Would you recommend using funds for an energy or maintenance project?

I think we need a lot more detail on the two projects.

I have to manage maintenance so I like fixing the broken management system.  If I paid the bills out of my pocket, I might like the energy project.

Calculate the NPV of each option and choose the one that's the most lucrative.

Too many unknowns calculate NPV?  Then there is no "right" answer, In my humble opinion.

There's no doubt that the most effective use of the funds would be to establish an on-going predictive maintenance program. If the state of the maintenance currently being done is less than what it should be, money is being continually wasted through equipment breakdowns, inneffective utilization of energy resources, continual lack of effective productivity and waste. Investment in an energy project at this point would be a band-aid with a short life expectancy.

Get comfortable with the idea that an effective maintenance program saves you far more than what it will cost. Once you;ve established good maintenance practices, further investment in an energy initiative will yield sustainable savings. You may even find that with the money saved through effective maintenance you may be able to fund some, or even all, of the energy initiative.

Train your staff (www.napenational.org) and allow them to do what you've hired them for. It will pay long-term dividends!

Thanks for your reply!

I agree, my question was (purposley) vague.

There  is data out there that shows, like MajorMark points out below, that investing in proactive maintenance management can save money over time.  However, it is culturally acceptable within most organizations that reactive maintenance is the norm. 

I understand the "maintenance is not a profit-center" discussion.  However, energy management does not seem like a profit center, yet it is more culturally acceptable.  

I still say there's no "right" answer without numbers to convince me.

And I'm a big fan of maintenance programs.

Angela, I believe that Ryan is correct that not enough information is given to answer the question you propose properly.  I like the other comments about fixing maintenance management before tackling an energy project because savings in the management end will also lead to savings in the long term, too, and may be also lead to energy savings as another benefit.  Energy savings are always a good thing, but it is necessary to remember that there is normally an up-front cost required to capture any savings, so the net cost savings are not as large as what the energy savings dollars calculated will lead you to believe.  Any equipment installed as part of an energy savings project also has a limited lifetime, so when you factor in replacement costs after a number of years, the net cost savings tend to become even smaller.  One way to calculate costs in an energy project is to use life cycle costs pro-rated annually, so that an annual rate of cost savings can be obtained.  We are thnking about installing a large number of sensor switches that would turn off closet and office lights, a project that would lead to immediate electricity savings but have a payback period of three to five years, not counting any switches replaced if there are any failures.

Dick Stutzman, Bridgewater Retirement Community, Bridgewater, VA

Angela,  I agree with Ryan.  I am a huge fan of maintenance programs.  Unfortunately sometimes it is a "hard sell" to upper management because they cannot physically see the benefits of predictive and preventive maintenance and the expense costs are quite significant.  However by ending up in a reactive position due to equipment failures you may be charged more for the parts needed, the cost to expedite delivery and potential overtime charges for the manhours to repair the equipment. 

Without having any real specifics, the scenario given sounds like the equipment is old and way past its life expectancy and reactive maintenance has been long-term with funds spent haphazardly.  I would suggest developing a detailed cost analysis before making any decision.  In order to get the "best of both worlds" during maintenance the manufacturer might be able to retrofit existing equipment to obtain better energy efficiencies.  You would be surprised to see how many manufacturers are willing to negotiate a cost to achieve both objectives.  I think the industry is seeing more and more how these 2 topics go "hand in hand"

There's no doubt that lobbies, elevators and hallways always receive a "higher than fair share" of maintenance budgets due to their asthetic values, and "green programs" are cool right now. One energy project that would make sense is the installation and utilization of electrical sub-metering. The M&V capabilities gained here can help facility managers state their case for good maintenance training & programs by helping illustrating the actual impact of work performed. The financial justifications are there; we just need to get better at presenting a justification for expenditures made. Facility managers and engineers who have successfully learned to study and understand their energy bills are becoming quite astute at this practice.

Here's my two cents,

In the general scenario it was a facility executive that you would be providing a recommendation to regarding energy savings or moving away from reactive maintenance.  Two things come to mind. 

First, an executive will be mainly concered with shareholder value; i.e. expanding operating margin.  So you would need to have specific projects in mind and you would need to be able to provide a reasonable economic analysis to develop a recommendation between two or more alternatives.  The alternative that provides the greater return on investment will be the one that would most interest a facility (or any) executive.  Any project that took more than two years to recoup its cost, or that had something less than a 20% annual ROI would probably not be all that interesting.  Most firms have investment standards such as these for weeding out non-starters.

Second, the scale of the funding that you mentioned ($50k to $100K) is significant, but in the big picture, is not likely to provide sufficient funding to move most organizations from a reactive to a preventive, or proactive maintenance culture in a top down fashion.  Truely moving away from a reactive culture will not happen by just throwing money at it.  There needs to be a well communicated culture change  plan and discipline by supervisors, managers and executives in supporting the plan.

Of course $50K to $100K can provide good seed funding for a maintenance manager to initiate some preventive or proactive activities; this can often be leveraged because it may generate increased interest while also improving operating margins.  

You could certainly purchase some predictive maintenance equipment to help reduce costs, or fund an energy efficiency project.  But going back to the business focus, whatever you recommend for a project, it should be the project that will have a reasonable probability of being the best return on investment of all the prospective projects.  Depending on the facility (university, hospital, manufacturing) there may be things that improve customer satisfaction, increase compliance with regulatoy issues, or other benefits that can also improve operating margins.

Hope that helps,

Tom

This is an excellent topic Angela. I have a reputation of sorts as a Facilities gunslinger. I am currently working at my third company with facilities that have been run to failure. I have been FM for a large public electric and water Utility in western Oregon for a little over a year and half. The properties are multiple sites with multiple buildings all of which suffer from twenty years of deferred maintenance. I was recruited to turn this around.

I always begin with a facilities audit, creating a dashboard  with an analysis of all equipment and the entire infrastructure from foundation to roof including roadways, parking and landscaping. I make a report on everything that is past it's functional life cycle. I present this to upper management as a three to five year plan with recommendation on replacing oldest equipment and systems first with energy efficient replacements. For example with twenty year old HVAC equipment it is easy to justify by showing a three to five year simple payback. Our Head Quarters building with 100,000 square feet had $78,000 of equipment that was beyond life cycle. Replacement with energy efficient equipment, DDC controls and the implementation of a simple CMMS can return that cost easily in energy savings within three years. It is an easy sell, there are not many money crunchers that would pass this up. This could be what you could do with your small budget.

This process of facility analysis will show overhead how to strengthen your facility operations and improve reliability. This will also allow you to present results to senior management with confidence that your facility is operating at peak efficiency. It can also provide you with a comprehensive maintenance plan that will prepare you and your facility to meet tomorrow's challenges. 

Good luck Angela,

Nick

If you want $ from the "suits" do NOT use the words "preventative maintenance" use the words "Capital Asset Protection".

I think it all depends on the amount of money available and the amount of maintenance equipment required to be maintained. Not having a maintenance program is like driving a car with no oil change and no tune up. Eventually it will cause catastrophic long term damage that requires more money.  That’s not to say that even with a good maintenance program you’ll never have equipment issues to deal with. After all it is mechanical equipment.

I also think you need a good balance of energy management, maintenance, and equipment repairs. The best way to do the energy side of this is to go energy efficient as you replace the maintenance neglected equipment during failure or post failure.  Then as the old becomes the new you must keep up with the maintenance on the new equipment.

I don’t think its rocket science, just common sense and cost vs. benefits.

Thanks,

Todd

Money spent towards energy project would also enhance the mainteanace projects at the same time. For example if your flourescent lamps ballsts have not been replaced for fifteen years and you are replacing it a high rate due to frequent failures, it would be better to spend the money in retrofitiing new rapd start ballsts that are energy efficient, that way at least for ten to fifteen years you want to have replace them saving your maintenance crew and budget.  It will also reduce lamps failures due to newer and more energy efficient ballasts.

Preventative maintenance has been proven to be more cost effective than reactive maintenance over the long run and is crucial to a smooth running building to avoid interuptions in production that could negatively effect production and lead to actual losses in revenue.  There are some energy management providers, my company being one of them, that offer sustainable energy management programs on a shared-savings basis.  I would use the money toward the maintance management project and have the energy management program underwritten by the consultant by entering into a shared-savings or "performance-based" contract.

Tiffany Slattery

Jorgensen Facility Services (www.RoyJorgensen.com/Facilities)

Irvine, CA

Energy saving projects and green campaigns need preventive maintenance too or soon they are not performing as expected and your ROI will not be realized.

My suggestion: Identify the current critical PM needs that will deliver the greatest return (while being manageable) and keep mission critical assets up.  Begin a transition from reactive to proactive. You can't just flip a switch, it will be a progression from reactive to proactive. Then, with the proper PM framework in place (which will require a significant behavioral change in the organization), you can implement new programs that, to be effective long-term, will need to be maintained.

Otherwise you are ultimately throwing good money after bad.

-- Jeff