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THE MACRO PROJECT

Cost/Risk Evaluation of Asset Management decisions


The European multi-industry collaboration project to collate best practices and
develop risk-based methods for the management of physical assets.
EEC Eureka Project EU1488

What is the MACRO project?


The MACRO project is a 3-year, £1.3 Million reliability, performance and equipment lifespan,
programme of investment in the tools and condition monitoring strategy and methods.
methods for making better decisions. Leading
European companies are collaborating to define Resourcing & Materials Strategies;
the correct Asset Management strategy. Spares and materials stock levels, supply chain
decisions, min/max policies, logistics and
The results combine the best of structured
warehousing strategies.
thinking and range estimating methods with
reliability and risk optimisation techniques into a
completely new way of handling decisions when
data is poor or uncertain.

Who is involved?
Anglesey Aluminium
Asset Performance Tools
Brown & Root Energy Services*
Det Norske Veritas
ICI Eutech
Target Areas
Institute of Asset Management
Project Evaluation, Asset Replacement Intevep
& Life Cycle Costing; National Power
Cost/benefit evaluation and prioritising of Railtrack
modifications, project screening, capex/opex Sector
trade-off, repair versus replacement, life extension
Shell Norway
& refurbishment options.
The National Grid Company*
Operating, Maintenance & The Woodhouse Partnership*
Inspection Strategies; UK Government (DTI)*
Shutdown programming, inspection, test and Yorkshire Electricity*
maintenance intervals, optimisation of efficiency,
* Core Sponsors
Cost/Risk Trade-Off Decisions Asking The Right Questions
All the target MACRO areas involve some sort of cost/risk The MACRO project is developing practical and
trade-off. There are competing pressures to spend less comprehensive guidance on a wide range of decision
types: identifying the optimal cost/risk/performance
and yet achieve more (reliability, performance, safety etc).
combination for project investments, maintenance,
The resulting compromise is usually determined by inspection, shutdown and materials strategies.
subjective judgement or "he who shouts loudest".
As MACRO companies have discovered, however, the The project results for each of the decision types are
available as a combination of training courses, analysis
optimum combination of costs and risks lies in surprising
software tools and procedural guidance to ensure that the
areas - and the value of finding this optimum is enormous. correct total cost/risk factors are considered and total
Investments in better cost control, work control, resource cost/risk impact is quantified.
management and project management might improve
Such guidance includes:
performance by 10, 20 or even 30%. MACRO methods,
in contrast, determine what work is worth doing in • what questions need to be asked, and why.
the first place. If we make mistakes in this area, we risk • how opinions, experience and expectation can be
doing the wrong work 10/20/30% faster! quantified and used to supplement any hard data.
• the identification of cost and risk optimal solutions,
and quantifying the penalties for over and under
Cost / Risk Trade-Off expenditure.
15 Total
• the cost of data uncertainty, and identification of
Current Interval
Impact
specific factors that are worth more detailed
Optimal Interval
Preventive
Costs investigation or collection in the future.
10 Risk
Exposure
• quantifying the performance/cost/risk impact of
£K/Month

Lost changes, investments or new ideas.


Performance
• calculating the premium paid for compliance with legal
5 or other constraints, environmental and safety factors.
• the audit trail between decisions and their underlying
assumptions, with ‘trapping’ of such links for future
0 review and updating.
10 20 30 40 50 60

Overhaul Interval Month(s)


Max Range for Decision
15 Pessimistic
Extreme
The widespread field application of MACRO methods
Optimistic
has already shown that some activities should be Extreme

cancelled or radically reduced and others increased 10 Best


Estimates
by orders of magnitude (with corresponding net
£K/Month

cost/risk improvements).

To quantify the relative impact of risk, safety, costs and 5

other conflicting interests, however, two major barriers


must be tackled:
0
• The available data and quality of that data 10 20 30 40 50 60 70
(what are the probabilities & consequences?) Overhaul Interval Month(s)

• The handling of the components to arrive at the


optimal combination (the economics and mathematics) Analysing The Uncertainty
The problems are addressed by a unique combination Almost all decisions are based on information that is
of structured thinking (using knowledge and experience incomplete. Errors are made because assumptions are
to supplement any hard data that is available) and very needed, and these can be inaccurate. However there is a
sophisticated "what if?" software tools. vast, largely untapped, resource of experience, wisdom
and good sense available in the workforce. MACRO
The technical solutions on their own are not enough:
provides the framework to draw on this knowledge but,
the decision-makers’ motivation, understanding
to do so safely, the inherent fears of accountability and
and ‘ownership’ are vital. MACRO has successfully
the widely varying degrees of confidence must be handled
blended the correct treatment of complex interacting
correctly. MACRO techniques include a compulsory step -
factors with the ‘soft’ issues of understandability and
analysing the uncertainty. This involves stretching all the
practical usefulness.
assumptions to their limits of credibility, and identifying
which factors have, or do not have, an effect upon the
final decisions.
THE DELIVERABLES
The MACRO project provides structured, logical and business impact-based methods in areas of greatest uncertainty and
critical decision-making. It addresses the key Asset Management problems of choosing the right amount of capital
investment, and the most appropriate operating, maintenance and resourcing levels, particularly when available data is
poor or absent.
MACRO methods force the right questions to be asked. They provide consistency and auditability to the resulting
decisions. They introduce the £ or $ sign to technical problems and their solutions. They provide a comprehensive
framework for exploring the business and risk impact of actions before committing to them. Perhaps most importantly,
however, they address the human factors of motivation, ‘ownership’, subjectivity and fact-based decision-making.
All of these objectives are met by the three core deliverables of the project:
Education (understanding the conflicting factors and how each can be quantified/estimated)
Procedural guidance (what tool is appropriate for what purpose)
Cost/risk calculation tools (providing customised, rapid "what if?" assessment of all options)

Operating, Maintenance & Resource Strategies: Project Phase Decisions: Evaluating Alternative
Solutions:
What maintenance is worthwhile, when? Capex vs. Opex, life cycle
Preventive maintenance and inspection / cost, design alternatives, Cost/benefit/risk analysis,
monitoring intervals, condition reaction points, operating, maintenance and changes to design, maintenance
operating and shutdown strategies, performance spares requirements. or inspection intervals,
/ reliability / lifespan trade-off. Making decisions with no operating procedures; ‘what if?’
Spares requirements, supply chain options, history data available. evaluation, comparisons and
contractor services. combinations of solutions.

Asset Management Processes


PROJECT DESIGN
& CONSTRUCTION
MATERIALS
& LABOUR

OPERATING & CHANGE


RESOURCE MAINTENANCE CONTROL
CONTROL STRATEGIES

EVALUATION OF
SOLUTIONS

RESOURCE ESTIMATING
& TASK ASSIGNMENT
PROBLEM/OPP'TY
INVESTIGATION

WORK PROGRAMME
SCHEDULING INSPECTION
WORK & CBM LOOP
CONTROL
PROBLEM/OPP'TY
IDENTIFICATION

PREVENTIVE, DETECTIVE
DATA
& CORRECTIVE WORK
COLLECTION
COST
CONTROL

What Data To Collect, And Why? Inspection / CBM Strategy: Problem Identification &
Investigation:
Condition monitoring and predictive Optimal monitoring and testing
maintenance, inspection / testing to intervals, condition reaction Key Performance Indicators,
detect hidden failures, performance points, alternative monitoring Top-10 reports, Criticality
indicators, reliability statistics, costs methods, cost / risk Assessment, Root Cause Failure
and lost opportunities, safety and optimisation. Analysis, trending,
environmental effects, trends pattern-finding, Statistical
and patterns. Process Control
Cost/Risk Evaluation Case Studies & Field Experience
ASSET PERFORMANCE TOOLS
Tools
Projects and Asset Replacements
APT-LIFESPAN • Over 400 proposals screened in 6 week period,
Life cycle analysis, asset replacement timing, repair eliminating £2.5 Million of unjustifiable expenditure
versus replacement, life extension options, alternative and prioritising business, safety, environmental and
designs, Capex/Opex combinations. welfare investments.

APT-PROJECT • Cost/benefit evaluation of the total budget for


Cost/benefit/risk screening and prioritising of largest oil refinery in the world - reducing average
proposals, modifications, projects, safety, process or evaluation time from 8 hours to 30 minutes and
procedure changes. increasing the quality/auditability of justifications.

APT-MAINTENANCE • Cancellation of £700k material upgrade project


that could not pay for itself.
Optimal maintenance intervals, deterioration
management, reliability, performance and lifespan
effects. Operating & Maintenance Strategy
• Optimal overhaul timing for gas turbines,
APT-INSPECTION HV circuit breakers, pumps, compressors, vehicles,
Inspection, testing and monitoring intervals, optimal instruments and static equipment.
condition reaction points, cost/benefit comparison of
monitoring methods. • Testing strategy for electrical protection devices -
showing justifiable 50% reduction in testing
APT-SCHEDULE requirements.
Optimal bundling of work content and intervals, • Corrosion monitoring programmes shown to be up
shutdown frequencies, shared access and work
to 10x the amount required by the risks involved.
alignment opportunities.
• Heat exchanger, furnace and compressor efficiency
APT-STOCK/SPARES optimisation: radical improvements in performance
Materials and spares strategies, min/max stock, by re-mixing the cleaning and shutdown strategies.
re-order quantities, buffer storage of intermediates,
supplier comparisons, stock ‘pooling’ options.
Spares & Materials Strategy
MACRO NAVIGATOR • N.Sea oil rig: justifying a critical spare (against
Decision guidance on which methods are appropriate prevailing instinct) saved over £3 million in avoided
in which circumstances, structured thinking guidance. failure consequences.

• Industry materials stockist: 60% inventory


reduction with no impact on risk exposures.
A Selection of Available • Electric motor rotors: over £600,000/year cost/risk
Training Courses savings by evaluating stock and supply options.

Concepts introduction to MACRO


cost/risk evaluation techniques. 2 days For further information
Cost/benefit and risk evaluation of
projects, changes and modifications. 1 day Please contact the Project Managers:
Optimal spares strategies. 1 day The Woodhouse Partnership Ltd.
Life Cycle Costing and Asset Headley Common Road
Replacement decisions. 3 days Newbury, Berkshire RG19 8LT.
United Kingdom
Cost/risk optimisation of
Maintenance Strategies. 3 days Telephone: +44 (0) 1635 269999
Risk-based Inspection, Testing and Facsimile: +44 (0) 1635 268812
Condition Monitoring. 3 days