1. INTRODUCTION AND PURPOSE
1.1. Maintenance can be expensive, particu-
larly around powerplants and switchyards
where valuable equipment is located. It is
worthwhile to make an economic analysis of
some maintenance programs, especially
those that: run into large amounts of money
(over $50,000, for example); extend over
several years time; and where there are
alternatives to consider to gain the desired
results.
larly around powerplants and switchyards
where valuable equipment is located. It is
worthwhile to make an economic analysis of
some maintenance programs, especially
those that: run into large amounts of money
(over $50,000, for example); extend over
several years time; and where there are
alternatives to consider to gain the desired
results.
1.2. Economic analysis should not be used
in situations where it is expected to:
in situations where it is expected to:
· Produce results more valid than
input data (garbage in, garbage out)
input data (garbage in, garbage out)
· Make final decisions
· Be applied with exact precision
· Provide relevant solutions to
irrelevant problems
irrelevant problems
· Predict political, social, and other non-
economic impacts
economic impacts
· Substitute for sound judgment,
management, or control
management, or control
A well-prepared economic analysis requires
considerable though, research, and effort. Do
not make an economic analysis when:
considerable though, research, and effort. Do
not make an economic analysis when:
· The analytical effort is not worth the
benefits
benefits
· Legislative directives or management
decisions govern
decisions govern
· Other studies have already been made
(usually by another name)
(usually by another name)
1.3. This bulletin is designed to show mainte-
nance managers, by example, how to make an
economic analysis of alternate ways to accom-
plish maintenance, thus giving them key
information to arrive at the best decisions.
Readers are shown how to analyze typical
maintenance situations by using "discount
factors" to determine the "present value" of
benefits and costs, a very powerful tool to
nance managers, by example, how to make an
economic analysis of alternate ways to accom-
plish maintenance, thus giving them key
information to arrive at the best decisions.
Readers are shown how to analyze typical
maintenance situations by using "discount
factors" to determine the "present value" of
benefits and costs, a very powerful tool to
determine the value of future payments. However,
economic analysis is but one of many factors that
maintenance managers must consider; other
Items such as Reclamation policies and social
and environmental impacts may influence the
decision more. Remember the advice in
paragraph 1.2.; the economic analysis is no
substitute for sound Judgment, management, or
control. Although other factors may override
economic considerations, maintenance managers
should be familiar with, and frequently use,
economic analysis to help guide their Judgments.
This bulletin is for them.
economic analysis is but one of many factors that
maintenance managers must consider; other
Items such as Reclamation policies and social
and environmental impacts may influence the
decision more. Remember the advice in
paragraph 1.2.; the economic analysis is no
substitute for sound Judgment, management, or
control. Although other factors may override
economic considerations, maintenance managers
should be familiar with, and frequently use,
economic analysis to help guide their Judgments.
This bulletin is for them.
2. THE THREE BASIC STEPS OF ANALYSIS
2.1. Economic analysis of a problem Involves
three basic steps: (1) examine all
alternatives; (2) determine costs and benefits
of each alternative; and (3) compare costs
and benefits of the alternatives.
three basic steps: (1) examine all
alternatives; (2) determine costs and benefits
of each alternative; and (3) compare costs
and benefits of the alternatives.
2.2. Examine all alternatives.- For example,
the alternatives of performing maintenance
on power circuit breakers include: (1) perform
periodic routine maintenance and major over-
hauls by force account labor, (b) perform peri-
odic routine maintenance by force account
labor but contract for performance of major
overhauls, and (c) lengthen intervals between
periodic maintenance to the point that occa-
sional repairs are required and depend
primarily on major overhauls every 5th (or
10th) year, etc. The list is limited only by
one's Ingenuity and judgment of prudent
actions. Consideration of alternatives usually
involves one or more of the following:
the alternatives of performing maintenance
on power circuit breakers include: (1) perform
periodic routine maintenance and major over-
hauls by force account labor, (b) perform peri-
odic routine maintenance by force account
labor but contract for performance of major
overhauls, and (c) lengthen intervals between
periodic maintenance to the point that occa-
sional repairs are required and depend
primarily on major overhauls every 5th (or
10th) year, etc. The list is limited only by
one's Ingenuity and judgment of prudent
actions. Consideration of alternatives usually
involves one or more of the following:
· To do maintenance or to do nothing and
accept occasional breakdowns
accept occasional breakdowns
· To repair or replace damaged equip-
ment
ment
· To buy or lease special services or
equipment such as communication cir-
cuits, computers, and test/inspection
services
equipment such as communication cir-
cuits, computers, and test/inspection
services
· To do manually or by machine (is the
program labor intensive or capital inten-
sive?)
program labor intensive or capital inten-
sive?)
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