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Facility Management Services: In-Service
“Deferred Maintenance” – the Cash
Flow Killer
March 19, 2015
Definition – “Deferred Maintenance is a formal or informal listing of
unaccomplished maintenance tasks. Such situations arise because of
shortages of funds, personnel, or specific management practices”.
Source: The International Facility Management Association (IFMA)
Wikipedia - Deferred maintenance is the practice of postponing
maintenance activities such as repairs on both real property (i.e.
infrastructure) and personal property (i.e. machinery) in order to save
costs, meet budget funding levels, or realign available budget monies.
The failure to perform needed repairs could lead to asset deterioration
and ultimately asset impairment. Generally, a policy of continued
deferred maintenance may result in higher costs, asset failure, and in
some cases, health and safety implications.
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Why Deferred Maintenance is sometimes called a cash flow killer?
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Take a car for example, if the engine is not checked, and changed
periodically, the engine will eventually seize and fail. Instead of a few
rupees to change the oil and filter, the entire engine would have to be
replaced – this results in having to spend much more finances than
necessary not to mention the service inconvenience of not having the
vehicle!
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When is this important to address Deferred Maintenance?
If the maintenance is not addressed as and when required, it the cost
to maintain is deferred, builds up, and increasingly increases the risk
liability for Kohinoor and our customers.
Facts – Corrective Work Orders – should be completed in 2-5 days.
Urgent Work Orders which are asset failures which pose imminent life
safety risk or may interrupt business continuity should be addressed
within hours.
What can be done to proactively stay ahead of Deferred
Maintenance?
1) Repair and maintain assets when they fail.
2) Regularly Conduct Facility Audits.
3) Conduct Predictive Maintenance on Technical Equipment
“Deferred Maintenance” – the Cash Flow Killer………………Page 1 of 3
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Facility Management Services: In-Service
Examples of predictive maintenance are:
a) Thermography Scans – Scans the component for unusual
heat generation via infrared radiation. Excessive heat can
cause a fire, as well reduce the effective life cycle, increase
operating costs, and interrupt service delivery to our
customers.
b) Power Analysis – Effectively measures Power Quality which
if not addressed can impact motor life longevity, realize
transformer faults, overheating of electrical wiring (fire),
and greater operating costs.
c) Vibration Analysis – Measures the extent of the vibration
for a motor, or mechanical device which if not addressed
could increase operating costs, and reduce the intended
life cycle of an asset.
d) Oil Viscosity Test – Measures the quality of oil to engine it
is operating within defined parameters which if not
adhered could reduce the asset life cycle.
e) Air Quality Test - Sampling and analysis of Indoor Air for
the parameters Temperature, Relative Humidity, Carbon
Dioxide, Carbon Monoxide, Oxygen, Nitrogen Dioxide,
Sulphur Dioxide, Respirable Suspended Particles, Total
Volatile Organic Compounds (TVOC), Formaldehyde,
Hydrogen Sulphide, Airborne Bacteria, and Chlorodiene.
Analysis of these parameters can lead to proactive
detection of Sick Building Syndrome (SBS) or Building
Related Illness (BRI).
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The above photo is thermogram shows a fault with an industrial electrical fuse
block.
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“Deferred Maintenance” – the Cash Flow Killer………………Page 2 of 3
Facility Management Services: In-Service
How bad is the state of deferred maintenance at my facility?
There is a grid called the Facility Condition Index or FCI. To determine
the complete value of the Deferred Maintenance, an engineering firm
could be hired to conduct a Building Condition Assessment.
The Current Replacement Value (CRV) is determined by the current cost
(₹/$) of replacement for the facilities’ fixed assets. This would not
include rolling inventory such as chairs, desks, etc.
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The Facility Condition Index formula is expressed as a percentage:
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FCI =
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Amount of Deferred Maintenance (INR)
Current Replacement Value (CRV)
For example,
$21,000,000 = 11.6%
$180,000,000
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Facility Condition Index Scale
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Good: Under 5%
Fair: Between 5-10%
Critical: Over 10%
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How much of my budget should be allocated towards Maintenance?
Typically in a western context, the amount of dollars allocated to
maintenance represents 2-4% of the Current Replacement Value. While
many countries are still developing their benchmarks, but they are
working on it!
Essentially when you go back to your facilities and now see deferred
maintenance, assuming your FM systems and procedures are efficient
and effective, you may well require more maintenance rupees to steer
clear of the deferred maintenance iceberg which can quickly become,
the Cash Flow Killer!
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Thanks for sharing your time today.
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We hope it was an investment.
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