(Total cost – Past cost ) / EUL = Annual Contributions
- Past cost = Total maintenance & renewal cost , excluding capital cost = sum of cycle cost ( Cycle cost/ cycle)
- Total cost = Total life time maintenance & renewal cost , excluding capital cost for expected useful life term.
- EUL = Expected useful life.
- Annual contribution = Total annual contribution for the specific year to the reserve fund
What does this formula do:
- This formula gives a estimated provision for a specific year that caters for cyclic maintenance cost, as well as unplanned failures, given the historical pattern.
- Cost provision for unplanned failures can be deduced by deduction the Annualized cyclic maintenance cost from the Annual contribution
- Can be used with replacement consideration by including capital cost and depreciation
It does not factor inflation
It do not directly account for future cost escalation/reduction through the life cycle of a structural item.
It does not factor in STSMa minimum reserve fund requirements
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