“F”) and necessitates renewal. The efficacy of statutory maintenance on fixed-time intervals during the P-F interval is also considered.


4.  Technological
Some of the concepts associated with the legal forces of retirement of assets are listed below.

 Knowledge of the emerging difficulties in procuring replacement parts (“P”) for certain assets (such as fire alarm panels and elevator controls) helps owners understand the justification for modernization projects (“F”) and to plan accordingly.


5.  Functional
Some of the concepts associated with the legal forces of retirement of assets are listed below.

The renewal of an asset when it no longer meets the needs of the space users. This force is more prevalent in the non-residential sectors.



6.  Aesthetic  Forces
Some of the concepts associated with the legal forces of retirement of assets are listed below.

This occurs when an asset is no longer desirable to the owners because it has gone out of popular fashion. For example: “When we replaced our lobby floor (“P”) we also replaced the lobby furniture (“F”) as it appeared dated and did not match the new aesthetics”.  


B.  Management of the forces

Stakeholders should be reminded of the significance of other “forces of retirement” that are equally important and compelling. Failure to consider the other “forces” will diminish the asset manager’s efficacy at making realistic forecasts and developing prudent asset replacement strategies.

1.  Management Across Different Assets.

2.  Management at Different Life Stages

These “forces” affect assets to varying degrees at different stages in their respective lifecycles, and suggests a method for cross referencing the forces against the points of Potential Failure (“P”) and Functional Failure (”F”) along the P-F Interval. The figure alongside provides an outline framework for developing strategies for risk mitigation in three time periods in the lifecycle of an asset: 

Anticipating these “forces” and developing optimal intervals for asset renewal is both an art and science. While the P-F interval brings methodological rigour to the challenging field asset renewal policy, adoption of these principles will vary depending on factors such as the type of building occupancy, the owners’ target operating standard and the sophistication of the asset management team.
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Fig. Environmental exposure as a force of retirement.

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Fig. Water damage as a force of retirement.



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Fig. P-F curve indicating the relationship between the forces of retirement and the points of potential and functional failure of an asset.


Chessboard analogy to illustrate the forces of retirement impacting upon the assets in a building
Fig. Chessboard analogy to illustrate the forces of retirement impacting upon the assets in a building.

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Read short article on the forces that drive the replacement of assets. 

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