Implications of Asset Management on Capital and O&M Financing
Abstract:Asset management is often used to assess asset repair and replacement (R&R) costs and project timing. However, asset management can also be used to reduce overall asset life cycle costs, from creation through disposal. For example, by purchasing technologically advanced assets today, an agency can greatly reduce operations and maintenance (O&M) costs. Although the capital costs of technologically advanced assets may be higher than standard assets, the long-term savings in O&M costs can outweigh the initial increased capital investment, and, over the lifetime of the asset, reduce life cycle costs.
“What-if” analyses concerning timing of capital projects, O&M efforts, and repair/replacement decisions can be used to determine the optimal scenario for project implementation. Other “what-if” scenarios can be evaluated, also based on forecasting the optimal asset replacement point, such as determining the time in the asset's life cycle in which O&M investments should be decreased to reduce the overall life cycle costs of the asset. These time influenced O&M strategies, in collusion with the use of energy efficient assets, greatly reduce O&M costs, thereby increasing the agency's future savings.
Document Type: Research Article
Publication date: January 1, 2006
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