A Sound Way To Set Effective Annual Maintenance Plans For Reliability Improvement And Let You Estimate A Believable Annual Maintenance Budget

You will not like what I next tell you. Having a budgeted annual maintenance plan does not naturally translate into effective maintenance outcomes. The only purpose of maintenance is to reduce operating risk below what it would be if there was no maintenance. Effective maintenance leads to lower production costs by removing and/or preventing operating risks that would have lost more money than it costs to do the maintenance to control them. Typically this is to SFAIRP (so far as is reasonably practicable) standards. From an annual budgetted maintenance plan you will only get effective maintenance if the annual plan contains effective maintenance strategy and tasks. When you budget maintenance by listing all your assets’ likely monthly maintenance work orders and their respective costs in a spread sheet it does not mean the budget will also be effective maintenance. A table of estimated annual maintenance costs is a forecast based on the hope the year ahead goes as was envisaged at the time the budget was developed.
The correct approach is to first have effective maintenance jobs that prevents operating risks to your plant and equipment and then estimate the annual maintenance budget to deliver the needed maintenance work—that is the only way you can be sure your yearly budget for maintenance will also deliver effective maintenance outcomes.
To determine your annual maintenance plan and its maintenance costs it is common practice to list every asset that will be maintained each month during the year. For every asset you list each month’s scheduled Preventive Maintenance (PM) and Predictive Maintenance (PdM) work orders due to be done. They will contain all the estimated resources and the costs for them. The PM and PdM jobs will also generate corrective work orders for parts needing replacement or refurbishment. You need to allow moneys for the corrective work orders expected month by month on each asset during the year. You can check the asset’s history for corrective work done in the past to see if there are regular problems and the costs associated to address them. You will also need to make some allowance for emergency work not foreseen.
If you only require your annual maintenance budget to be within plus-minus 20% of the actual maintenance expenditure, you can use the historic maintenance costs from previous years to do your next year’s maintenance budgeting. This is the easiest way to budget maintenance, as next year’s maintenance costs will very likely be similar to the mode value of past years’ costs. It is not a rigorous way to determine your maintenance budget, but it is a statistically correct method to arrive at a believable annual maintenance budget estimate. This is a common project costing methodology used to forecast the budget for large capital works. The estimating is done by collating the costs of similar work done in past projects (suitably corrected for inflation and market movements) and deriving a statistical estimate of the budget allowance for the future project.
If in your company an accuracy of 20% is fine to budget maintenance then don’t waste your time doing extra work beyond compiling your assets’ past maintenance costs. In a reactive organisation you won’t get a more accurate estimate than what you get by determining a maintenance budget as noted above. To be more accurate with your maintenance budget estimate is impossible in reactive operations. In some years you might find the actual maintenance expenditure was close to the maintenance budget value, but that was because of your luck—not your expertise! Many companies think they are good at controlling their maintenance budget, when in fact they have just been lucky!
To intentionally get your actual maintenance costs within plus-minus 5% of your maintenance budget year after year is an outcome of the effectiveness of your maintenance strategy and the efficiencies of your maintenance processes; it is not the result of your maintenance budget methodology. Only once your maintenance strategy and its delivery plans are truly effective at stopping operating risk will the maintenance plan’s budget also become effectively applied maintenance.
A highly successful maintenance reduction methodology is the Sumitomo Chemicals PM-10 maintenance  reliability improvement approach described in our August 2002 PDF report Japanese Path to Maintenance Excellence. Include their equipment reliability improvement concept into your maintenance budget process and every year you will have a truly effective maintenance plan against which to budget maintenance expenditure. Use PM-10 maintenance planning and you will continually create greater reliability and drive operating costs lower each year.
To recap: first have effective maintenance strategy for each asset that brings its operating risk down to the SFAIRP level. The strategy will be delivered through a series of fully defined and totally costed maintenance work orders. Those work orders (known Preventive, known Predictive, known Improvement, and estimated Corrective work orders) are accumulated together to become the annual maintenance plan (and the wise maintenance manager ensures it includes PM-10 reliability improvement maintenance work) that provides an accurately priced annual maintenance budget and gives you an excellent chance to get the actual maintenance costs to within 5% of the annual maintenance budget.
I hope the suggestions above prove to be helpful in your situation.