Abstract: Managing the

Maintenance Budget, Robert

Peffen, 2014

In this article Peffen explains, in simple layman terms, the importance of a well-
developed maintenance budget that both maintenance and non-maintenance readers
will understand, and appreciate the importance of the budget as part of the
maintenance manager’s ability to deliver successful maintenance outcomes to an
organisation.
Peffen notes that controlling maintenance costs against a budget is a key responsibility
of a maintenance manager but the success of the maintenance manager is also
dependant on maintaining or actually improving equipment availability and reliability.
He asserts that the ability of the maintenance manager to control maintenance costs
relies on how well developed the maintenance budget is, and that the quality of the
maintenance budget can have a dramatic positive or negative impact upon the
maintenance costs and outcomes of a business.
Peffen notes that typically maintenance costs are tracked by Finance against a cost
centre by labour, materials, contractors and other related expense types. However
without a well-developed maintenance budget cost control is then dependant on the
maintenance manager to further define costs against the budget. This can be an
onerous task and limited by information available from the ERP or CMMS system.
Peffen observes that cost control can be further limited by lack of a well-developed
work management system, including job planning, scheduling and data collection.
Without access to information and systems in place, maintenance cost management
and control is difficult, if not impossible, and Peffen likens it to “looking through an
out of focus lens”.
Budget Development Peffen goes on to discuss budget development and that it is not
an insignificant or quick task and realistically it is an incremental three year process.
Typically the first year will require the most effort where budget costs will be an
estimate. But through an effective variance analysis process the second year will see
maintenance activities measured against a more refined budget and as the budget and
process is established it becomes significantly easier in subsequent years. The third
year, and moving forward, will see further refinements and asset management and
cost improvement opportunities will become clearly identifiable.
Work Management System Peffen also discusses the importance of a well-structured
work management system to support a cost effective maintenance function. This
includes establishing effective work approval, planning and scheduling systems.
Peffen states that it is three to five times more expensive to perform unplanned
maintenance work and five to ten times more expensive to perform emergency or
catastrophic breakdown work. In addition not only is well planned and scheduled
work significantly cheaper but it is typically of a higher quality.
Data, Reporting and KPI Metrics Peffen defines the steps in building and managing
the maintenance budget and cost control and identifies collecting and analysing data
on maintenance work as a key component. He specifically discusses the importance of
variance analysis and establishing performance metrics to track how well work is
identified, planned, scheduled and performed.
Long Range Planning Peffen touches on the importance of long-range planning.
With constant pressure to reduce costs in the short term, the maintenance manager can
be forced to compromise reliability by deferring spending. This will clearly only
result in an ongoing and long term reduction of performance with increased and
inefficient spending on reactive maintenance.
To summarise Peffen identifies that the maintenance manager has two key
deliverables, equipment performance and reliability, and controlling or even reducing
maintenance costs. It may appear that these are competing objectives and the
maintenance manager is facing a double edged sword, it is impossible to simply cut
maintenance spending and achieve reliable equipment performance.
His article spells out clear responsibilities and steps for a successful maintenance
manager and function. In the long term executing maintenance against a well-
developed budget increases reliability, through better planned work, and reduces costs
through identifying assets for improvement.
Read the full article here
Ramesys Global We have been developing cost management and reporting solutions
to the mining industry for over 20 years.
Our Maintenance Budgeting and Reporting System removes the need for
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