Home        About       Blog      Contact
14

Return on Investment (ROI)

A figure of merit used to make decisions relating to either:


A.  Maintenance ROI
The maintenance ROI has two components, relative to the two objectives of maintenance, as follows:
Some maintenance tasks have a demonstrable Return-on-Investment (ROI) and a measurable Time-to-Value (TTV).  For example, we wash the atmospheric dirt accumulations on the inaccessible windows and balcony railing glass so that the occupants of the building can immediately enjoy the views from their suites. The TTV is instant and the ROI is indisputable.  This glass cleaning task satisfies the first part of the definition of maintenance in that it keeps the asset’s function above a minimum acceptable level; however, it has no impact on helping the asset to “reach” the end of its useful life or to “extend” that life. Cleaning the glass is a legitimate maintenance activity that presents a compelling business case to the owners and is therefore seldom compromised in an annual maintenance budget. 

On the other hand, there are many legitimate maintenance tasks that fall into a different category because they do not (yet) have a clearly defined ROI or TTV. They are recommended by manufacturers and consultants but is not accompanied with a quantified statement of probabilities and consequences. For example, we may de-energize our transformer and blow out the dust every three years but there is little in the published literature to quantify how this task helps, in a measurable way, to ensure that the transformers will “reach” the end of some pre-defined life expectancy or may, in fact, “extend” the life of that asset.  While it has been empirically demonstrated that dust traps heat, and there is consensus among electrical engineers that the de-energized service is a necessary task that has efficacy, the ROI and TTV remain ill-defined. As a result, the layperson building owners, who approves the maintenance budgets, may be inclined to underfund these types of activities. 

It will take many years, if not decades, for the engineering disciplines to more precisely quantify the ROI and TTV of certain types of maintenance tasks. The author is personally confident that emerging diagnostic technologies will continue to help with this problem of quantification and return a more compelling business case for certain maintenance activities. In the interim, it is helpful to explore the fine distinction between “reaching” life and “extending” life, which provides building owners, managers and operators with meaningful insight into some risk management principles to secure the necessary and sufficient maintenance funding. 

In order to more fully articulate the concepts of “reaching” life and “extending” life, we will also explore the relationship between the Probability of Failure (PoF) and the Consequences of Failure (CoF) of an asset.

Maintenance ROI is achieved through the lowering of the Probability of Failure (PoF).


B.  Capital ROI
Capital ROI, in the form of asset replacement, has a few value metrics, as follows:
  • The new asset has a lower lifecycle cost then the old asset
  • The new asset has a longer service life than the old asset
Capital ROI is achieved through the mitigation of the Consequences of Failure (CoF).

After years of careful planning and stewardship, I. Care and his facility are now aligned.
Fig. After years of careful planning and stewardship, I. Care and his facility are now aligned



1
Window washing

1 1
Floor polishing                            Powersweeping




































1  Roof renewal project
Fig. Exterior painting project    Fig. Roof renewal project.

1  1
Fig.  Repiping project.               Fig. pool resurfacing project.


See also:


(c) Copyright Asset Insights, 2000-2013, All Rights Reserved - "Insight, foresight and oversight of assets" Google