Pay Now, or Pay Later
JUSTIFYING A PROACTIVE MAINTENANCE PROGRAM
IN UNCERTAIN ECONOMIC TIMES
LABOR
RISK
REACTIVE
PROACTIVE
Emergency
Routine
Condition-based
(CbM)
perform
maintenance when
indicators show
performance
is declining
Predictive (PdM)
determine
condition to
predict when
maintenance
is needed
Preventive (PvM)
required by code
or warranty
Urgent
Real estate departments have long
been under pressure to contribute to
the bottom line through cost savings.
As companies continue to trim their
budgets, so continues scrutiny of
facilities operations dollars, particularly
for maintenance.
With this pressure comes the need
to make the decision: As an owner,
should you spend money now to
perform proactive maintenance? Or is
it less expensive to run systems longer,
and possibly to failure, to reduce
current labor and material expenses?
The inflection point of any proactive
maintenance decision is not only the
cost, but when to incur it. Pay now, or
pay later?
To start, we need to define the burning
“why” of a proactive maintenance
program. In the United States alone,
an estimated $800 million a year is
spent on facility or plant maintenance.
Performing proactive maintenance is
estimated to save 40 to 60 percent on
operational and reactive costs. Taking
a very conservative estimate of the
bottom half of that range, a 20 percent
savings in maintenance costs yields
$160 million a year, which could go a
long way to attacking immediate and
deferred capital needs. Applying that
math to a property portfolio with a $2
million annual spend on maintenance
yields $400,000 in annual savings – a
significant contribution to corporate
cost-saving initiatives.
To help our clients define the return
on proactive maintenance investment,
C&WServicestakesthatsimpleequation
further. First, we define maintenance as
the activities required or undertaken to
conserve as nearly, and for as long as
possible, the original condition of an
asset while compensating for normal
wear and tear, whether proactive or
reactive.
Decisions that seem straightforward
are more complex when you take
into account maintenance and life-
cycle options. For example, a low cost
roof that needs regular inspection
and maintenance might be a cost-
effective option for a property with a
short-term ownership horizon. But an
owner anticipating a 30-year property
lifespan may select a more expensive
but maintenance-free roof having a
lower total cost in the long run.
While the target of programs such as
Reliability Centered Maintenance (RCM)
or Business FocusedMaintenance (BFM)
is to execute proactive maintenance
activities as 75 percent to 85 of efforts,
we find the reverse is mainly true. The
reality of most clients’ staffing and
budget drive them to operate with more
than half of their efforts as reactive.
18 | Cushman &Wakefield