Overview

Your system is perfectly designed to give you the results that you get.

W. Edwards Deming

After going through an audit of design and capital project practices, it became clear that when implementing new capital projects, including the construction of new plants, Beta International typically did not adequately apply historical experience, particularly of the maintenance and operations departments, to help assure highly reliable plant equipment. While not an excuse, Beta is fairly typical. According to the Society for Maintenance and Reliability Professionals (SMRP), 86% of manufacturers surveyed do not use a life-cycle cost model when designing new capital equipment projects. ^[1] Indeed, at Beta, the design and installation philosophy appeared to be one of lowest installed cost and minimum adequate design (MAD). While minimum adequacy may be appropriate, the problem for Beta was that the basis for minimum adequacy was often poorly defined, and was often driven by constrained capital budgets, rather than lowest life-cycle cost. This approach to design and capital projects typically did not lead to the lowest life-cycle cost, nor to the lowest unit cost of production for manufacturing.

Further, the economic importance of addressing reliability and life-cycle cost during the planning, design, and procurement phases should not be underestimated, and a characteristic graph of the implications of life-cycle cost is shown in Figure 4-1. According to Blanchard, ^[2] while expenditures for plant and equipment occur later in the acquisition process, most of the life-cycle cost is committed at preliminary stages of the design...