This is the world of unplanned , unexpected, emergency breakages or failures

Lets starts with the basic premises or hypothesis. With any structural asset or item. do we have the expectation that it will, subject to diligent maintenance,  generally maintain it’s operational integrity without major failures through the course of its life cycle. We also accept that, as an item age, the maintenance cost pattern will mirror the degree of degradation .

This expectation in the statistical world as called the “bathtube” probability curve.LTMP clearly explained Bathtube risk


With the realm of managing property structures, are unexpected failures  most often difficult  to comprehend and manage. Unexpected failures are also the most common cause  and result in  insufficient financial provisions and reserves. The degree to which failures are provisioned for determine the success of a LTMP – Long term maintenance plan

By using established metrics,  can we determine and interpret the degree  and extent of failure probability and thus reliably do forecast  in a LTMP.  PMD use these metrics in their LTMP.

Cost elements

This discussion focus on the risk cost element of marginal costs. In a separate discussion will we tackle the other element, namely maintenance costs.

In forecasting need we provision for the marginal cost of a structural asset. The marginal cost is made up of the maintenance cost, plus the risk cost. The risk cost is the cost associated with a failure.

Risk costs

Failures is a reality and can happen at any stage through the life-cycle of a structural item.

There is a distinction between an asset failure that is repairable (non-destructive) and one that is not. Whether an asset’s failure is destructive or non-destructive has significant implications for determining the end of economic life of the asset. The reason is that a destructive failure carries with it some offsetting benefit – a new asset – that a non-destructive failure does not.

 Risk is defined as the probability of failure times the consequence of failure. However in the case of destructive failures, the replacement cost of the asset is subtracted from the consequence cost, reducing risk and extending the economic life of the asset:

Risk cost( asset with non-destructive failure)

risk = probability of failure X consequence of failure

Risk cost ( asset with destructive failure)

risk = probability of failure x (consequence of failure – replacement cost)

  • Probability of failure

The failure curve is often called a “hazard rate.” It is a conditional probability curve, defining the annual probability of failure assuming an asset’s given age.

This rate is determined by independent and dependant variables. Independent variables are usually asset class determinants such as type of material, purpose fit,etc. The dependant variables include factors such as, adherence to maintenance requirements and environmental factors, etc. These variables make up the health index of an item.

Using historical and item specific data can we then include an occurence factor to the probability variable to provision for multiple cycle occurences. In an infant stage this factor us usually less than 1 , with adult stage equal to 1 and aging stage more than 1.

Simply stated the health index(characteristics of the item and the degree of care taking) determine the probability of failure.

From this can we extrapolate the effective age or state (premature failure or extended useful life) of a specific item.

  •  The consequence of failure

Consequences of Failure are the full range of effects that occur when an asset fails. Possible effects include the direct cost related to repair/replacement of the asset and secondary resultant damage,  secondary or indirect costs can include usage interruptions , possible safety or environmental costs.

These consequences are item/asset specific and can vary from item to item. Consequences of failure are often described using multiple failure modes or scenarios.

The Health index or economic life of an item is a factor of the marginal & annualized  life cycle cost, where  the intersection between the two represents the best possible benefit cost ratio and is the point where replacement should be considered.

  • Extending the life of an item past this point exponentially increase cost and decrease value.
  • Force premature replacement equals value lost and equal to variance Between risk cost and EAC
  • By reducing/increasing the risk factor will failure probability and propensity determine the economic useful life resulting in premature (B )or extended life cycle (C )LTMP clearly explained failure risk


See next publication on Understanding maintenance costs.