Derivation of Life Cycle Cost Model for Selecting Optimum Decisions in Engineering Asset Management

Abstract

It is common that interdepartmental conflict may arise in an organisation to select which decision to be taken, especially in the area of engineering asset management. In this paper, an engineering asset management related case study is discussed and a derivation of a life cycle cost model is proposed to assist finding the optimum decision. Another challenge in this study is a situation that the data and information required to calculate the total cost is unavailable. To deal with this situation, a cost comparison approach is proposed as well as a sensitivity analysis in order to select the optimum decision if the uncontrolled variable in the system nature changes. The result shows that the total cost model derived from the life cycle cost model is capable to assist selecting the optimum decision. A simple spreadsheet based Monte Carlo model is also developed to represent the randomness of the time to failure during the five years of time horizon of the analysis.