Operations and Maintenance (O&M)Moving from a Cost to an Advantage
Maintenance is an inherent issue with any building system. The costs of maintenance can be
unpredictable and unsettling for many business / building owners. Anything that has moving
parts will inevitably fail at some point and, as most find out, these components never fail at
“a good time”. The cost of such failures cannot be calculated simply by looking at the invoice
the owner receives from the trade contractor at the end of a repair. When looking at the cost
of any issue, one must include;
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The time it took staff to identify the problem
The time it took staff to deal with the problem
The impact the problem had on the day to day business
The impact the problem had on the customer/ tenant experience
The safety of occupants
The costs incurred by the invoice payment process
There are some other factors that may also impact the overall cost;
1. The efficiency of the systems prior to failure
2. The taxing of other systems or components to compensate for the failure
3. The energy efficiency of the malfunctioning component before failure
In the following paper we will endeavour to explore and explain some of the strategies used
to deal with such situations efficiently to minimize costs and operational impacts while
extending the life expectancy of the equipment.
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Operations and Maintenance (otherwise referred to as “O&M”) is defined by the U.S.
Department of Energy as “the decisions and actions regarding the control and upkeep of
property and equipment”. These are inclusive, but not limited to, the following:
1. Actions focused on scheduling, procedures, and work / systems control and
optimization
2. Performance of routine, preventative, predictive, scheduled and unscheduled actions
aimed at preventing equipment failure or decline with the goal of increasing
efficiency, reliability and safety.
There are three distinct strategies when considering an O&M program;
1. Reactive Maintenance (Breakdown Maintenance)
This strategy can be described as a “run-it-till-it-breaks” strategy. When it breaks, fix
it or replace it as necessary. This can be equated to running a vehicle without
performing regular oil changes. Eventually the oil will break down causing engine
failure.
2. Preventative Maintenance (Time Based Maintenance)
This strategy can be described as a program to maintain equipment in an ongoing and
scheduled manner, usually as recommended by the manufacturer. This approach can
limit the number of “reactive” situations by prolonging the life of a piece of
equipment. This can be equated to implementing a strict schedule of oil changes on a
vehicle based on 5000km travelled.
3. Predictive Maintenance (Condition Based Maintenance)
This strategy can be described as a program to measure the equipment’s
performance in an ongoing manner and using the resulting data to predict and
circumvent failures before they happen. This can be equated to monitoring a
vehicle’s oil level and viscosity on an ongoing basis and scheduling service as the oil
begins to break down.
All companies have an O&M strategy. Some are 100% reactive which usually causes
fluctuating budgets, unpredictable cash flow and often frustrated / overworked personal. As
companies advance, the options of adding a higher percentage of their strategy as a
Preventative or even Predictive become more attractive.
According to the U.S. Department of Energy “O&M Best Practices Guide” published in August
2010, the breakdown of the average O&M programs is as follows:
60%
50%
40%
30%
20%
10%
0%
Reactive
Preventative
Predictive
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The strategies listed each have their own distinct advantages and disadvantages to consider.
In the charts below we compare each:
Advantages
Reactive
Low Initial Cost (especially
when equipment is new)
Less staff to manage initially
(especially when equipment
is new)
Preventative
Overall very cost effective
Flexibility can allow for
adjustment of schedule to
accommodate other work.
Predictive
Increased component
operational life / availability
Allows for Pre-emptive
corrective actions
Increased equipment life
Decreased Part and Labour
Costs
Saved energy cost resulting
from equipment running at
peak efficiency
Reduced equipment or
process failure
An overall savings of
between 12% and 18% over
purely reactive program
Improved safety and
environment
Energy savings
An overall estimated savings
of 8% to 12% over
Preventative maintenance
Disadvantages
Reactive
Increased Cost due to
unplanned downtime
Increased labour costs
(overtime)
Possible secondary failure to
equipment or process
Inefficient use of staff
resources
Unpredictable nature of the
program
Preventative
Catastrophic failures still a
risk
Labour intensive
Performance of maintenance
based on schedule not
requirement
Risk of damage when
conducting unneeded
maintenance
Savings not readily visible
without a baseline/ history
Predictive
Increased investment of
diagnostic equipment
Increased staff training for
analyzing data
Savings not readily visible
without a baseline/ history
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While the reactive maintenance portion of a program can never be eliminated 100%,
studies suggest that the reactive portion of a well planned out program can be brought
below 10% of the entire program when a well thought out combination of Predictive and
Preventative tactics are employed. The change from a fully reactive to a more Preventative /
Predictive program usually has a high initial “change over cost” as years of neglect need to be
caught up to standards while the new programs are put in place.
As the program moves to a more predictive strategy, additional costs for monitors
and other equipment are also incurred. The combination of these added costs and the shear
amount of upfront organization required usually creates a “hurdle” that some company
officials have a hard time surmounting. For those that can see the initial expenditure as an
investment, the rewards come quickly in the way of predictable budgets, manageable work
loads, overall cost savings and operational efficiencies.
The Role of Communication in a Maintenance Program:
Critical to all O&M programs is a system of communication. Some important factors to
consider when designing such a system:
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Document storage that allows all necessary parties to access the identical relevant
information.
Searchable / sortable history and the ability to access a history of work done on
specific equipment or at a specific location.
Tools to communicate common solutions to all necessary parties efficiently.
Standards for updates, timing and labelling to communicate effectively and eliminate
all possible confusion.
Scheduling tools to compound as much work (current with future) as possible into
each trip to site / floor / area (maximizing efficiency while reducing onsite
disruptions). While always important, a well thought out scheduling system will
especially help minimize the initial start up costs of implementation.
Should enable multiple “ongoing commissioning programs” to be synchronized,
avoiding multiple trips and minimizing interruptions to normal business.
An asset management system component will allow accurate budgeting for
replacement costs while saving time auditing sites for existing equipment.
A proper communication system also ensures that the maintenance program can leverage a
building’s schedule appropriately or alternately avoid disruptions during peak or special
usage times. For example, if an operation is being shut down for a short time to perform
inventory, this time may be communicated to the maintenance team to ensure all possible
work is scheduled during this time. Alternately, if a building is being used to host a special
appearance that is predicted to draw large crowds, a maintenance team needs to be aware
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so they can both make sure everything is running at peak levels prior to the event and ensure
they stay away from the building during the event.
The Role of Standardization in a Maintenance Program
Standardization of equipment can play a powerful role in maintenance and dependability
from many angles:
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Allows a level of familiarity to all staff when operating and analyzing the equipment.
Allows organizations to leverage their size during the initial buy and during any
warranty periods.
Helps streamline the ongoing commissioning of equipment, ensuring maximum
efficiency throughout the lifecycle.
Allows for common spare parts to be warehoused and to be available on short notice.
Helps predict end of life strategies and simplify organization-wide solutions.
A system of standardization allows multi-site organizations the most cost effective method of
predictive maintenance (“trend spotting”) as they can review like equipment for common
situations.
Internal versus External
Companies need to stand back and look at what will be required for their needs when
considering a maintenance program. Every company is different; some can justify hiring
internal people to run the programs, perform the maintenance and complete the reporting,
while others find it more effective to outsource the entire program. Some things to consider
when deciding between internal versus external (or a combination of both);
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Is the required expertise existing within your company or is it easily sourced?
Is there enough work to keep staff working full time?
Are there systems in place to facilitate this work?
Are the facilities spread out geographically?
What are the costs involved in tools and test equipment required for the program?
How does this added scope affect the current safety program?
How much research and development will an inside source be able to perform to
maintain knowledge of current technologies?
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How Can Savings be Captured and Reported?
When moving away from a purely reactive program the question often arises:
“How can savings be captured to ensure the company is making the right decision
moving to a preventative or predictive program?”
The question is very valid because in many cases problems are being detected and fixed
before ever affecting the business in a negative fashion. Therefore;
“How does one calculate the savings if the “when and how” the equipment was to
fail is never realized?”
There are several strategies that can be employed to address this requirement;
1. Records of previous year’s maintenance costs through the reactive program can be
referenced. This “baseline” approach can give a very simplistic view of money saved.
2. A program can be put in place where costs for downtime on critical equipment can be
estimated. With this value in hand, staff can report problems found and rectified on
this equipment. The two pieces of information can be combined to calculate a
savings based on avoided downtime.
3. “Cost Avoidance” savings can be calculated based on each of the efficiencies built into
the system. For example, when two items in one location are tackled on the same
trip (i.e. while fixing a doorbell a filter is changed slightly ahead of schedule), there is
a savings to recognize and record for the company.
Environmental/ Energy Programs:
The current buzz in most industries is around environmental or energy saving programs.
Most of these programs fail to include considerations on the O&M side, but rather shoot
straight for “the most environmental” or the “highest possible energy savings”. Companies
can have several different motives for initiating an energy or environmental program, such as
public perception, internal pressures, competitive advantage, or others. All of these
programs need to be able to recognize a financial justification of some sort, such as:
• Higher profits due to public perception
• Return on investment due to energy savings
• Lower cost of doing business through a cultural change.
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Regardless, most programs will eventually affect the equipment being used in a facility.
When the equipment is being considered, someone with expertise in O&M should be
consulted. This makes sense from three standpoints:
1. The person with insight into the company’s O&M will have knowledge into current
spending, plans for upgrades that are currently budgeted for, and problems the
company has already faced.
2. They would also have valuable insight into potential new technologies and different
options for upgrades.
3. Potential O&M savings may factor in to make a return on investment much more
attractive.
Some considerations from an O&M standpoint that may influence decisions on the
environmental or energy management program;
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Will the new technology increase / decrease required O&M spend? Has this been
taken into consideration in the financial calculation?
Is there a baseline on the O&M spend to compare results on a pilot program? Can
results be continually monitored into the future as the program is deployed?
Do the proposed improvements have any safety-related concerns to consider?
Have all possible technologies been considered from an unbiased perspective (i.e. is
the new technology and financial calculation being provided by someone related to
that product?).
Will the new products being considered have a positive or negative affect on current
conditions for staff or for the clients?
Is there an educational component required to be considered along with the
improvements being considered? Has that cost been included in the financial
calculation?
Conclusion
For many organizations, O&M is just another line item on their balance sheet. An
item they can only ‘hope’ comes in under budget each year. For more progressive
companies, O&M can be an item they can attack and plan around using some of the theories
noted above. They can plan, not only to keep costs predictable, but to actually reduce the
costs resulting in a competitive advantage for the organization.
For organizations of any size there can be a large learning curve when setting up a
program for attacking or controlling costs. This learning curve is often seen as a large
expense or risk that can sometimes stall the program’s implementation. To overcome this
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perceived hurdle, it is often economical to leverage the expertise and experience of an
outside partner that has other clients and experiences. Often results from one industry or
customer base can be bridged to shorten the learning curve, leading to faster, more
dependable results while providing economies of scale. Also, through experience, programs
can be staged with the savings from the simple first steps used to fund the more difficult
future steps. The experiences brought in by an outside partner can also be leveraged to
“tuck in” other programs currently being considered to maximize results for all sides of the
budget: improving overall organizational health with minimized financial impact.
If a partner from outside the organization is used, they should be neutral from all
technologies and large enough to be able to stay current with all emerging advancements.
The combination of size and neutrality will ensure the highest probability for the organization
and the chosen partner to find the right solution for the right situation, resulting in the most
efficient and cost effective long term program possible. There are many product options
available in the market today and advancements are being made everyday. Only through
independent and constant research can an organization be confident that the most
appropriate solution is implemented for the situation at hand.
Finally, it is important to remember that an O&M program is never finished. It needs
to be monitored and adjusted on an ongoing basis to ensure a continual positive end result
for an organization. Successful organizations need to change, grow and adapt to stay
relevant in an ever changing environment. An O&M program needs to do the same or it risks
falling back into a steady routine of costly confusion rather than following a strategically
planned execution of maintenance.
Brian Van Herk,
National Roll-Out Manager
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References and figures as per U.S. Department of Energy “Operations & Maintenance Best
Practices- A Guide to Achieving Operational Efficiency”.
For a copy please refer to- http://www1.eere.energy.gov/femp/pdfs/omguide_complete.pdf
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