{"id":6907,"date":"2021-03-11T16:04:02","date_gmt":"2021-03-11T16:04:02","guid":{"rendered":"https:\/\/swefc.unm.edu\/iamf\/?page_id=6907"},"modified":"2022-03-21T18:52:04","modified_gmt":"2022-03-21T18:52:04","slug":"life-cycle-costing-long-term-replacement-plans-business-case-evaluations","status":"publish","type":"page","link":"https:\/\/swefc.unm.edu\/iamf\/life-cycle-costing-long-term-replacement-plans-business-case-evaluations\/","title":{"rendered":"Life Cycle Costing \/ Long Term Replacement Plans \/ Business Case Evaluations"},"content":{"rendered":"<p>[et_pb_section fb_built=&#8221;1&#8243; custom_padding_last_edited=&#8221;on|tablet&#8221; admin_label=&#8221;Popup &#8211; #undefined&#8221; _builder_version=&#8221;4.8.1&#8243; _module_preset=&#8221;default&#8221; positioning=&#8221;none&#8221; horizontal_offset_tablet=&#8221;&#8221; horizontal_offset_phone=&#8221;&#8221; horizontal_offset_last_edited=&#8221;on|tablet&#8221; custom_margin=&#8221;0px||||false|false&#8221; custom_margin_tablet=&#8221;&#8221; custom_margin_phone=&#8221;&#8221; custom_margin_last_edited=&#8221;on|desktop&#8221; custom_padding=&#8221;0px|||0px|false|false&#8221; custom_padding_tablet=&#8221;|||25px|false|false&#8221; custom_padding_phone=&#8221;&#8221; da_disable_devices=&#8221;off|off|off&#8221; custom_padding__hover_enabled=&#8221;on|desktop&#8221; da_is_popup=&#8221;off&#8221; da_exit_intent=&#8221;off&#8221; da_has_close=&#8221;on&#8221; da_alt_close=&#8221;off&#8221; da_dark_close=&#8221;off&#8221; da_not_modal=&#8221;on&#8221; da_is_singular=&#8221;off&#8221; da_with_loader=&#8221;off&#8221; da_has_shadow=&#8221;on&#8221;][et_pb_row _builder_version=&#8221;4.8.1&#8243; _module_preset=&#8221;default&#8221; width=&#8221;100%&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.8.1&#8243; _module_preset=&#8221;default&#8221;][et_pb_text _builder_version=&#8221;4.9.2&#8243; _module_preset=&#8221;default&#8221; hover_enabled=&#8221;0&#8243; sticky_enabled=&#8221;0&#8243;]<\/p>\n<h2>Business Case Evaluations<\/h2>\n<p>&nbsp;<\/p>\n<p>Because capital projects can be such a significant expense for a system, it is critical that the projects be validated to make sure the project is necessary, all potential alternatives are considered, and the best alternative is selected. To address these concerns, a business case evaluation should be performed that includes the following type of information:<\/p>\n<ul>\n<li>Project Description<\/li>\n<li>Need for Project<\/li>\n<li>Benefits as a Result of the Project<\/li>\n<li>Risk of Not Doing Project<\/li>\n<li>Current Asset Condition<\/li>\n<li>Estimated Useful Life of the Existing Asset<\/li>\n<li>Estimated Useful Life of the New Asset<\/li>\n<li>Probability and Consequence of Failure<\/li>\n<li>Current <span class='et-tooltip'>O&amp;M<span class='et-tooltip-box'>Operations and Maintenance<span class='et-tooltip-arrow'><\/span><\/span><\/span><\/li>\n<li>Capital Cost of Proposed Project<\/li>\n<li>Triple Bottom Line Analysis of Proposed Project<\/li>\n<li>Understanding Condition Curve and if Asset will Appreciate or Depreciate<\/li>\n<li><span class='et-tooltip'>O&amp;M<span class='et-tooltip-box'>Operations and Maintenance<span class='et-tooltip-arrow'><\/span><\/span><\/span> of Proposed Project<\/li>\n<li>Options for <span class='et-tooltip'>O&amp;M<span class='et-tooltip-box'>Operations and Maintenance<span class='et-tooltip-arrow'><\/span><\/span><\/span> to forestall the capital project<\/li>\n<li>Alternatives to Proposed Project, including Non-Asset Alternatives<\/li>\n<\/ul>\n<p>In some cases, there might be opportunities for <span class='et-tooltip'>O&amp;M<span class='et-tooltip-box'>Operations and Maintenance<span class='et-tooltip-arrow'><\/span><\/span><\/span> interventions that can keep the asset in service for some additional time to delay the capital project. These options, cost, and number of years gained in useful life need to be documented.<\/p>\n<p>No matter what the proposed project, there are almost always alternatives. There might be alternatives with different combinations of capital and <span class='et-tooltip'>O&amp;M<span class='et-tooltip-box'>Operations and Maintenance<span class='et-tooltip-arrow'><\/span><\/span><\/span> costs that can be compared to determine whether a project with higher capital cost and lower <span class='et-tooltip'>O&amp;M<span class='et-tooltip-box'>Operations and Maintenance<span class='et-tooltip-arrow'><\/span><\/span><\/span> cost is more advantageous than a project with lower capital and higher <span class='et-tooltip'>O&amp;M<span class='et-tooltip-box'>Operations and Maintenance<span class='et-tooltip-arrow'><\/span><\/span><\/span> cost. There might be alternatives that more closely match community values or alternatives that are more comfortable for the current operators. It is critical that a thorough analysis of all the alternatives be completed and that the analysis is done objectively. All reasonable alternatives should be clearly presented, along with cost and benefit information.<\/p>\n<p>A specific type of alternative that should be included, when feasible, is a non-asset solution. Non-asset solutions are alternatives that address a need without installing assets.<\/p>\n<p>When done correctly, a business case evaluation can take time to complete. Therefore, it might be a good idea to use this process only for projects above a certain dollar amount.<\/p>\n<ul>\n<li>A business case evaluation can have several possible outcomes:<\/li>\n<li>Project should go forward in current year\u2019s <span class='et-tooltip'>CIP<span class='et-tooltip-box'>Capital Improvement Plan<span class='et-tooltip-arrow'><\/span><\/span><\/span><\/li>\n<li>Project should be delayed until a future year\u2019s <span class='et-tooltip'>CIP<span class='et-tooltip-box'>Capital Improvement Plan<span class='et-tooltip-arrow'><\/span><\/span><\/span><\/li>\n<li>Insufficient information was presented in the business case; project should be re-submitted with additional information<\/li>\n<li>Alternatives should be investigated, and the project should be re-submitted with the additional information<\/li>\n<li>A different alternative than the one selected should be chosen<\/li>\n<li>Additional <span class='et-tooltip'>O&amp;M<span class='et-tooltip-box'>Operations and Maintenance<span class='et-tooltip-arrow'><\/span><\/span><\/span> is recommended; the project should be delayed for some number of years<\/li>\n<li>Project should not go forward<\/li>\n<\/ul>\n<p>For assistance with preparing \u201cbusiness cases\u201d for proposed capital projects, see The Business Case Evaluation: A Hands-on Manual in the <a href=\"https:\/\/swefc.unm.edu\/iamf\/life-cycle-costing-long-term-replacement-plans-resources\/\">Resources<\/a>.<\/p>\n<p>[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=&#8221;1_2,1_2&#8243; _builder_version=&#8221;4.9.2&#8243; _module_preset=&#8221;default&#8221; width=&#8221;100%&#8221; locked=&#8221;off&#8221;][et_pb_column type=&#8221;1_2&#8243; _builder_version=&#8221;4.9.2&#8243; _module_preset=&#8221;default&#8221;][et_pb_text _builder_version=&#8221;4.9.2&#8243; _module_preset=&#8221;default&#8221;]<\/p>\n<p>Justifying projects with business case evaluations &#8211; Kevin Campanella, P.E., Assistant Director Asset Management, Department of Public Utilities, City of Columbus, OH\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/p>\n<p>[\/et_pb_text][et_pb_video src=&#8221;https:\/\/youtu.be\/hQL56qy0ilY&#8221; _builder_version=&#8221;4.9.2&#8243; _module_preset=&#8221;default&#8221; border_radii=&#8221;on|25px|25px|25px|25px&#8221;][\/et_pb_video][\/et_pb_column][et_pb_column type=&#8221;1_2&#8243; _builder_version=&#8221;4.9.2&#8243; _module_preset=&#8221;default&#8221;][et_pb_text _builder_version=&#8221;4.9.2&#8243; _module_preset=&#8221;default&#8221;]<\/p>\n<p>With business case evaluations, it is decided early on who will operate and maintain the asset \u2013 Eric Saylor, P.E., Principal Engineer, Project And Business Development Division, Metropolitan Sewer District of Greater Cincinnati, Cincinnati, OH<\/p>\n<p>[\/et_pb_text][et_pb_video src=&#8221;https:\/\/youtu.be\/eBrzDO_ErWQ&#8221; _builder_version=&#8221;4.9.2&#8243; _module_preset=&#8221;default&#8221; border_radii=&#8221;on|25px|25px|25px|25px&#8221;][\/et_pb_video][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Business Case Evaluations &nbsp; Because capital projects can be such a significant expense for a system, it is critical that the projects be validated to make sure the project is necessary, all potential alternatives are considered, and the best alternative is selected. To address these concerns, a business case evaluation should be performed that includes the following type of information: Project Description Need for Project Benefits as a Result of the Project Risk of Not Doing Project Current Asset Condition Estimated Useful Life of the Existing Asset Estimated Useful Life of the New Asset Probability and Consequence of Failure Current <span class='et-tooltip'>O&amp;M<span class='et-tooltip-box'>Operations and Maintenance<span class='et-tooltip-arrow'><\/span><\/span><\/span> Capital Cost of Proposed Project Triple Bottom Line Analysis of Proposed Project Understanding Condition Curve and if Asset will Appreciate or Depreciate <span class='et-tooltip'>O&amp;M<span class='et-tooltip-box'>Operations and Maintenance<span class='et-tooltip-arrow'><\/span><\/span><\/span> of Proposed Project Options for <span class='et-tooltip'>O&amp;M<span class='et-tooltip-box'>Operations and Maintenance<span class='et-tooltip-arrow'><\/span><\/span><\/span> to forestall the capital project Alternatives to Proposed Project, including Non-Asset Alternatives In some cases, there might be opportunities for <span class='et-tooltip'>O&amp;M<span class='et-tooltip-box'>Operations and Maintenance<span class='et-tooltip-arrow'><\/span><\/span><\/span> interventions that can keep the asset in service for some additional time to delay the capital project. These options, cost, and number of years gained in useful life need to be documented. No matter what the proposed [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"<!-- wp:divi\/placeholder \/-->","_et_gb_content_width":"","footnotes":""},"class_list":["post-6907","page","type-page","status-publish","hentry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Life Cycle Costing \/ Long Term Replacement Plans \/ Business Case Evaluations - Integrated Asset Management Framework<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/swefc.unm.edu\/iamf\/life-cycle-costing-long-term-replacement-plans-business-case-evaluations\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Life Cycle Costing \/ Long Term Replacement Plans \/ Business Case Evaluations - Integrated Asset Management Framework\" \/>\n<meta property=\"og:description\" content=\"Business Case Evaluations &nbsp; Because capital projects can be such a significant expense for a system, it is critical that the projects be validated to make sure the project is necessary, all potential alternatives are considered, and the best alternative is selected. To address these concerns, a business case evaluation should be performed that includes the following type of information: Project Description Need for Project Benefits as a Result of the Project Risk of Not Doing Project Current Asset Condition Estimated Useful Life of the Existing Asset Estimated Useful Life of the New Asset Probability and Consequence of Failure Current Capital Cost of Proposed Project Triple Bottom Line Analysis of Proposed Project Understanding Condition Curve and if Asset will Appreciate or Depreciate of Proposed Project Options for to forestall the capital project Alternatives to Proposed Project, including Non-Asset Alternatives In some cases, there might be opportunities for interventions that can keep the asset in service for some additional time to delay the capital project. These options, cost, and number of years gained in useful life need to be documented. 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