Maintenance cost as a share of replacement value

Maintenance cost as a percentage of replacement asset value is annual maintenance spend divided by what it would cost to replace the assets you maintain. It is the most comparable long-run number in maintenance, because it holds up between sites of different sizes and between industries.

The formula, and the two hard parts

Divide total annual maintenance cost by total asset replacement value, and express it as a percentage. Both numbers need care, and the care is the whole exercise.

• •Cost: labour including your own team, contractors, parts and materials. Not capital projects. Not utilities. Not cleaning or security unless your team does them.
• •Replacement value: what it would cost to rebuild the plant and equipment today. Not the book value, which depreciation has made meaningless, and not the insured sum unless it was recently assessed.

Typical ranges

Widely quoted figures put good performers around 2 to 3 percent, with heavy process industries higher and light commercial property lower. Take any published band as orientation rather than as a target, because what is included varies enormously between the organisations quoting them.

The rule that matters: write down your own definition, apply it consistently for three years, and compare yourself with yourself.

A low number is not automatically good

Spending very little on maintenance produces an excellent ratio and a deteriorating asset base. The number only means something alongside a measure of condition, which is why it belongs next to the deferred maintenance backlog and the facility condition index rather than on its own.

What it is good for

• •Comparing sites within your own portfolio, where definitions are consistent
• •Showing the effect of a reliability programme over several years
• •Sanity-checking a budget request: a site asking for a step change should be able to say where it sits
• •Spotting a site quietly under-spending its way into a capital problem

Present it with the condition number

Cost as a share of replacement value tells you what you spent. The facility condition index tells you what state that money left things in. Together they are an argument. Apart, either one can be used to prove almost anything.