AAOM Handbook

Quantity

• One estimate of the cost to implement each potential Service Strategy for each threat. • One Net Present Value (NPV) for the implementation cost of each potential Service Strategy.

Quality

Each estimate shall consider; • all of the labour, materials and contract costs necessary to implement the Service Strategy, including operating and capital expenditure, and • the opportunity cost (i.e. the cost of lost revenue) of implementing the Service Strategy.

Estimate values should be to the same confidence level expected for 5 year expenditure forecasts.

The Net Present Value of (NPV) implementing each viable Service Strategy option shall be calculated. The NPV calculation shall; • be based on total direct expenditure on the strategy option, • include the cost of all actions required to implement the strategy. • be evaluated over the period of the longest service life provided by one of the potential strategy options, • use an interval between service actions equal to the most likely interval to failure for Age Related failure modes and the historical or estimated mean time to failure for non-Age Related failure modes, • use the discount rate applied to capital project evaluation, and • shall conform to the standards used for capital project evaluation.

A database shall be used to record the cost estimates and NPV calculations for potential Service Strategy options.

Time

The cost of potential Service Strategies shall be specified during establishment of a process.

Review and validation of Service Strategies shall be based on the benefit ranking of improvement opportunities identified through analysis of performance.

Resources

The identification of potential strategy options is the accountability of the role specified in the configured flow chart.

© McAlear Management Consultants 2006

Operational Planning: Set Service Strategy

Updated: August 2018

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