BUSINESS & MANAGEMENT METRIC

1.5 TOTAL MAINTENANCE COST AS A PERCENT OF

REPLACEMENT ASSET VALUE (RAV)
Published on April 16, 2009

DEFINITION
This metric is the amount of money spent annually maintaining assets, divided by the
replacement asset value (RAV) of the assets being maintained, expressed as a percentage.

OBJECTIVES
This metric allows comparisons of the expenditures for maintenance with other plants of
varying size and value, as well as comparisons to benchmarks. The RAV is used in the
denominator to normalize the measurement given that plants vary in size and value.

FORMULA
Total Maintenance Cost per RAV (%) =
[Total Maintenance Cost ($) × 100] / Replacement Asset Value ($)

COMPONENT DEFINITIONS
Annual Maintenance Cost
Annual maintenance cost is the annual expenditures for maintenance labor, including
maintenance performed by operators (e.g., total productive maintenance (TPM), materials,
contractors, services and resources). Includes all maintenance expenses for outages,
shutdowns or turnarounds, as well as normal operating times. Includes capital expenditures
directly related to end-of-life machinery replacement so that excessive replacement versus
proper maintenance is not masked. Does not include capital expenditures for plant expansions
or improvements. When calculating, ensure maintenance expenses included are for the assets
included in the replacement asset value (RAV) in the denominator.

Estimated Replacement Asset Value (ERV)

Also referred to as Replacement Asset Value (RAV), it is the dollar value that would be required
to replace the production capability of the present assets in the plant. Includes

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production/process equipment, as well as utilities, facilities and related assets. Does not use the
insured value or depreciated value of the assets. Includes the replacement value of buildings
and grounds if these assets are included in maintenance expenditures. Does not include the
value of real estate, only improvements.

Replacement Asset Value (RAV)

Also referred to as estimated replacement value (ERV), it is the dollar value that would be
required to replace the production capability of the present assets in the plant. Includes
production/process equipment as well as utilities, facilities and related assets. Also includes the
replacement value of buildings and grounds if these assets are included in maintenance
expenditures. Does not include the insured value or depreciated value of the assets, nor does it
include the value of real estate, only improvements.

Total Maintenance Cost

The total expenditures for maintenance labor, including maintenance performed by operators
such as total productive maintenance (TPM), materials, contractors, services and resources.
Includes all maintenance expenses for outages, shutdowns or turnarounds, as well as normal
operating times. Also includes capital expenditures directly related to end-of-life machinery
replacement so that excessive replacement versus proper maintenance is not masked. Does not
include capital expenditures for plant expansions or improvements.

QUALIFICATIONS
1. Time basis: Annually
2. This metric is typically used by corporate managers to compare plants. It is also used by
plant managers, maintenance managers, operations managers, reliability managers and
vice presidents.
3. It can be used to determine the standing of plant in a four-quartile measurement
system, as in most industries. Best-in-class plants with high asset utilization and high
equipment reliability spend less maintaining their assets.
4. SMRP suggests not relying on this metric alone since lower maintenance cost does not
necessarily equate to best-in-class.

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SAMPLE CALCULATION
If total maintenance cost is $3,000,000 annually and the replacement asset value for the assets
is $100,000,000, then the total maintenance cost as a percent of replacement asset value
would be:
Total Maintenance Cost As a Percent of RAV =
[Annual Maintenance Cost ($) × 100] / Replacement Asset Value

Total Maintenance Cost As a Percent of RAV = ($3,000,000 × 100) / $100,000,000

Total Maintenance Cost As a Percent of RAV = 3%

BEST- IN- CLASS TARGET VALUE

Generally less than 3%; top quartile range is 0.7% to 3.6%, varying by industry

CAUTIONS
Top quartile target is reasonable only if maintenance practices are advanced and mature. The
target should be higher if maintenance practices are not advanced and not mature. For
example, a third quartile plant with third quartile practices will have to spend at a third quartile
level (more maintenance dollars) in order to maintain reasonable reliability and avoid asset
degradation.

Regarding the variation by industry, an abundance of data suggests that lighter, less complex
industries (non-industrial facilities, for example) tend to spend less than heavier industries
(mining, for example), although the differences are quite small in the top quartile. The range
shown above describes the lowest industry’s top-of-the-top quartile target (0.7%) and the
highest industry’s bottom-of-the-top quartile target. Targeting 1.5% may or may not be
appropriate for a particular facility. Consultation with experts is advised to establish the
appropriate target for the facility.

HARMONIZATION
This metric and its supporting definitions are similar to EN 15341 Indicator E3.

Note 1: This metrics and EN 15341 are different in that EN 15341 has a broader definition and
includes depreciation of maintenance owned equipment and facilities in total maintenance cost
(office, workshop and warehouse).

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Note 2: The SMRP term replacement asset value is equal to the EN 15341 term asset
replacement value.

Note 3: The SMRP metric is calculated on an annual basis. EN 15341 is undefined in terms of
time.

This document is recommended by the European Federation of National Maintenance Societies

(EFNMS) as a guideline for calculating the E1 indicator. Additional information is available in the
document Global Maintenance and Reliability Indicators, available in the SMRP Library.

REFERENCES
AT Kearny. (n.d.) Published benchmarks for the chemical processing industry. Chicago, IL

Gulati, R. (2009). Maintenance and reliability best practices. South Norwalk, CT: Industrial
Press, Inc.

Hawkins, B. and Smith, R. (2004). Lean maintenance – reduce costs, improve quality, and
increase market share. Burlington, NY: Elsevier Butterworth Heinemann.

Management Resources Group, Inc. (2002). Proprietary benchmarks for 14 industries. Sandy
Hook, CT.

Mitchell, J. S. (2007). Physical asset management handbook (4th ed). South Norwalk, Industrial\
Press, Inc.

Moore, R. (2002). Making common sense common practice. Burlington, NY: Elsevier
Butterworth Heinemann.

Solomon Associates. (n.d.). Benchmarks for the oil refining, petrochemical, chemical processing
and other industries. Dallas, TX.

Townsend and Associates. (n.d.). Benchmarks for the polymers industry.

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