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Replacement Analysis


The study of the planning, rationale and execution of the effective replacement of an existing asset, such as a roof or a boiler, or a group of assets, with a new asset(s).

The scope of the analysis includes, but not limited to some of the following:
  • The timing of the replacement.
  • The business case for the replacement
  • The preparations for the replacement.
  • The costs of replacement.
  • The procurement process.
Replacement analysis is a broad topic that can be organized, for discussion purposes, into six general facets, as follows:

The following series of questions illustrate some of the challenges in the decision-making process surrounding the replacement of assets:
  • How do we know that it is absolutely necessary to replace the asset?
  • Can we do anything to extend the life of the asset and postpone the project?
  • What preparations need to be made when replacing large and expensive assets?
  • How much advance notice will we be given before having to replace the asset?
  • Will we have enough money for the project?
  • What will happen if we do not replace the asset or replace it with something different?



A.  The Replacement Forces ("Why?")

The first facet of replacement analysis requires an understanding of the "forces" that drive the replacement of assets. This understanding is necessary regardless of whether an asset is in imminent need of replacement of whether that replacement is many years in the future.

Essentially, it asks the question: "Why do I ever need to replace my assets?". 

These are globally referred to as the "forces of retirement" and includes the following:
The deterioration and eventual replacement of assets is an inescapable reality. However, the rate at which the deterioration occurs can be regulated. 



B.  The Replacement Motivations ("What if?")

The second element of replacement analysis is an understanding of the effects of the forces of retirement and why we cannot ignore these forces.

This facet asks the question: "Where is this going to affect us? What is it that requires me to replace my assets? What will happen if we dont do it" 


Each of the six above noted replacement drivers
are evaluated against a series of metrics, which are summarized below:          
    1.  Physical Effects

          What we want...
           What we dont want...2.  Financial Effects

           What we want...
    • Preservation of the real estate investment
    • Economies of scale
    • Return on Investment (ROI)
    • Loss Prevention
    • Lower costs
    • Resale value and marketability
            What we want to avoid...
    • Higher Insurance Deductibles
    • Wasteful spending
    • Inefficiencies
    3.  Legal Effects

           What we want
          What we want to avoid..
    • Litigation
    • Fines and penalties
    • Accidents and injuries
    4.  Environmental Efffects

          What we do want...
          What we want to avoid ...
    5.  Operational/Social Effects

           What we want...
           What we want to avoid...
    • Stress
    In other words these are the failure effects and unintended consequence that are to be:
    • Avoided/Prevented
    • Mitigated
    • Managed over the lifecycle of an asset.
    Conditions or circumstances that compel/motivate the owners to replace an asset. These drivers are the owners response and attitude to the failure effects.



    C.  The Replacement Paths ("When?")

    The third facet or replacement analysis requires an understanding of the path of deterioration of an asset over its useful life.

    Essentially it asks the question:
    "When will we need to reasonably replace the asset?"

    Various deterioration models have been developed by engineers and other disciplines to map these paths. Listed below are some examples of these models:
    Failure Analysis
    A study by
    Nolan and Heap identified six failure patterns, as follows:
    A study at Iowa University identify failure patterns with classes of 31 Iowa Curves, as follows:
    Model


    D.  Interim Preservation Motivations ("What if? / How can we...?") 

    The fourth facet of replacement analysis endeavours to evaluate the role of maintenance and preservation and steps that can be taken over the life of the asset.

    It asks the question: "What can we do to leverage the full life from our assets and delay the replacement as long as reasonably possible?"

    This requires an appreciation of two concepts:
    Preservation strategies require an understanding of the role of the two broad classes of maintenance:
    Each of the two classes of maintenance can be organized into four models: Listed below are some of the asset management principles for preservation at different stages during the life of an asset

    E.  Replacement Policy ("How?")

    The fourth facet of replacement analysis considers the owners attitude towards the timing of and preparations for the replacement.

    This facet asks the question: "How do I prepare for the replacement of my assets?"

    There owners attitude to replacement, and development of a replacement strategy is affected by the following:
    Replacement policies can be organized into two vary broad categories as follows:
    The body of replacement policies are listed below.

           Group 1: Preventive Replacement

           Group 2: Failure Replacement: These two categories are managed with the following conceptsOnce the owners have a replacement policy and an interim preservation strategy that matches the replacement policy, it is a matter of waiting out the period until actual replacement occurs.

    We now turn our attention to the final facets of replacement analysis that look to the decisions surrounding the new asset.




    Phase B:  The New Asset

    F.  Replacement Strategy ("How much?")

    The second phase of replacement analysis concerns itself with the selection of  a new asset - the replacement strategies. We are no longer focused on preservation of the old asset and we turn our attention to the new asset.

         Scope of work
          Type of work
    • Swap-out
    • Rebuild
    • Overhaul

    A. How much money do we need?
    Replacement Costs, such as:

    B.  How much money will we have?
    The final aspect of replacement analysis considers how the owners are going to pay for the project. Listed below are some concepts that may be useful in this regard.


    F.  Replacement Logistics ("Who?")

    The sixth facet of replacement analysis is concerned with the replacement logistics - ie., the  actual design and execution of the project. In other words, what are the final steps to be takes as we get close to the point of Functional Failure  {"F") and during the implementation.

          Before the Event ("F")
          At the Event ("F")
    The two classes of replacement strategies and summary explanation of the five alternative replacement strategies.
    Fig. The two classes of replacement strategies and summary explanation of the five alternative replacement strategies.


    1
    Fig. Elevator relay controls replaced with elevator solid state controls


    1
    Fig. Polyurethane roof (12 year life) replaced with upgraded SBS roof (20 year life).


    Network diagram of alternative asset replacement strategies.
    Fig. Network diagram of alternative asset replacement strategies.


    VFD retrofit
    Fig. Triplex booster pump package replaced with package that includes VFDs.


    Sample distribution of the percentage of assets under each of the five replacement strategies - the replacement mix.
    Fig. Sample distribution of the percentage of assets under each of the five replacement strategies - ie., the replacement mix.


    1  1
    Fig. Renewal of exterior sealant
      Fig. Pool tank resurfacing


    A decision tree indicating the alternative paths to reinvestment or redevelopment/replacement
    Fig. A decision tree indicating the alternative paths to reinvestment or redevelopment/replacement
    .


    Replacing copper piping (the defender) with pex piping (the challenger)
    Fig. Replacing copper piping (the "defender") with pex piping (the "challenger")


    The forces of retirement mapped onto the P-F curve
    Fig. The different forces of retirement (obsolescence) mapped on the P-F curve.


    Retrofit conversion of tank-type domestic water heating system to boiler-and-storage-tank configuration
    Fig. Retrofit conversion of tank-type domestic water heating system to boiler-and-storage-tank configuration.


    Sprinkler head retrofit due to legal obsolescence arising from a product recall
    Fig. Sprinkler head retrofit due to legal obsolescence arising from a product recall.


    Examples of some types of projects that are considered normal during each of the lifecycle stages.
    Fig. Examples of some types of projects that are considered normal during each of the lifecycle stages.


    Facility Life cycle model indicating get ahead costs
    Fig. Lifecycle model to indicate the stage at which functional obsolescence ("yellow") is most prevalent.


    Retrofit of elevator hydraulic cylinder with PVC corrosion protection
    Fig. Retrofit of elevator hydraulic cylinder with PVC corrosion protection.


    Expert system by cohort to identify obsolescence of elevator components
    Fig. An expert system by cohort to identify obsolescence of elevator components at different life stages.



    Retrofit of a conventional fire alarm control panel (FACP) to an addressable system
    Fig. Retrofit of a conventional fire alarm control panel (FACP) to an addressable system.


    Retrofit of fluorescent strip lighting from T12 to T8 and T5 fixtures for improved energy efficiency.
    Fig. Retrofit of fluorescent strip lighting from T12 to T8 and T5 fixtures for improved energy efficiency.


    Distribution of medium-life assets within each of the eight primary physical systems
    Fig. Distribution of short-life, medium-life and long-life assets within each of the eight primary physical systems.



    Retrofit of overhead gate from spring-loaded to weight-loaded mechanism
    Fit. Retrofit of overhead gate from spring-loaded to weight-loaded mechanism.


    A project implemented in three phases distributed over three consecutive years
    Fig. A project implemented in three phases distributed over three consecutive years.


    Retrofit of acrylic dome skylights to unit skylights
    Fig. Retrofit of acrylic dome skylights to unit skylights.


    I. Care is trying to blend the optimal replacement mix for the assets in his portfolio
    Fig. I. Care is trying to blend the optimal replacement mix for the assets in his portfolio

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