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Maintenance Costs and
Life Cycle Cost Analysis
Maintenance Costs and
Life Cycle Cost Analysis

Diego Galar, Peter Sandborn,

and Uday Kumar
CRC Press
Taylor & Francis Group,
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Boca Raton, FL 33487-2742

© 2017 by Taylor & Francis Group, LLC

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Library of Congress Cataloging-in-Publication Data

Names: Galar, Diego, author. | Sandborn, Peter A., 1959- author. | Kumar, Uday,
author.
Title: Maintenance costs and life cycle cost analysis/Diego Galar, Peter
Sandborn, Uday Kumar.
Description: Boca Raton : Taylor & Francis, a CRC title, part of the Taylor & Francis
imprint, a member of the Taylor & Francis Group, the academic division of
T&F Informa, plc, [2017] | Includes bibliographical references and index.
Identifiers: LCCN 2016059173 | ISBN 9781498769549 (hardback: alk. paper) |
ISBN 9781498769556 (ebook)
Subjects: LCSH: Plant maintenance. | Life cycle costing.
Classification: LCC TS192.G35 2017 | DDC 658.2--dc23
LC record available at https://lccn.loc.gov/2016059173

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Contents

Preface.....................................................................................................................xix
Acknowledgments................................................................................................xxi
Authors................................................................................................................ xxiii

1. Relevance of Maintenance Function in Asset Management...................1

1.1 Purpose of Maintenance Function.......................................................1
1.1.1 Maintenance Function..............................................................2
1.1.2 Benefits and Risks.....................................................................4
1.1.3 Maintenance Process: Goals to Achievements......................5
1.1.3.1 Develop a Structured Maintenance Framework...... 6
1.1.3.2 Develop a Maintenance Policy................................6
1.1.3.3 Develop a Maintenance Strategy............................7
1.1.3.4 Implement a Maintenance Management
Framework.................................................................7
1.1.3.5 Allocate Maintenance Resources............................ 8
1.1.4 Developing a Maintenance Program/Plan...........................8
1.1.4.1 Outline of a Maintenance Plan................................9
1.1.5 Fund Maintenance: The Beginning of Maintenance
Costs..........................................................................................10
1.1.6 Developing a Basis for Maintenance Performance
Measurement...........................................................................12
1.1.7 Maintenance World of Tomorrow........................................15
1.1.8 e-Maintenance.........................................................................15
1.2 Reliability and Maintenance...............................................................16
1.2.1 Reliability Engineering...........................................................17
1.2.1.1 Important Capabilities of Reliability Engineers..... 18
1.2.2 Maintenance Engineering......................................................18
1.3 Changing Role of Maintenance in Asset Management..................21
1.3.1 Asset Life Cycle.......................................................................22
1.3.2 Asset Planning.........................................................................22
1.3.3 Asset Creation/Acquisition..................................................23
1.3.4 Asset Operations.....................................................................24
1.3.5 Asset Maintenance..................................................................24
1.3.6 Asset Condition/Performance..............................................24
1.3.7 Asset Replacement..................................................................25
1.3.8 Asset Disposal/Rationalization............................................25
1.3.9 Financial Management...........................................................26
1.3.10 Asset Management Definition and Function......................26
1.3.11 Structure of Asset Management............................................27

v
vi Contents

1.3.12 Asset Management Strategy..................................................28

1.3.13 Changing Role of Maintenance Management in
Asset Management.................................................................29
1.3.14 Improve Asset Maintenance Strategy or Renew
the Asset?.................................................................................29
1.4 Physical Asset Management and Maintenance Cost......................32
1.4.1 What Are Assets?....................................................................33
1.4.1.1 Asset Life Cycle and Strategy................................33
1.4.2 Maintenance and Physical Asset Management..................36
1.4.2.1 Getting Help in the Development of Asset
Management............................................................37
1.4.2.2 Life Cycle Stages......................................................37
1.4.3 Life Cycle Processes and Interaction with
Maintenance Process..............................................................38
1.4.3.1 Asset Management: Standards..............................38
1.4.4 Develop a Maintenance Information System..................... 39
1.4.5 Cost Avoidance for Physical Assets..................................... 39
1.4.5.1 Business Benefits of Asset Management..............40
1.4.5.2 Proactive Use of Maintenance Budgets................40
1.4.5.3 Improved Ability to Manage Current
Resources and New Capital Assets......................40
1.4.5.4 Informed and Accurate Financial Planning
and Reporting..........................................................42
1.5 Focusing on the Bottom Line..............................................................42
1.5.1 Maintenance and the Bottom Line.......................................43
1.5.2 Maintenance beyond the Bottom Line.................................45
1.5.3 Managing Availability for Improved Bottom-Line
Results......................................................................................45
1.5.3.1 Availability Types....................................................46
1.5.3.2 Factors Determining Availability..........................47
1.5.3.3 Optimizing Availability..........................................47
1.5.3.4 Design of Achievable Availability.........................48
1.5.3.5 Determining Achievable Availability for an
Existing Facility.......................................................50
1.5.3.6 Building the Reliability Block Diagram (RBD)...51
1.5.3.7 Refining the RBD.....................................................51
1.5.3.8 Obtaining Failure and Repair Data.......................51
1.5.3.9 Closing the Gaps.....................................................52
1.5.3.10 Minimizing Number and Length of
Unscheduled Outages............................................53
1.5.3.11 Improve Equipment................................................54
1.5.3.12 Capital Improvements to Increase Availability..... 54
1.5.3.13 Matching Availability Goals to Annual
Business Needs........................................................54
References........................................................................................................57
Contents vii

2. Maintenance Costing in Traditional LCC Analysis................................61

2.1 Traditional LCC....................................................................................61
2.1.1 Life Cycle Phases.................................................................... 62
2.1.2 Considerations of Life Cycle Cost........................................64
2.1.2.1 Problems of Traditional Design.............................65
2.1.2.2 Problem of Cost Visibility......................................66
2.1.2.3 Structure of Cost Breakdown.................................67
2.1.3 Cost Categories.......................................................................71
2.1.3.1 Investment Costs versus Operational Costs........71
2.1.3.2 Initial Investment Costs versus Future Costs......72
2.1.3.3 Single Costs versus Annually
Recurring Costs.................................................. 72
2.2 Life Cycle Cost Analysis as a Project Follow-Up for Assets..........73
2.2.1 Objectives of the Life Cycle Costing Methodology........... 75
2.2.2 Estimating Life Cycle Costs...................................................76
2.2.2.1 Estimating OM&R Costs from
Cost-Estimating Guides..........................................76
2.2.2.2 Estimating OM&R Costs from Direct Quotes....... 77
2.2.3 Impact of Analysis Timing on Minimizing Life Cycle
Costs..........................................................................................77
2.2.4 Selecting Potential Project Alternatives
for Comparison....................................................................78
2.2.5 Effect of Intervention..............................................................79
2.2.6 Estimating Future Costs.........................................................79
2.2.7 Managing Cash Flow.............................................................80
2.2.8 Selecting a Discount Rate.......................................................80
2.2.9 Time Value of Money.............................................................83
2.3 Trade-Off Tools for LCC......................................................................83
2.3.1 Effectiveness, Benchmarks, and Trade-Off Information....... 84
2.4 LCC Analysis as Maintenance DSS...................................................86
2.4.1 Maintenance as a Value Driver.............................................89
2.4.2 Typical Outcomes of Investments in Maintenance
and Repair................................................................................90
2.4.3 Mission-Related Outcomes....................................................92
2.4.3.1 Improved Reliability...............................................92
2.4.3.2 Improved Productivity...........................................93
2.4.3.3 Functionality............................................................93
2.4.4 Compliance-Related Outcomes............................................94
2.4.4.1 Fewer Accidents and Injuries................................94
2.4.4.2 Fewer Insurance Claims, Lawsuits, and
Regulatory Violations.............................................94
2.4.5 Condition-Related Outcomes................................................94
2.4.5.1 Improved Condition...............................................94
2.4.5.2 Reduced Backlogs of Deferred Maintenance
and Repair................................................................94
viii Contents

2.4.6 Outcomes Related to Efficient Operations..........................95

2.4.6.1 Less Reactive, Unplanned Maintenance
and Repair................................................................95
2.4.6.2 Lower Operating Costs.......................................... 95
2.4.6.3 Lower Life Cycle Costs...........................................95
2.4.6.4 Cost Avoidance........................................................95
2.4.6.5 Reductions in Energy Use and Water Use...........96
2.4.7 Stakeholder-Driven Outcomes..............................................96
2.4.8 Risks Posed by Deteriorating Assets....................................97
2.4.8.1 Risk to Users............................................................98
2.4.8.2 Risk to Safety, Health, and Security......................98
2.4.8.3 Risk to Efficient Operations...................................99
2.4.8.4 Indexes and Models for Measuring Outcomes...... 99
2.5 Remaining Service Life as Gauge and Driver for
Maintenance Expenses and Investments........................................101
2.5.1 Service Life and Remaining Service Life...........................101
2.5.2 Techniques for RSL Estimation and Maintenance
Investment Outcomes..........................................................102
2.5.2.1 Engineering Analysis............................................102
2.5.2.2 Cost and Budget Models......................................102
2.5.2.3 Operations Research Models...............................103
2.5.2.4 Simulation Models................................................103
2.5.2.5 Proprietary Models...............................................104
2.6 Uncertainty in LCC and Maintenance Cost Estimations.............104
2.6.1 Approaches to Uncertainty in LCC....................................105
2.6.2 What Uncertain Variables Go into Life Cycle Costs?......106
2.6.2.1 Application of LCC Techniques for
Machine/Equipment Selection........................... 110
2.6.2.2 Application of LCC to Select Design
Alternatives: To Design Out Maintenance
or to Design for Maintenance.............................. 112
2.7 LCC Data Acquisition and Tracking Systems................................ 114
2.7.1 Data, Tools, and Technologies to Support
Investments in Maintenance and Repair........................... 114
2.7.2 Technologies for Asset Data Management........................ 115
2.7.3 Emerging Technologies for Data Acquisition and
Tracking..................................................................................120
2.8 Restriction of Maintenance Role in Operation Phase...................120
References......................................................................................................122

3. Maintenance Budget versus Global Maintenance Cost.......................127

3.1 Asset Management and Annual Maintenance Budget.................127
3.1.1 “Selling” the Maintenance Budget.....................................127
3.1.2 Composition of Maintenance Budget................................128
3.1.2.1 Maintenance Budget Composition.....................129
Contents ix

3.1.3 Development of an Annual Maintenance Budget............129

3.1.4 Basis of a Maintenance Budget...........................................133
3.1.4.1 Maintenance Program..........................................134
3.1.4.2 Key Considerations in Maintenance Budget
Decisions.................................................................135
3.1.4.3 Preparing a Maintenance Budget........................135
3.1.4.4 Executing a Maintenance Budget.......................136
3.1.4.5 Reviewing a Maintenance Budget......................138
3.1.5 Control Maintenance Costs Using the Maintenance
Budget.....................................................................................141
3.1.6 Maintenance Budgets versus Maintenance Costs............142
3.1.6.1 Associated Maintenance Costs............................143
3.1.7 Factors Affecting the Estimate of the Maintenance
Budget.....................................................................................144
3.1.7.1 Formula for Maintenance Budget Estimate.......145
3.2 Cost of Labor Force: In-House versus Outsourced, Blue
versus White Collar...........................................................................146
3.2.1 Guidelines for Choosing In-House or Outsourced
Maintenance..........................................................................146
3.2.1.1 In-House Maintenance Considerations.............147
3.2.1.2 Outsourced Maintenance Considerations.........147
3.2.2 Outsourcing Maintenance Activities..................................148
3.2.2.1 Expected Benefits of Outsourcing.......................148
3.2.2.2 Potential Risks of Outsourcing............................151
3.2.3 Cost Determination Methodology......................................152
3.2.4 Performance-Based Contracts.............................................153
3.2.4.1 Performance-Based Contracting Process...........153
3.2.4.2 Advantages and Disadvantages of
Performance-Based Maintenance Contracts.....154
3.2.4.3 Development of Performance Indicators
for Performance-Based Maintenance
Contracting.......................................................... 155
3.2.4.4 Lessons Learned Using Performance-Based
Contracting in the Maintenance Function.........156
3.3 Spare Parts Policies for Cost Savings..............................................158
3.3.1 Spare Parts Management.....................................................159
3.3.2 Spare Parts Evaluation and Optimization.........................161
3.3.3 Inventory Analysis................................................................162
3.3.4 Determining Optimal Parameters for Expediting
Policies....................................................................................165
3.4 Overinvestments in Maintenance and Avoided Costs.................167
3.4.1 Cost Savings, Avoided Costs, and
Opportunity Costs.......................................................... 168
3.4.2 Meaning of Cost Savings.....................................................169
3.4.3 Concept of Avoided Cost.....................................................169
x Contents

3.4.4 Maintenance: Investment or Expense?..............................170

3.4.4.1 What Are Maintenance Expenses?......................171
3.4.4.2 Accounting of Maintenance Expenses...............171
3.4.5 When Is Maintenance Work Classified as a Capital
Expenditure?..........................................................................172
3.4.5.1 Extension of Useful Life.......................................172
3.4.5.2 Extension of Useful Life of an Asset...................173
3.4.6 Reduction in Future Operating Costs: Effect of
Overinvestments...................................................................174
3.4.7 Optimizing Maintenance as a Cost Control Measure......175
3.4.8 Role of Avoided and Overinvestment Costs in
Global Maintenance Cost.....................................................176
3.4.8.1 Costs of Intervention.............................................177
3.4.8.2 Costs of Failures....................................................177
3.4.8.3 Cost of Storage.......................................................178
3.4.8.4 Cost of Overinvestments......................................178
3.4.8.5 Avoided Costs........................................................179
3.5 CMMS as a Maintenance Cost Control Tool..................................179
3.5.1 Uses of Computerized Maintenance Management
System.....................................................................................180
3.5.1.1 CMMS Needs Assessment...................................180
3.5.1.2 CMMS Capabilities...............................................181
3.5.1.3 CMMS Benefits......................................................182
3.5.1.4 Use CMMS to Save Costs by Avoiding
Maintenance...........................................................183
3.5.1.5 Line Maintenance Costs.......................................183
References......................................................................................................185

4. Maintenance Performance Measurement: Efficiency...........................191

4.1 Key Performance Indicators for Maintenance...............................191
4.1.1 Physical Asset Management................................................191
4.1.2 Asset Reliability Process......................................................194
4.1.3 Performance Metrics for the Maintenance Function.......196
4.1.3.1 Reliability Process Key Performance
Indicators: Leading Measures.............................197
4.1.3.2 Performance Analysis...........................................201
4.1.3.3 Key Performance Indicators of Maintenance
Effectiveness...........................................................202
4.2 Maintenance Costs.............................................................................203
4.2.1 Maintenance-Related Downtime........................................203
4.2.2 Summary of KPIs for Maintenance....................................204
4.2.3 Hierarchy of Indicators........................................................206
4.3 Financial KPIs and Their Relation to Maintenance Costs............206
4.3.1 Maintenance Performance Indicators................................208
4.3.1.1 World-Class Indicators.........................................208
Contents xi

4.3.2 Economic Indicators in EN 15341.......................................210

4.3.3 Financial Perspective............................................................214
4.4 Benchmarking Financial KPIs..........................................................216
4.4.1 Benchmarking Fundamentals.............................................216
4.4.1.1 Language of Benchmarking.................................216
4.4.1.2 Competitive Analysis...........................................218
4.4.1.3 Enablers..................................................................218
4.4.2 Defining Core Competencies..............................................219
4.4.3 Types of Benchmarking........................................................223
4.4.3.1 Internal Benchmarking.........................................223
4.4.3.2 Similar Industry/Competitive Benchmarking..... 224
4.4.3.3 Best Practice Benchmarking.................................224
4.4.3.4 Benchmarking Process..........................................225
4.5 Key Performance Indicators, Benchmarking, and Best
Practices...............................................................................................226
4.5.1 Continuous Improvement: The Key to
Competitiveness....................................................................227
4.5.2 Benchmarking Goals............................................................227
4.5.3 Gap Analysis..........................................................................228
4.5.4 Benchmarking Process.........................................................230
4.5.4.1 A. Plan.....................................................................230
4.5.4.2 B. Search..................................................................231
4.5.4.3 C. Observe..............................................................232
4.5.4.4 D. Analyze..............................................................232
4.5.4.5 E. Adapt..................................................................232
4.5.4.6 F. Improve...............................................................233
4.5.5 Benchmarking Code of Conduct........................................234
4.5.6 Traps in Benchmarking........................................................234
4.5.7 Other Pitfalls..........................................................................236
4.5.8 Procedural Review................................................................236
4.5.9 Final Points............................................................................237
4.6 Maturity of Maintenance as a Roadmap: Outcome
of Benchmarking................................................................................237
4.6.1 Preventive Maintenance...................................................... 239
4.6.2 Inventory (Stores) and Procurement..................................240
4.6.3 Work Flows and Controls....................................................240
4.6.4 Computerized Maintenance Management Systems
Usage......................................................................................241
4.6.5 Technical and Interpersonal Training................................241
4.6.6 Operational Involvement.....................................................241
4.6.7 Predictive Maintenance........................................................242
4.6.8 Reliability-Centered Maintenance......................................242
4.6.9 Total Productive Maintenance............................................243
4.6.10 Financial Optimization........................................................243
4.6.11 Continuous Improvement...................................................243
xii Contents

4.7 Attempts at Standardization from Europe (EN) and the

United States (ISO).............................................................................244
4.7.1 European Maintenance Standards.....................................244
4.7.2 Objective of the Harmonized Indicator Document.........245
4.7.2.1 Contents of Harmonized Indicators
Document...............................................................246
4.7.3 International Maintenance Standards................................247
4.7.3.1 Review of ISO 55000 Series..................................247
4.7.3.2 Contents of ISO 55001 and Its Companion
Documents.............................................................249
4.7.3.3 Context of the Organization................................249
4.7.3.4 Leadership..............................................................250
4.7.3.5 Support...................................................................253
4.7.3.6 Operation................................................................256
4.7.3.7 Performance Evaluation.......................................257
4.7.3.8 Improvement.........................................................258
4.8 Role of Maintenance Cost in a Maintenance Audit.......................259
4.8.1 Conducting an Audit............................................................261
4.8.2 Historical Maintenance Audit Models...............................262
4.8.3 Fundamental Financial Information for Maintenance
Audits.....................................................................................264
References......................................................................................................266

5. Consequential Maintenance Cost: A Problem Area.............................269

5.1 Economic Importance of Maintenance...........................................269
5.2 Classification of Maintenance Costs................................................270
5.2.1 Global Cost of Maintenance................................................273
5.2.1.1 Definitions..............................................................273
5.2.1.2 Imputation of Global Cost of Maintenance.......276
5.2.1.3 Optimization of Global Cost................................276
5.2.1.4 Other Factors..........................................................278
5.2.1.5 Determination of Cost of Failure........................278
5.2.1.6 Cost Breakdown on Shop Floor..........................279
5.3 Costs after Downtime........................................................................279
5.3.1 Reasons for Downtime.........................................................280
5.3.2 Impact of Downtime.............................................................281
5.3.3 Downtime Factor Analysis..................................................281
5.3.3.1 Site-Related Factors...............................................281
5.3.3.2 Equipment-Related Factors.................................281
5.3.3.3 Crew-Level Factors...............................................283
5.3.3.4 Force Majeure.........................................................283
5.3.3.5 Company Procedures and Policies.....................283
5.3.3.6 Project-Level Factors.............................................284
5.3.3.7 Shop-Level Management Actions.......................284
5.3.3.8 Consequences of Downtime................................284
Contents xiii

5.3.4 Dynamics of Downtime.......................................................285

5.3.4.1 Repair Cost.............................................................287
5.3.4.2 Cost of Idle Time for Laborers, Operators,
and Supervisors.....................................................287
5.3.4.3 Cost of Idle Time of Equipment..........................287
5.3.4.4 Cost of Substitute Equipment..............................287
5.3.4.5 Project-Associated Costs......................................288
5.3.4.6 Loss of Labor Productivity...................................288
5.3.4.7 Other Costs.............................................................288
5.4 Intangible Aspects of Maintenance Costs and Uncertainty.........288
5.4.1 Sources of Intangible Costs.................................................289
5.4.2 Addressing Intangible Costs...............................................289
5.4.3 Iceberg Effect and Intangible Costs....................................290
5.4.4 Analysis of Benefits and Intangible Costs.........................291
5.4.4.1 Intangible Benefits and Costs Defined...............291
5.4.4.2 MDSS Function Analysis......................................293
5.4.4.3 Intangible Benefits of MDSS Function...............295
5.5 Combining Tangible and Intangible Maintenance Costs
and Benefits.........................................................................................295
5.5.1 Maintenance Practices Influencing Maintenance
Costs: Causal Relations between Various
Cost Factors.......................................................................296
5.5.2 Estimation of Cost Elements...............................................297
5.5.3 Associated Resource Impact Costs.....................................300
5.5.4 Lack of Availability and Downtime Costs.........................300
5.5.4.1 LAD Groups...........................................................300
5.5.4.2 Scenarios.................................................................302
5.5.4.3 LAD Cost Model....................................................302
5.5.5 Associated Resource Impact Cost Procedure................... 304
5.5.6 Lack of Readiness Costs.......................................................307
5.5.6.1 Lack of Readiness Cost Procedure......................308
5.5.7 Service-Level Impact Costs.................................................310
5.5.7.1 SLI Cost Procedure................................................ 311
5.5.8 Alternate Method Impact Costs..........................................312
5.5.8.1 AMI Cost Procedure.............................................313
References......................................................................................................316

6. Maintenance Services and New Business Models: A New Way

to Consider Costs.........................................................................................319
6.1 New Maintenance Service Providers..............................................319
6.1.1 New Maintenance Network................................................320
6.1.2 Performance Measurement of Maintenance Services......320
6.1.3 Impact of Servitization on Life Cycle.................................322
6.1.4 Life Cycle Accounting in Business Networks...................323
6.1.5 Managing Value in the Network........................................327
xiv Contents

6.1.6 Mutation of Maintenance toward Asset

Management.........................................................................327
6.1.7 Holistic Maintenance, the Beginning of
Servitization..........................................................................330
6.2 Impact of Business and Technological Environment on
Maintenance Costs.............................................................................331
6.2.1 Maintenance Technology Insights and Profitability........333
6.2.2 Maintenance Impact on Business Processes.....................333
6.2.3 Industry 4.0 and Maintenance 4.0......................................334
6.2.3.1 Maintenance 4.0.....................................................336
6.2.4 State-of-the-Art Technologies and Methodologies for
Maintenance..........................................................................338
6.2.4.1 CBM, the First Step to the Fourth Industrial
Revolution in Maintenance..................................340
6.2.4.2 PHM, One Step Ahead of CBM...........................342
6.2.4.3 e-Maintenance: Pervasive Computing in
Maintenance...........................................................344
6.3 Planned Obsolescence and the End of Traditional
Maintenance........................................................................................351
6.3.1 Key Principle and Measures................................................352
6.3.1.1 Preemptive Measures...........................................352
6.3.1.2 Proactive Measures...............................................353
6.3.2 Types of Obsolescence and Terminology..........................353
6.3.3 Reasons for Obsolescence....................................................353
6.3.3.1 Use of Commercial Off-the-Shelf Products.......353
6.3.3.2 Life Cycle Duration...............................................354
6.3.3.3 Increased Use of Electronics................................355
6.3.4 Obsolescence Mitigation......................................................356
6.3.4.1 Systems Engineering.............................................356
6.3.4.2 Software Engineering...........................................359
6.3.4.3 Test Phase...............................................................359
6.3.4.4 Prognostics.............................................................360
6.4 Outsourcing Maintenance: New Frameworks...............................360
6.4.1 Maintenance Contracting Strategies..................................361
6.4.1.1 Delivery Methods..................................................362
6.4.1.2 Contract Specifications.........................................363
6.4.1.3 Pricing Strategies...................................................364
6.4.2 Conclusion.............................................................................364
6.4.3 Main Reasons for Outsourcing...........................................364
6.4.3.1 Refocusing on Strategic Activities......................365
6.4.3.2 Economies of Scale and Costs..............................365
6.4.3.3 Reorganization Policies........................................365
6.4.3.4 Swift Technological Change.................................366
6.4.3.5 Market Globalization............................................366
6.4.3.6 Conclusion..............................................................366
Contents xv

6.4.4 Outsourcing: Decision-Making Process.............................366

6.4.4.1 Internal Costs versus External Costs..................367
6.4.4.2 Need for Specialized Capability of
Suppliers........................................................... 368
6.4.5 Framework for a Win-Win Maintenance Outsourcing
Relationship...........................................................................368
6.4.5.1 Selecting the Number of Activities to
Outsource...............................................................369
6.4.5.2 Selecting Which Activities to Outsource............369
6.4.5.3 Selecting Which Activities are Outsourced
Individually and Which Are Bundled................370
6.4.5.4 Selecting a Single Outsourced Activity..............370
6.4.5.5 Selecting Bundled Activities................................371
6.4.5.6 Selecting Nearly All Activities.............................371
6.4.5.7 Selecting the Type of Contract
Specification................................................... 372
6.4.5.8 Selecting a Pricing Strategy..................................372
6.4.6 Elements in Successful Management of Outsourcing
Relationship...........................................................................372
6.4.7 Cost of Selecting a Service Provider...................................374
6.4.8 Benchmarking to the Current Market................................374
6.5 Warranty Management: Extensions and Claims...........................375
6.5.1 Warranty Management Framework...................................378
6.5.2 Importance of a Warranty Management System..............379
6.5.3 Models and Support Tools for Warranty Cost
Management..........................................................................380
6.5.4 Adapting e-Warranty to Warranty Assistance..................382
6.6 Insurance: Economic Responsibility of Third Parties...................383
6.6.1 Breaking Down Third-Party Insurance.............................384
6.6.1.1 Importance of Third-Party Liability
Insurance.............................................................. 384
6.6.1.2 Other Types of Third-Party Liability
Insurance................................................................385
6.6.2 Economic View of the Insurance Business........................385
6.6.3 Equipment Maintenance Insurance...................................386
References......................................................................................................387

7. Maintenance Costs Across Sectors...........................................................395

7.1 Maintenance Costs Across the Sectors............................................395
7.2 Transportation Assets: Rolling Stock Case Study 1.......................396
7.2.1 Introduction and Background.............................................396
7.2.2 Decision Models of Transport Systems Evaluation.........397
7.2.2.1 Assumptions and Purpose of LCCA..................399
7.2.2.2 Comparison of Service Process in Analyzed
Variants...................................................................400
xvi Contents

7.2.2.3 System Breakdown Structure and LCC

Model Development.............................................400
7.2.2.4 LCC Assessment and DSS Based on
Outcomes................................................................402
7.3 Transportation Assets: Rolling Stock Case Study 2.......................404
7.3.1 Introduction and Background.............................................404
7.3.2 Calculation of Cost and Profit Life Cycle of a Tram........407
7.3.2.1 Assumptions and Purpose of LCCA..................407
7.3.2.2 Decision Models Considering Asset Revenues.... 409
7.4 Infrastructure: Railway Infrastructure............................................410
7.4.1 Introduction and Background.............................................410
7.4.2 Decision Models of Transport Systems Evaluation.........410
7.4.2.1 Assumptions and Purpose of LCCA with
a Focus on Maintenance....................................... 411
7.4.2.2 Availability: The Goal of Infrastructure
Mangers..................................................................413
7.4.2.3 Prediction of the Infrastructure Downtime
as Budget Maintenance Optimizer.....................413
7.4.2.4 Life Cycle Costs of Rail Infrastructure...............414
7.4.2.5 LCC as Supporting Decision-Making on
Design and Maintenance......................................416
7.4.2.6 Process of Railway Data Collection for
Accurate LCC Estimates.......................................418
7.4.2.7 MRO and Infrastructure Expenditures..............420
7.4.2.8 Infrastructure Costs...............................................423
7.4.2.9 Valorization of Infrastructure Assets..................424
7.4.2.10 Cost of Life Extension of Deteriorating
Structures................................................................426
7.5 Manufacturing Assets........................................................................426
7.5.1 Introduction and Background.............................................426
7.5.2 LCC of Pumping Systems....................................................428
7.5.2.1 Assumptions and Purpose of LCCA..................428
7.5.2.2 Life Cycle Cost Analysis.......................................429
7.5.2.3 Data Collection for LCC and TCO Estimation..... 429
7.5.2.4 Total Life Cycle Cost.............................................434
7.5.2.5 Lessons Learnt in LCC and TCO of
Pumping Systems..................................................436
7.6 Military Equipment...........................................................................437
7.6.1 Introduction and Background.............................................437
7.6.2 Cost Analysis and Uncertainty...........................................438
7.6.2.1 Assumptions in LCCA..........................................438
7.6.2.2 Economic Analysis................................................438
7.6.2.3 Cost Analysis Training..........................................439
7.7 Aviation...............................................................................................439
7.7.1 Introduction and Background.............................................439
Contents xvii

7.7.2 Air Transport Association (ATA)-Level Costs..................442

7.7.3 System and Component Reliability....................................444
7.8 Facilities...............................................................................................445
7.8.1 System-Level O&M Manuals..............................................447
7.8.2 Teardowns..............................................................................447
7.8.3 Major Resources....................................................................447
7.8.3.1 Planning and Design Phase.................................447
7.8.3.2 Construction Phase...............................................448
7.8.3.3 O&M Approach.....................................................448
7.8.3.4 Life Cycle O&M.....................................................448
7.8.3.5 Computerized Maintenance Management
Systems...................................................................449
7.8.3.6 Coordinating Staff Capabilities and
Training with Equipment and System
Sophistication Levels............................................449
7.8.3.7 Non-O&M Work....................................................450
7.9 Energy..................................................................................................451
7.9.1 Nuclear Plant Life Cycle Cost Analysis Considerations.....451
7.9.2 LCCA Defined.......................................................................452
7.9.2.1 LCCA Considerations...........................................452
7.9.2.2 Cost and Revenue Influences..............................452
7.9.2.3 Economic Factors...................................................454
7.9.2.4 Determining Magnitude of Change...................454
7.9.2.5 Data Uncertainty...................................................455
7.9.3 LCCA Tools............................................................................456
7.9.3.1 PRA and RAM Analysis.......................................456
7.9.3.2 LCCA Output.........................................................457
7.9.3.3 LCCA Tool Selection.............................................459
7.9.4 Improvement Option Selection...........................................461
7.9.4.1 LCC Optimization Step 1: Data Collection........463
7.9.4.2 LCC Optimization Step 2: Economic
Screening Analysis................................................464
7.9.4.3 LCC Optimization Step 3: Optimization
with Constraint......................................................466
7.9.4.4 Step 4: Optimal Solution Process........................466
7.10 Mining..................................................................................................467
7.10.1 Introduction and Background.............................................468
7.10.2 Design of Maintenance Plan................................................468
7.10.3 Analysis of Maintenance Data............................................469
7.10.3.1 Machine Hours......................................................469
7.10.3.2 Machine Availability.............................................470
7.10.3.3 Mean Time between Failures and Mean
Time to Repair........................................................470
7.10.4 Decision Models for Maintenance Decision and
Optimum Life Cycle Management.....................................472
xviii Contents

7.10.5 Cost of Maintenance.............................................................472

7.10.5.1 Fixed Costs.............................................................472
7.10.5.2 Variable Cost..........................................................472
7.10.6 Life Cycle Maintenance Cost...............................................473
7.10.7 Outcomes of LCCA: Added Value.....................................475
References......................................................................................................475

Index......................................................................................................................479
Preface

The purpose of maintenance is to reduce societal, business, and personal

risks. However, the cost associated with maintenance actions should not
exceed the value of the risks being eliminated and the associated benefits
reflected in terms of increased productivity or reduced number of accidents,
etc. In world-class organizations, in general, maintenance decisions are based
on a sound cost-benefit-risk analysis. Maintenance costs analysis should
include direct, consequential, and indirect costs; intangible costs; opportu-
nity costs; and the cost of potential risks. Benefits should include all direct
and indirect revenues and intangible benefits, such as increased productiv-
ity from improved employee safety, etc. The contribution of maintenance
to the success of organizations has been increasingly recognized. The role
of maintenance managers has been naturally extended into their involve-
ment in strategic planning issues, such as production capacity or renewal of
equipment planning. This includes the selection of technological solutions
and maintenance cost quantification and optimization within life cycle cost
(LCC) analysis, which, in turn, contributes to the study of the consequences
for the investments to be made.
Maintenance itself, in all its areas of intervention, is very difficult to man-
age, given the variability of situations where it has to intervene and its evo-
lution over time. Probably for this reason, maintenance management is the
most recent variable to be considered when organizations try to increase
their competitive advantages. Approaches like on-condition maintenance,
predictive maintenance, reliability, virtual reality, certification attempts, and
key performance indicators are only some of the many maintenance fields
or, in other words, LCC fields that motivate organizations to work better and
increase their market value.
The competitiveness of organizations is increasingly dependent on the
optimization of the LCC of their physical assets and how well they achieve
their required function. Depending on the sector, the cost of maintaining
physical assets represents around 5%–20% of the added value achieved by
maintenance; 5%–12% of the total capital invested; 1%–15% of gross sales;
3%–10% of the production costs. These are strong reasons to emphasize the
importance of maintenance costs in the annual budget and within LCC.
Maintenance costs are a fact of everyday life. Nevertheless, when engi-
neers who have good knowledge of mathematics and technical skills are pre-
sented with cost theory, there is a clear gap in their knowledge, especially
when discussing cost–benefit analysis, etc.
In any case, in this book, we have carefully avoided the approach adopted
by economists, that is, a financial type of presentation understandable only
to economists. All of the theory is included but we have tried to present it

xix
xx Preface

in an easy-to-understand manner; we do not want to use an economist’s

approach to explain the concepts of cost modeling. We have relied heavily
on the assumption that engineers have a solid mastery of technology and
management but not financial mathematics.
In developing the contents of this book, we respected the fact that orga-
nizations may use the existing methodologies as per their convenience and
tradition. Therefore, we present the issues and challenges of maintenance
costs in such a way that engineers can choose the approach or methodology
convenient for their purpose. Our goal is to provide a comprehensive and
understandable treatment of the fundamentals. Once engineers have mas-
tered these, we can lead them to deeper analysis and more accurate LCC
estimation but with a substantial difference, that is, a deep understanding of
maintenance costing.
Clearly, there are many views of how the fundamentals of maintenance
cost should be organized. We have attempted to create coherent chapters
and sections and to present topics in a logical and sequential order. The
text necessarily starts with the importance of the maintenance function in
an organization and moves to LCC considerations and to budgeting con-
straints. We have intentionally postponed a discussion of intangible costs
and downtime costs to later in the book mainly because of the controversy
among managers.
We conclude the book with a short description of a number of sectors
where maintenance cost is critical. The goal is to train the reader in a deeper
study and better understanding of these elements for decision-making in
maintenance, specifically in the context of asset management. Considering
the ever-increasing role of asset management, we believe this is an effective
way to introduce the rigor of the subject to those who will use it.
The book is motivated by the persistent pattern of failure of maintenance
engineers to explain the basics of maintenance cost and associated risks
and benefits to senior managers in their organizations. This motivation was
reinforced by the recent success of several publications putting this type of
research into the spotlight, especially the new ISO 55000.
This book is intended for managers, engineers, researchers, and practitio-
ners directly or indirectly involved in the area of maintenance. We hope the
book will contribute towards a better understanding of maintenance cost
and that this enhanced knowledge will be used to improve the maintenance
process.
It was a challenge for us to create a reader-friendly book that could be
useful for both practitioners and researchers in the maintenance field. But
it evolved naturally throughout our many years of teaching, research, and
consulting in the area of maintenance engineering and life cycle costing.
Acknowledgments

It is with immense gratitude that we acknowledge the support and help of

our universities, Maryland and Lulea, for their institutional support during
this time showing a clear interest in the topic. We must thank students and
the academic and administrative staff at Luleå Tekniska Universitet and the
University of Maryland for giving us the opportunity and support to write
this manuscript and perform research on the topic. Thanks for providing
the facilities to do it.
The list of the people who should be thanked for this book is too long to
mention everyone, but we will do our best. First of all, we thank our families.
Without their continuous support and encouragement, we would never have
been able to achieve our goals.
Thanks to the people who directly or indirectly participated in this book;
none of this would have been possible without them. Their dedication and
perseverance made the work enjoyable. Especially remarkable was the
contribution of Dr. Aditya Thadouri. His support in the preparation of the
manuscript was indispensable to the success of the project.
We want to thank all our colleagues at the Division of Operation and
Maintenance, University of Lulea, Sweden, and CALCE at the University of
Maryland, for encouraging us to produce this book as a compilation of main-
tenance cost methods widely used in our field, especially those who worked
with us for many long hours discussing the coherence of a manuscript that
addresses such a controversial and multidisciplinary topic.
It was a challenge to create a reader-friendly book that would be useful for
both practitioners and researchers in the maintenance field! That is why we
must also thank all international conferences, forums, maintenance associa-
tions, journals, etc., who fed our need of information and discussion.
Thanks to all of you. Without your help, this book would not be a reality.

xxi
Authors

Diego Galar has an MSc in telecommunications and a PhD in manufacturing

from the University of Saragossa, Zaragoza, Spain. He has been professor in
several universities, including the University of Saragossa and the European
University of Madrid. He also was a senior researcher in I3A, Institute for
Engineering Research in Aragon; director of academic innovation; and sub-
sequently pro-vice-chancellor of the university. In industry, he has been tech-
nological director and CBM manager. He has authored more than a hundred
journal and conference papers, books, and technical reports in the field of
maintenance. Currently, he is professor of condition monitoring in the Division
of Operation and Maintenance at Luleå University of Technology (LTU),
where he is coordinating several EU-FP7 projects related to different main-
tenance aspects and is also involved in the SKF UTC center located in Lulea
focused on SMART bearings. He is also visiting professor at the University
of Valencia, Polytechnic of Braganza (Portugal), Valley University (Mexico),
Sunderland University (UK), and Northern Illinois University (USA).

Peter Sandborn is a professor in the CALCE Electronic Products and

Systems Center at the University of Maryland, College Park, Maryland.
Dr. Sandborn’s group develops obsolescence forecasting algorithms and per-
forms strategic design refresh planning and lifetime buy quantity optimi-
zation. Dr. Sandborn is the developer of the MOCA refresh planning tool.
MOCA has been used by private and government organizations worldwide
to perform optimized refresh planning for systems subject to technology
obsolescence. Dr. Sandborn also performs research in several other life cycle
cost modeling areas, including maintenance planning and return on invest-
ment analysis for the application of prognostics and health management
(PHM) to systems, total cost of ownership of electronic parts, transition from
tin-lead to lead-free electronics, and general technology trade-off analysis for
electronic systems. Dr. Sandborn is an associate editor of the IEEE Transactions
on Electronics Packaging Manufacturing and a member of the editorial board
of the International Journal of Performability Engineering. He is a past confer-
ence chair and program chair of the ASME Design for Manufacturing and
Life Cycle Conference. He is the author of more than 150 technical publica-
tions and several books on electronic packaging and electronic systems cost
analysis and was the winner of the 2004 SOLE Proceedings and 2006 Eugene
L. Grant awards. He has a BS in engineering physics from the University
of Colorado, Boulder, in 1982, and an MS in electrical science and a PhD in
electrical engineering, both from the University of Michigan, Ann Arbor, in
1983 and 1987, respectively.

xxiii
xxiv Authors

Uday Kumar the chaired professor of operation and maintenance engineer-

ing, is director of Luleå Railway Research Center and scientific director of the
Strategic Area of Research and Innovation—Sustainable Transport at Luleå
University of Technology, Luleå, Sweden. Before joining Luleå University
of Technology, Dr. Kumar was professor of Offshore Technology (Operation
and Maintenance Engineering) at Stavanger University, Norway. Dr. Kumar
has research interests in the subject area of reliability and maintainability
engineering, maintenance modeling, condition monitoring, LCC and risk
analysis, etc. He has published more than 300 papers in international jour-
nals and peer-reviewed conferences and has made contributions to many
edited books. He has supervised more than 25 PhD theses related to the area
of reliability and maintenance. Dr. Kumar has been a keynote and invited
speaker at numerous congresses, conferences, seminars, industrial forums,
workshops, and academic institutions. He is an elected member of the
Swedish Royal Academy of Engineering Sciences.
1
Relevance of Maintenance Function
in Asset Management

1.1 Purpose of Maintenance Function

Webster’s dictionary defines maintenance as

• To maintain
• Keep in existing condition
• Preserve, protect
• Keep from failure or decline

EN 13306:2010 defines maintenance management as “all activities of the

management that determine the maintenance objectives, strategies, and
responsibilities, and implement them by means, such as maintenance plan-
ning, maintenance control and supervision, improvement of methods in the
organization, including economical, environmental, and safety aspects.
Therefore, the overall goal of maintenance within an industry is to pre-
serve, with reliability, the system (or product) operation at a level that meets
the company’s business needs, and to ensure

A specific duration of failure-free performance under stated conditions.

Maintenance management will take care of the resource allocation required

to accomplish the maintenance goals; and maintenance costs definitely play
a key role in this equation to achieve those goals at minimum cost and also to
know how to calculate, register, and control those costs.
Everyone has an understanding of what maintenance is. If asked, they
will mention things like fix, restore, replace, recondition, patch, rebuild, and
rejuvenate. To some extent, there is a place for these concepts, but they miss
the mark in understanding the totality of maintenance. Maintenance is the
act of maintaining. The basis for maintaining is to keep, preserve, and pro-
tect; that is, to keep in an existing state or preserve from failure or decline.

1
2 Maintenance Costs and Life Cycle Cost Analysis

There is a major difference between this definition and the words and func-
tions normally mentioned by those considered “knowledgeable” about
maintenance.
The maintenance department is responsible and accountable for mainte-
nance. It is responsible for the way equipment runs and looks and for the
costs incurred in achieving the required level of performance. This is not to
say that operators have no responsibility for the use of equipment when it is
in their hands—they do. But to split responsibility between maintenance and
any other department is to leave no one accountable.
Therefore, the maintenance department is responsible for the frequency
and level of maintenance, thus balancing responsibility and cost control.
That said, the maintenance function should report to top management. This
allows maintenance problems to be dealt with in the best interests of the
plant or company as a whole. Maintenance efforts and costs must not be
manipulated as a means for a department to achieve its desired results.
When the maintenance department or group is held responsible and
accountable for maintenance, its relationship with other departments takes
on new meaning. The maintenance department can’t afford to have adver-
sarial relationships with others. It must base its interdepartmental relation-
ships on credibility and trust. This is essential for the successful operation of
a maintenance management system (Smith and Mobley, 2007).

1.1.1 Maintenance Function
The process of maintaining physical assets covers all actions necessary for

• Retaining an asset in a specified condition

• Restoring an asset to a specified condition

Deterioration of the condition and capability of a manufacturing system

starts as soon as the system is commissioned. In addition to normal wear
and deterioration, other failures may occur, especially when the equipment
is pushed beyond its design limits or suffers operational errors. Equipment
downtime, quality problems, processing speed losses, safety hazards, and/or
environmental pollution all occur because of deterioration. These outcomes
can negatively impact the operating cost, profitability, customer satisfaction,
and productivity. To ensure a plant or a company meets its production tar-
gets at an optimal cost, maintenance management has to carefully plan its
maintenance objectives and strategies.
Good maintenance assumes that maintenance objectives and strategies are
not determined in isolation, but are derived from such factors as company
policy, manufacturing policy, and other potentially conflicting demands and
constraints in the company. According to Muchiri et al. (2010), maintenance
objectives are related to the attainment of production targets (through high
availability) at a required quality level, and within the constraints of the
Relevance of Maintenance Function in Asset Management 3

system’s condition and safety. Furthermore, maintenance resources are used

to ensure the equipment is in good condition, the plant achieves its design
life, the safety standards are met, and the energy use and raw material con-
sumption are optimized, among other factors.
Some of the important factors influencing the maintenance objectives are
shown in Figure 1.1: ensuring the plant functionality (availability, reliability,
product quality, etc.); ensuring the plant achieves its design life; ensuring
plant and environmental safety; ensuring cost-effectiveness in maintenance;
and ensuring the effective use of resources (energy and raw materials). The
maintenance objectives of a given company or plant will obviously influence
the specific performance indicators used to measure success.
Once the maintenance objectives are outlined, the next step is to formu-
late the maintenance strategy) and action plan: what type of maintenance
needs to be done, who should execute the maintenance tasks, when to
do it, and how often it can be done. In general, maintenance decision-
making can be broadly explained in terms of maintenance actions (basic
tasks), maintenance policies, and maintenance concepts, etc. (Pintelon and
Van Puyvelde, 2006). Maintenance policies are the rules or set of rules
describing the triggering mechanism for the various maintenance actions.
Examples of these policies are failure-based maintenance (FBM), use-based
or time-based maintenance (UBM/TBM), condition-based maintenance

Corporate
objective and
strategy

Production
Plant condition
objective

Plant functionality
requirements Maintenance
e.g., availability, Safety
objective
reliability, quality

Availability of
resources Government
e.g., skill, budget, man regulations
power

Others
e.g., climate

FIGURE 1.1
An illustration of factors influencing maintenance objectives.
4 Maintenance Costs and Life Cycle Cost Analysis

(CBM), and design-out maintenance (DOM) (Coetzee, 1997; Madu, 2000;

Waeyenbergh and Pintelon, 2002; Savsar, 2006).
Once the objectives and strategies have been established, the success of the
maintenance function is dependent on the maintenance work management.
The maintenance work management cycle, as outlined by Campbell (1995),
consists of work identification, planning, scheduling, execution, and closing
the job. Maintenance work is identified using the preventive, predictive, and
failure-finding work orders generated by proactive maintenance. Alternatively,
repair work occurs because of failure. At the heart of the maintenance func-
tion is work planning and scheduling; this defines what gets done and when.
To complete the work cycle, effective work execution is vital to guarantee the
achievement of the required equipment condition and performance.
Reviewing the maintenance objectives can yield insights into the complex
environment within which the maintenance department functions. They are
essential ingredients and indicators in the development of a maintenance
performance measurement system, and they form a potential basis for per-
formance evaluation (Muchiri et al., 2010).
In summary, the maintenance function provides a strategic link between
a maintenance program and its corporate directions and core business. It
­supports the management in planning and implementing a maintenance
program in alignment with its capital investment, and operational and
­
­disposal plans.
It requires a properly structured and professionally managed system to
achieve this in a cost-effective manner. (Maintenance excludes general clean-
ing and refurbishment to a new standard of use (Assetic System Overview).)
The objective of the maintenance function is to ensure that assets con-
tinue to support the business objectives and service delivery requirements.
Maintenance itself also ensures that the capital investment in the asset is
­preserved, and is consistent with its age and market value.
The purpose of planning is to ensure that short- and long-term objectives
are achieved in an efficient and effective manner. Planning should occur at
the strategic level, as well as at the delivery level, to ensure that maintenance
supports the agency’s corporate and business directions, and that it links
directly with programs for capital investment, management-in-use and asset
disposal.

1.1.2 Benefits and Risks

The benefits associated with the effective management of the maintenance
function include the following:

• Assurance of asset capacity to perform

• Better management of risks associated with ownership and use
• Compliance with statutory requirements (e.g., for workplace health
and safety)
Another random document with
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 schools. … The only important amendment to this Act was passed
in 1875, and provided that the legislative grant, instead of
being divided between the Protestant and Catholic schools as
heretofore, should in future be distributed in proportion to
the number of children of school age in the Catholic and
Protestant districts. Already immigration had begun to upset
the balance of numbers and power, and as the years went on it
became evident that the Catholics were destined to be in a
permanent minority in Manitoba. This trend of immigration,
which in 1875 made legislation necessary, has continued ever
since; and to-day the Catholics of the province number only
20,000 out of a total population of 204,000. No further change
was made in the educational system of Manitoba until the
memorable year of 1890. In that year the provincial
legislature boldly broke all moorings with the past, and,
abolishing the separate denominational schools, introduced a
system of free compulsory and unsectarian schools, for the
support of which the whole community was to be taxed. … To
test the legality of the change, what is known as Barrett's
case was begun in Winnipeg. It was carried to the Supreme
Court of Canada, and the Canadian judges by a unanimous
decision declared that the Act of 1890 was ultra vires and
void.
{60}
The city of Winnipeg appealed to the Privy Council, and that
tribunal in July 1892 reversed the decision of the Canadian
Court and affirmed that the Act was valid and binding. … The
second subsection of the 22nd section of the Manitoba Act
already quoted says: 'An appeal shall lie to the
Governor-General in Council from any Act or decision of the
legislature of the province, or of any provincial authority,
affecting any right or privilege of the Protestant or Roman
Catholic minority of the Queen's subjects in relation to
education.' But if the legislation of 1890 was intra vires,
and expressly declared to be so on the ground that it had not
prejudicially affected the position which the minority held at
the time of the Union, how could there be an appeal from it? …
The Governor-General, however, consented to refer the question
as to his jurisdiction to the courts of justice. What is known
as Brophy's case was begun, and in due course was carried to
the Supreme Court of Canada. The decision of that tribunal,
though not unanimous, was in accord with public expectation.
The majority of the judges felt that the previous judgment of
the Privy Council had settled the matter beforehand. The Act
of 1890 had been declared intra vires on the ground that it
had not interfered with the rights which the minority
possessed before the Union, and therefore there could be no
appeal from it. …

"Still the undaunted Archbishop of St. Boniface went on, and

for a last time appealed to that Judicial Committee of the
Privy Council which two years and a half before had so spoiled
and disappointed the Catholic hopes. In January 1894 the final
decision in Brophy's case was read by the Lord Chancellor. For
a second time the Lords of the Council upset the ruling of the
Supreme Court of Canada, and treated their reasoning as
irrelevant. It will be remembered that both the appellant
prelates and the Canadian judges had assumed that the clause
in the Manitoba Act, which conferred the right of appeal to
the Governor-General, was limited to one contingency, and
could be invoked only if the minority were robbed at any time
of the poor and elementary rights which they had enjoyed
before the Act of Union. But was the clause necessarily so
limited? Could it not be used to justify an appeal from
legislation which affected rights acquired after the Union? …
In the words of the judgment: 'The question arose: Did the
sub-section extend to the rights and privileges acquired by
legislation subsequent to the Union? It extended in terms to
"any" right or privilege of the minority affected by any Act
passed by the legislature, and would therefore seem to embrace
all the rights and privileges existing at the time when such
Act was passed. Their lordships saw no justification for
putting a limitation on language thus unlimited. There was
nothing in the surrounding circumstances or in the apparent
intention of the legislature to warrant any such limitation.'
… In other words, the dispute was referred to a new tribunal,
and one which was free to consider and give effect to the true
equities of the case. The Governor-General and his responsible
advisers, after considering all the facts, found in favour of
the Catholic minority, and at once issued a remedial Order to
the Government of Manitoba, which went far beyond anything
suggested in the judgment in Brophy's case. The province was
called upon to repeal the legislation of 1890, so far as it
interfered with the right of the Catholic minority to build
and maintain their own schools, to share proportionately in
any public grant for the purposes of education, and with the
right of such Catholics as contributed to Catholic schools to
be held exempt from all payments towards the support of any
other schools. In a word, the Governor-General and Sir
Mackenzie Bowell's Administration, exercising, as it were,
appellate jurisdiction, decided that the minority were
entitled to all they claimed. The Government of Manitoba,
however, had hardened their hearts against the minority in the
province, and refused to obey the remedial Order. …

"The refusal of the provincial Government 'to accept the

responsibility of carrying into effect the terms of the
remedial Order' for the first time brought the Parliament of
Canada into the field, and empowered them to pass coercive
legislation. A remedial Bill was accordingly, after an
inexplicable delay, brought into the Federal Parliament to
enforce the remedial Order. … The Cabinet recognised that the
Federal Parliament had no power to spend the money of the
province, and so all they could do was to exempt the minority
from the obligation to contribute to the support of schools
other than their own. The Bill bristled with legal and
constitutional difficulties; it concerned the coercion of a
province; it contained no less than 116 clauses; it was
introduced on the 2nd of March 1896, when all Canada knew that
the life of the Federal Parliament must necessarily expire on
the 24th of April. Some fifteen clauses had been considered
 when the Government admitted, what all men saw, the
impossibility of the task, and abandoned the Bill. … While the
fate of the remedial Bill was still undecided, Sir Donald
Smith and two others were commissioned by the Federal
Government to go to Winnipeg and see if by direct negotiations
some sort of tolerable terms could be arranged. … Sir Donald
Smith proposed that the principle of the separate school
should be admitted wherever there were a reasonable number of
Catholic children—thus, wherever in towns and villages there
are twenty-five Catholic children of school age, and in
cities where there are fifty such children, they should have
'a school-house or school-room for their own use,' with a
Catholic teacher. … In the event the negotiations failed; the
baffled Commissioners returned to Ottawa, and on the 24th of
April 1896 Parliament was dissolved. The Government went to
the country upon the policy of the abandoned Bill. On the
other hand, many of the followers of Mr. Laurier in the
province of Quebec pledged themselves to see justice done to
the Catholics of Manitoba, and let it be understood that they
objected to the remedial Bill only because it was not likely
to prove effective in the face of the combined hostility of
the legislature and the municipalities of the province. …
Catholic Quebec gave Mr. Laurier his majority at Ottawa. …

{61}

"When the Liberal party for the first time for eighteen years
found itself in power at Ottawa, Mr. Laurier at once opened
negotiations with Manitoba. The result was a settlement which,
although it might work well in particular districts, could not be
accepted as satisfactory by the Catholic authorities. It arranged
that where in towns and cities the average attendance of
Catholic children was forty or upwards, and in villages and
rural districts the average attendance of such children was
twenty-five or upwards, one Catholic teacher should be
employed. There were various other provisions, but that was
the central concession. … Leo the Thirteenth, recognising the
 difficulties which beset Mr. Laurier's path, mindful, perhaps,
also that it is not always easy immediately to resume friendly
conference with those who have just done their best to defeat
you, has sent to Canada an Apostolic Commissioner."

J. G. Snead Cox,
Mr. Laurier and Manitoba
(Nineteenth Century, April, 1897).

CANADA: A. D. 1895.
Northern territories formed into provisional districts.

"The unorganized and unnamed portion of the Dominion this year

was set apart into provisional districts. The territory east of
Hudson's Bay, having the province of Quebec on the south and
the Atlantic on the east, was to be hereafter known as Ungava.
The territory embraced in the islands of the Arctic Sea was to
be known as Franklin, the Mackenzie River region as Mackenzie,
and the Pacific coast territory lying north of British
Columbia and west of Mackenzie as Yukon. The extent of Ungava
and Franklin was undefined. Mackenzie would cover 538,600
square miles, and Yukon 225,000 square miles, in addition to
143,500 square miles added to Athabasca and 470,000 to
Keewatin. The total area of the Dominion was estimated at
3,456,383 square miles."

The Annual Register, 1895,

page 391.

CANADA: A. D. 1895.
Negotiations with Newfoundland.

Negotiations for the entrance of Newfoundland into the

federation of the Dominion of Canada proved ineffectual and
were abandoned in May. The island province refused the terms
proposed.
CANADA: A. D. 1896 (June-July).
Liberal triumph in Parliamentary elections.
Formation of Ministry by Sir Wilfred Laurier.

General elections held in Canada on the 23d of June, 1896,

gave the Liberal Party 113 seats out of 213 in the Dominion
House of Commons; the Conservatives securing 88, and the
Patrons of Industry and other Independents 12. Much to the
general surprise, the scale was turned in favor of the
Liberals by the vote of the province of Quebec,
notwithstanding the Manitoba school question, on which
clerical influence in the Roman church was ranged against that
party. The effect of the election was to call the Liberal
leader, Sir Wilfred Laurier, of Quebec, to the head of the
government, the Conservative Ministry, under Sir Charles
Tupper, retiring on the 8th of July.

CANADA: A. D. 1896-1897.
Policy of the Liberal Government.
Revision of the tariff, with discriminating duties
in favor of Great Britain, and provisions for reciprocity.

"The position of the Canadian Liberals, when they came into

power after the General Election of 1896, was not unlike that
of the English Liberals after the General Election of 1892.
Both Liberal parties had lists of reforms to which they were
committed. The English measures were in the Newcastle
Programme. Those of the Canadian Liberals were embodied in the
Ottawa Programme, which was formulated at a convention held at
the Dominion Capital in 1893. … A large part of the Ottawa
Programme was set out in the speech which the Governor-General
read in the Senate when the session of 1897 commenced. There was
then promised a measure for the revision of the tariff; a bill
providing for the extension of the Intercolonial railway from
Levis to Montreal; a bill repealing the Dominion Franchise Act
and abolishing the costly system of registration which goes
with it; and a measure providing for the plebiscite on the
Prohibition question. Neither of these last two measures was
carried through Parliament. Both had to be postponed to
another session; and the session of 1897 was devoted, so far
as legislation went, chiefly to the tariff, and to bills, none
of which were promised in the Speech from the Throne, in
retaliation for the United States Contract Labor Laws, and the
new United States tariff. …

"The new tariff was a departure from the tariffs of the

Conservative regime in only one important direction.
Protective duties heretofore had been levied on imports from
England, in the same way as on imports from the United States
or any other country. The 'National Policy' had allowed of no
preferences for England; and during the long period of
Conservative rule, when the Conservatives were supported by
the Canadian manufacturers in much the same way as the
Republican party in the United States is supported by the
manufacturing interests, the Canadian manufacturers had been
as insistent for adequate protection against English-made
goods, as against manufactured articles from the United States
or Germany. The Conservative party had continuously claimed a
monopoly of loyalty to England; but in its tariffs had never
dared to make any concession in favour of English goods. In
the new tariff, preferences for England were established; and
with these openings in favour of imports from Great Britain,
there came a specific warning from the Minister of Finance
that Canadian manufacturers must not regard themselves as
possessing a vested interest in the continuance of the
protective system. …

"When the Minister of Finance laid the tariff before the House
of Commons, he declared that the 'National Policy,' as it had
been tried for eighteen years, was a failure; and … claimed
that lowering the tariff wall against England was a step in
the direction of a tariff 'based not upon the protective
system but upon the requirements of the public service.'
During the first fifteen months of the new tariff, the
 concession to England consists of a reduction by one-eighth of
the duties chargeable under the general list. At the end of
that time, that is on the last of July, 1898, the reduction
will be one-fourth. The reductions do not apply to wines, malt
liquors, spirits and tobacco, the taxes on which are
essentially for revenue. While England was admitted at once to
the advantages of the reduced tariff, this tariff is not to be
applicable to England alone. In July, it was extended to the
products of New South Wales, the free-trade colony of the
British Australasian group; and any country can come within
its provisions whose government can satisfy the Comptroller of
Customs at Ottawa, that it is offering favourable treatment to
Canadian exports, and is affording them as easy an entrance
through its customs houses as the Canadians give by means of
the reciprocal tariff. It is also possible, under a later
amendment to the Tariff Act, for the Governor in Council to
extend the benefits of the reciprocal tariff to any country
entitled thereto by virtue of a treaty with Great Britain.
{62}
Numerous alterations were made in the general list of import
duties. Some of these involved higher rates; others lowered
the duties. But if the changes in the fiscal system had been
confined to these variations, the new tariff would not have
been noteworthy, and it would have fulfilled few of the
pledges made by the Liberals when they were in Opposition. It
owes its chief importance to the establishment of an inner
tariff in the interests of countries which deal favourably
with Canada."

E. Porritt,
The New Administration in Canada
(Yale Review, August, 1897).

CANADA: A. D. 1897 (June-July).

Conference of colonial premiers with
the British Colonial Secretary.
 See (in this volume)
ENGLAND: A. D. 1897 (JUNE-JULY).

CANADA: A. D. 1897 (October).

Self-government for the Northwestern Territories.

By an Act passed in October, a system of self-government,

going far towards the full powers of a provincial government,
but having some limitations, was provided for the Northwest
Territories.

CANADA: A. D. 1898 (January).

Encyclical Letter of the Pope on the Manitoba School Question.

On the report made by his delegate, Monsignor Merry del Val,

Pope Leo XIII. addressed an encyclical letter to the Roman
Church in Canada, concerning the duty of Catholics in the
matter of the Manitoba schools (see above: A. D. 1890-1896),
which was made public at Quebec on the 9th of January, 1898.
The letter has great general importance, as defining with
precision the attitude of the Church towards all secular
school systems. With a few unessential passages it is given in
what follows:

"It was with extreme solicitude," wrote the Pope, "that we

turned our mind to the unhappy events which in these later
years have marked the history of Catholic education in
Manitoba. … And since many expected that we should make a
pronouncement on the question, and asked that we should trace
a line of conduct and a way to be followed, we did not wish to
decide anything on this subject before our Apostolic delegate
had been on the spot, charged to proceed to a serious
examination of the situation, and to give an account to us of
the state of affairs. He has faithfully and diligently
fulfilled the command which we had given him. The question
agitated is one of great and exceptional importance. We speak
of the decision taken seven years ago by the parliament of
Manitoba on the subject of education. The act of Confederation
had secured to Catholic children the right of education in public
schools in keeping with their conscientious convictions. The
parliament of Manitoba abolished this right by contrary law.
By this latter law a grave injury was inflicted, for it was
not lawful for our children to seek the benefits of education
in schools in which the Catholic religion is ignored or
actively combated, in schools where its doctrine is despised
and its fundamental principles repudiated. If the Church has
anywhere permitted this, it was only with great reluctance and
in self-defense, and after having taken many precautions,
which, however, have too often been found unequal to parrying
the danger. In like manner one must at all cost avoid, as most
pernicious, those schools wherein every form of belief is
indifferently admitted and placed on an equal footing—as if in
what regards God and Divine things, it was of no importance
whether one believed rightly or wrongly, whether one followed
truth or falsehood. You well know, venerable brothers, that
all schools of this kind have been condemned by the Church,
because there can be nothing more pernicious nor more fitted
to injure the integrity of faith and to turn away the tender
minds of youth from the truth. … For the Catholic there is but
one true religion, the Catholic religion; hence in all that
concerns doctrine, or morality, or religion, he cannot accept
or recognize anything which is not drawn from the very sources
of Catholic teaching. Justice and reason demand, then, that
our children have in their schools not only scientific
instruction but also moral teachings in harmony, as we have
already said, with the principles of their religion, teachings
without which all education will be not only fruitless but
absolutely pernicious. Hence the necessity of having Catholic
teachers, reading books, and textbooks approved of by the
bishops, and liberty to organize the schools, that the
teaching therein shall be in full accord with Catholic faith
as well as with all the duties that flow therefrom. For the
rest, to decide in what institutions their children shall be
instructed, who shall be their teachers of morality, is a
right inherent to parental authority. When, then, Catholics
demand, and it is their duty to demand, and to strive to
obtain, that the teaching of the masters shall be in
conformity with the religion of their children, they are only
making use of their right; and there can be nothing more
unjust than to force on them the alternative of allowing their
children to grow up in ignorance, or to expose them to
manifest danger in what concerns the supreme interests of
their souls. It is not right to call in doubt or to abandon in
any way these principles of judging and acting which are
founded on truth and justice, and which are the safe-guards
both of public and private interests. Therefore, when the new
law in Manitoba struck a blow at Catholic education, it was
your duty, venerable brothers, to freely protest against the
injury and disaster inflicted; and the way in which you all
fulfilled that duty is a proof of your common vigilance, and
of a spirit truly worthy of bishops; and, although each one of
you will find on this point a sufficient approbation in the
testimony of his own conscience, learn, nevertheless, that you
have also our conscience and our approbation, for the things
which you sought and still seek to protect and defend are most
sacred. The difficulties created by the law of which we speak by
their very nature showed that an alleviation was to be sought
for in a united effort. For so worthy was the Catholic cause
that all good and upright citizens, without distinction of
party, should have banded themselves together in a close union
to uphold it. Unfortunately for the success of this cause, the
contrary took place. What is more deplorable still, is that
Catholic Canadians themselves failed to unite as they should
in defending those interests which are of such importance to
all—the importance and gravity of which should have stilled
the voice of party politics, which are of much less
importance. We are not unaware that something has been done to
amend that law. The men who are at the head of the federal
government and of the Province of Manitoba have already taken
certain measures with a view to decreasing the difficulties of
which the Catholics of Manitoba complain, and against which
 they rightly continue to protest.
{63}
We have no reason to doubt that these measures were taken from
love of justice and from a laudable motive. We cannot, however,
dissimulate the truth; the law which they have passed to
repair the injury is defective, unsuitable, insufficient. The
Catholics ask—and no one can deny that they justly ask—for
much more. Moreover, in the remedial measures that have been
proposed there is this defect, that in changes of local
circumstances they may easily become valueless. In a word, the
rights of Catholics and the education of their children have
not been sufficiently provided for in Manitoba. Everything in
this question demands, and is conformable to justice, that
they should be thoroughly provided for, that is, by placing in
security and surrounding with due safe-guards those
unchangeable and sacred principles of which we have spoken
above. This should be the aim, this the end to be zealously
and prudently sought for. Nothing can be more injurious to the
attainment of this end than discord; unity of spirit and
harmony of action are most necessary. Nevertheless since, as
frequently happens in things of this nature, there is not only
one fixed and determined but various ways of arriving at the
end which is proposed and which should be obtained, it follows
that there may be various opinions equally good and
advantageous. Wherefore let each and all be mindful of the
rules of moderation, and gentleness, and mutual charity; let
no one fail in the respect that is due to another; but let all
resolve in fraternal unanimity, and not without your advice,
to do that which the circumstances require and which appears
best to be done. As regards especially the Catholics of
Manitoba, we have every confidence that with God's help they
will succeed in obtaining full satisfaction. This hope is
founded, in the first place, in the righteousness of the
cause, next in the sense of justice and prudence of the men at
the head of the government, and finally in the good-will of all
upright men in Canada. In the meantime, until they are able to
obtain their full rights, let them not refuse partial
 satisfaction. If, therefore, anything is granted by law to
custom, or the good-will of men, which will render the evil
more tolerable and the dangers more remote, it is expedient
and useful to make use of such concessions, and to derive
therefrom as much benefit and advantage as possible. Where,
however, no remedy can be found for the evil, we must exhort
and beseech that it be provided against by the liberality and
munificence of their contributions, for no one can do anything
more salutary for himself or more conducive to the prosperity
of his country, than to contribute, according to his means, to
the maintenance of these schools. There is another point which
appeals to your common solicitude, namely, that by your
authority, and with the assistance of those who direct
educational institutions, an accurate and suitable curriculum
of studies be established, and that it be especially provided
that no one shall be permitted to teach who is not amply
endowed with all the necessary qualities, natural and
acquired, for it is only right that Catholic schools should be
able to compete in bearing, culture, and scholarship with the
best in the country. As concerns intellectual culture and the
progress of civilization, one can only recognize as
praiseworthy and noble the desire of the provinces of Canada
to develop public instruction, and to raise its standard more
and more, in order that it may daily become higher and more
perfect. Now there is no kind of knowledge, no perfection of
learning, which cannot be fully harmonized with Catholic
doctrine."

CANADA: A. D. 1898 (September).

Popular vote on the question of Prohibition.

Pursuant to a law passed by the Dominion Parliament the

previous June, a vote of the people in all the Provinces of
the Dominion was taken, on the 29th of September, 1898, upon
the following question: "Are you in favor of the passing of an
act prohibiting the importation, manufacture or sale of
spirits, wine, ale, beer, cider, and all other alcoholic
 liquors for use as beverages?" The submitting of this question
to a direct vote of the people was a proceeding not quite
analogous to the Swiss Referendum, since it decided the fate
of no pending law; nor did it imitate the popular Initiative
of Swiss legislation, since the result carried no mandate to
the government. It was more in the nature of a French
Plébiscite, and many called it by that name; but no Plebiscite
in France ever drew so real an expression of popular opinion
on a question so fully discussed. The result of the voting was
a majority for prohibition in every Province except Quebec,
Ontario pronouncing for it by more than 39,000, Nova Scotia by
more than 29,000, New Brunswick by more than 17,000, Manitoba
by more than 9,000, Prince Edward's Island by more than 8,000,
and the Northwest Territories by more than 3,000, while
British Columbia gave a small majority of less than 600 on the
same side. Quebec, on the other hand, shouted a loud "No" to
the question, by 93,000 majority. The net majority in favor of
Prohibition was 107,000. The total of votes polled on the
question was 540,000. This was less than 44 per cent of the
total registration of voters; hence the vote for Prohibition
represented only about 23 per cent of the electorate, which
the government considered to offer too small a support for the
measure asked for.

CANADA: A. D. 1898-1899.
The Joint High Commission for settlement of all unsettled
questions between Canada and the United States.

As the outcome of negotiations opened at Washington in the

previous autumn by the Canadian Premier, relative to the
seal-killing controversy, an agreement between Great Britain,
Canada and the United States was concluded on the 30th of May,
1898, for the creation of a Joint High Commission to negotiate
a treaty, if possible, by which all existing subjects of
controversy between the United States and Canada should be
settled with finality. Appointments to the Commission by the
three governments were made soon afterwards, Great Britain
 being represented by the Lord High Chancellor, Baron
Herschell; Canada by Sir Wilfred Laurier, Premier, Sir Richard
Cartwright, Minister of Trade and Commerce, and Sir Louis
Henry Davies, Minister of Marine and Fisheries; the United
States by Honorable John W. Foster, ex-Secretary of State,
Senator Charles W. Fairbanks, Senator George Gray,
Representative Nelson Dingley, and the Honorable John A.
Kasson, Reciprocity Commissioner. Senator Gray having been
subsequently appointed on the Commission to negotiate peace
with Spain, his place on the Anglo-American Commission was
taken by Senator Faulkner.
{64}
The Joint Commission sat first in Quebec and later in
Washington. Among the questions referred to it were those
relating to the establishment of the boundary between Alaska
and British Columbia; the issues over Bering Sea and the catch
of fur seals; the unmarked boundary between Canada and the
United States near Passamaqnoddy Bay in Maine and at points
between Wisconsin and Minnesota and Canada; the northeast
fisheries question, involving the rights of fishing in the
North Atlantic off Newfoundland and other points; the
regulation of the fishing rights on the Great Lakes;
alien-labor immigration across the Canadian-American border;
commercial reciprocity between the two countries; the
regulation of the bonding system by which goods are carried in
bond across the frontier and also the regulation of traffic by
international railways and canals of the two countries;
reciprocal mining privileges in the Klondyke, British North
America and other points; wrecking and salvage on the ocean
and Great Lakes coasting waters; the modification of the
treaty arrangement under which only one war vessel can be
maintained on the Great Lakes, with a view to allowing
warships to be built on the lakes and then floated out to the
ocean. The sessions of the Joint Commission were continued at
intervals until February, 1899, when it adjourned to meet at
Quebec in the following August, unless further adjournment
should be agreed upon by the several chairmen. Such further
 adjournment was made, and the labors of the Joint Commission
were indefinitely suspended, for reasons which the President
of the United States explained in his Message to Congress,
December, 1899, as follows: "Much progress had been made by
the Commission toward the adjustment of many of these
questions, when it became apparent that an irreconcilable
difference of views was entertained respecting the
delimitation of the Alaskan boundary. In the failure of an
agreement as to the meaning of articles 3 and 4 of the treaty
of 1825 between Russia and Great Britain, which defined the
boundary between Alaska and Canada, the American Commissioners
proposed that the subject of the boundary be laid aside and
that the remaining questions of difference be proceeded with,
some of which were so far advanced as to assure the
probability of a settlement. This being declined by the
British Commissioners, an adjournment was taken until the
boundary should be adjusted by the two Governments. The
subject has been receiving the careful attention which its
importance demands, with the result that a modus vivendi for
provisional demarcations in the region about the head of Lynn
Canal has been agreed upon [see (in this volume) ALASKA
BOUNDARY QUESTION] and it is hoped that the negotiations now
in progress between the two Governments will end in an
agreement for the establishment and delimitation of a
permanent boundary."

CANADA: A. D. 1899 (October).

Modus Vivendi, fixing provisional boundary line of Alaska.

See (in this volume)

ALASKA BOUNDARY QUESTION.

CANADA: A. D. 1899-1900.
Troops to reinforce the British army in South Africa.

A proposal from the Canadian government to assist that of the

Empire in its South African War was gratefully accepted in the
 early stages of the war, and a regiment of infantry called the
Royal Canadian, numbering a little more than 1,000 men, sailed
from Quebec, October 30. In the following January a second
contingent of more than 1,000 men was sent to the field. This
latter comprised squadrons of mounted rilles and rough-riders,
and three batteries of field artillery. In the same month the
Canadian government accepted an offer from Lord Strathcona to
raise, equip and transport at his own expense a body of 500
mounted men from the Northwest.

CANADA: A. D. 1900 (November).

General election.

The general election of members of the Dominion House of

Commons was held November 7, resulting as follows:

Provinces. Liberal. Conservative.

Independent. Total.

Nova Scotia. 15 5
0 20
New-Brunswick. 9 5
0 14
Prince Edward Island. 3 2
0 5
Quebec. 57 8
0 65
Ontario. 33 54
5 92
Manitoba. 2 3
2 7
Northwest Territories. 2 0
2 4
British Columbia. 3 2
1 6

Totals. 124 79
10 213

As in the election of 1896, the Liberal Ministry of Sir

Wilfred Laurier found its strong support in the province of
Quebec. Its party suffered unexpected losses in Ontario. The
slight meaning of the election was summed up by Professor
Goldwin Smith as follows: "The net result of the elections
seems to be a Government resting on French Quebec and an
Opposition resting on British Ontario. The minor provinces
have been carried, as usual, by local interests rather than on
general questions. Apart from the distinction of race between
the two great provinces and the antagonism, before dormant but
somewhat awakened by the war, there was no question of importance
at issue between the parties. Both concurred in sending
contingents to South Africa. The Liberals, though they went in
at first on the platform of free trade—at least, of a tariff
for revenue only—have practically embraced protection under
the name of stability of the tariff, and are believed to have
received from the protected manufacturers contributions to
their large election fund. The other special principles, such
as the reduction of expenditure and discontinuance of the
bonus to railways, proclaimed by Liberals before the last
election, have been dropped. So has reform of the Senate. It
is not likely that the Liberal victory will be followed by any
change either in legislation or government, or by any special
reform. Mr. Bourassa and Monet, of the French-Canadian members
who protested against the contingent, have been re-elected.
Great as may be the extent and warmth of British feeling, the
statement that Canadians were unanimously in favour of
participation in the war must not be taken without
qualification. For myself, I felt that so little principle was
at stake that I voted for two Conservatives on their personal
merits."
{65}

CANAL, The new Bruges.

See (in this volume)

BRUGES: A. D. 1900.

CANAL, The Chicago Drainage.

See (in this volume)

CHICAGO: A. D. 1900.

CANAL, City of Mexico Drainage.

See (in this volume)

MEXICO: A. D. 1898.

CANAL, The Elbe and Trave.

See (in this volume)

GERMANY: A. D. 1900 (JUNE).

CANAL, Interoceanic, The Project of the: A. D. 1581-1892.

The early inception of the project.
Movements towards its realization.

"The thought of uniting the two great oceans by means of a

canal across the American isthmus sprang up, as is known, from
the moment the conviction was reached that the passage which,
from the days of Columbus, was thought to exist towards the
Southern Sea, was not a reality. … Nevertheless the first
survey of the land was not carried out until the year 1581,
when, in obedience to superior instructions, Captain Antonio
Pereira, Governor of Costa Rica, organized an expedition and
explored the route by way of the San Juan river, the lake, and
the rivers emptying into Gulf Nicoya, Costa Rica. Thirty-nine
years later Diego de Mercado submitted to King Philip III his
famous report of January 23, 1620, suggesting the route by the
river and lake, and thence through Costa Rican territory along
the Quebrada or Barranca Honda to Salinas Bay, then called
Puerto del Papagayo. Either because the magnitude of the
undertaking was at that time superior to the necessities of
trade, or, as was said, because Spain considered the canal
antagonistic to her interests, the era of independence arrived
without the execution of the project ever having been entered
upon. After independence the Congress of Central America, in
which Costa Rica and Nicaragua were represented as States of
the Federation which succeeded the Colonial Government,
enacted on June 16, 1825, a decree providing for the
construction of the canal, and in that same year Don Antonio
José Cañas, Diplomatic Representative of Central America in
Washington, addressed the Secretary of State, Mr. Henry Clay,
informing him of this resolution and stating that: 'A company
formed of American citizens of respectability was ready to
undertake the work as soon as a treaty with the United States
insuring the coöperation of the latter was signed; that he was
ready to enter into negotiations for the treaty, and that
nothing would be more pleasant for Central America than to see
the generous people of the United States joining her in the
opening of the canal, sharing the glory of the enterprise, and
enjoying the great advantages to be derived from it.' The
Government of Central America could not carry the undertaking
into effect, notwithstanding that among the means employed to
reach the desired result there figures the arrangement
concluded with the King of Holland in October, 1830. But,
though the hopes centered in the undertaking were frustrated,
to the honor of Central America the declarations of that
Congress, which constitute, like the concession for the canal
itself, one of the loftiest public documents ever issued by
any nation of the earth, have become a matter of record. The
Central American Federation dissolved, this important matter
attached to Nicaragua and Costa Rica directly, and the
boundary line between the two republics having been determined