Asset Management Lifecycle: Creation, Use,

and Disposal
Asset management follows a lifecycle approach, considering creation
(procurement/design), use (operation/maintenance), and disposal
(decommissioning/replacement) to optimize performance, cost, safety,
sustainability, and economic impact.
I am not part of the design and procurement process or decision making. I had the
opportunity to review requirements and design documents. I was part of some other
smaller procurement process and learned about the principle that needed to be
followed while acquiring a new asset or services. The following assessment is my
personal understanding with limited knowledge of the insights.

1. Creation (Procurement & Design)

 Assets are selected based on safety, reliability, maintainability, and supplier
availability.
 Acquisition decisions prioritize the lowest upfront costs, as it is nearly
impossible to convince city politicians to change the guidelines on any
purchase.
 Procurement decisions have focused more on initial purchase costs rather
than a comprehensive total cost of ownership (TCO) that includes long-term
maintenance and operational expenses.
 Single sourcing to a local manufacturer, supports the local economy by
sustaining jobs and the domestic supply chain.
 Using the same supplier ensures compatibility with existing infrastructure,
reducing the need for costly system modifications and retraining.
 However, this approach has also increased costs due to limited competition
and supplier dependency.
 Obsolescence concerns have emerged, as certain components become
unavailable with no direct replacements, impacting long-term asset viability.
 Design choices focus on ease of maintenance, durability, energy efficiency,
and risk reduction.

2. Use (Operation & Maintenance)

 Preventive and predictive maintenance strategies ensure safe and reliable
asset performance.
 A form of real-time monitoring, inspections, and performance tracking help
identify potential safety and obsolescence risks early.
 Compliance with safety regulations and best practices is a priority in
maintenance activities.
 Standardization of assets through a single supplier simplifies maintenance,
training, and spare parts management.
  Due to the lack of TCO analysis in procurement, higher-than-expected
maintenance and operational costs have emerged.
 Obsolescence management efforts, such as stocking critical spares and
exploring aftermarket solutions, have become necessary to sustain
operations.

3. Disposal (Decommissioning & Replacement)

 End-of-life assets are assessed for reuse, refurbishment, or safe disposal.
 Retired vehicles have been converted into work cars and refurbished to
extend their useful life, allowing them to serve several more years before
final disposal.
 Partial data-driven decision-making was followed to determine the right time
for replacement, balancing safety, cost, sustainability, and obsolescence
risks.
 Replacement or life extension decision made only based on available fund
from different level of government.
 Materials and components are safely repurposed whenever feasible and cost-
effective, ensuring no compromise on safety or availability while minimizing
waste.

Results
 Infrastructure Compatibility: Standardizing assets through a single
supplier reduces integration challenges and supports existing systems.
 Economic Benefit: Supporting a local manufacturer helps sustain jobs and
domestic industry.
 Cost Challenges: The focus on low upfront costs, driven by political
guidelines, has led to higher long-term maintenance and operational costs.
 Obsolescence Risks: Limited alternatives have made it difficult to replace
outdated components, requiring proactive obsolescence management.
 Reliability & Safety: Improved asset performance, reduced hazards, and
enhanced worker protection.
 Sustainability: The practice of refurbishing retired vehicles to extend their
life has reduced waste and improved resource utilization.
 Compliance: Adherence to safety, environmental, and industry regulations.
Decisions made early in the asset lifecycle significantly impact long-term costs and
performance, emphasizing the importance of balancing initial cost savings with
lifecycle cost considerations.
Question:
Based on your experience, what strategies can be used to highlight the importance
of lifecycle cost analysis within an organization?
Answer:
Lowest cost rule is implemented by the city purchasing policy. I have a recent
experience in contracting out a service. As a part of bid evaluators, we were
instructed to go for the lowest cost bidder while I know that will cost us more or will
give us extra pain during life of the contract.
Another example, I was involved in selecting a supplier for upgrading our CMMS to
add warranty module. We have chosen the lowest cost supplier who was not the
original developer. This decision makes us suffer greatly and eventually we paid
almost the same amount when the project was complete, and we still did not get
the product to my satisfaction. I had no choice but accept it.
Although I am not part of another purchase that upgrading the CMMS to its recent
version, I learned that our organization is selecting the same supplier for upgrading
CMMS. I raised my concern with many other people but no luck. So, it would not be
so easy to change the policy in public sector. It is the most visible items to everyone
and the most expensive part of overall purchasing decision.
From my experience, I would say we need to educate our influential stake holders as
well as decision maker regarding Total Cost of Ownership (TCO) for an asset. We also
need to make it visible every part of the cost associated with the asset so that it is
obvious to everyone what involves in the asset ownership. I would not say it can be
solved easily, but with right education to the targeted audience of right people,
proper analysis presented in a right format may resolve the issue and bring
everyone in the same understanding of TCO. It sounds not complicated but, in my
experience, these are most difficult part of the job to convince other away from
their existing belief.
Revised:
The city's purchasing policy mandates selecting the lowest-cost option, which often
leads to challenges during the asset's lifecycle. I recently experienced this while
evaluating bids for outsourcing a service. As part of the bid evaluation team, we
were required to select the lowest-cost bidder, despite knowing this choice would
likely result in higher long-term costs and operational difficulties throughout the
contract's duration.
Another example involves the selection of a supplier to upgrade our CMMS with a
warranty module. We opted for the lowest-cost supplier, who was not the original
developer. This decision proved costly, as we faced significant challenges and
ultimately paid almost the same amount as the original developer’s proposal—yet
the final product still did not meet my expectations. Unfortunately, I had no choice
but to accept the outcome.
Now, a separate project is underway to upgrade the CMMS to its latest version.
Although I am not directly involved, I have learned that the organization is once
again selecting the same supplier. Despite raising concerns alongside others, the
decision remains unchanged. This highlights a fundamental challenge in the public
sector—changing procurement policies is incredibly difficult, even when it is clear
that upfront cost savings may lead to higher long-term expenses.
Based on my experience, the best approach to emphasizing the importance of
lifecycle cost analysis is through education and visibility. Decision-makers and
influential stakeholders need to understand the Total Cost of Ownership (TCO) of an
asset. Every cost associated with an asset—from acquisition to maintenance and
disposal—must be made visible and clearly presented to illustrate the long-term
financial impact. While shifting entrenched beliefs is not easy, targeted education,
proper analysis, and well-structured presentations can help bridge the gap and
foster a better understanding of TCO. In practice, this is often one of the most
challenging aspects of influencing procurement decisions.

It's great that your organization requires a total lifecycle cost analysis upfront when
purchasing major assets. I completely agree that estimating acquisition costs is
relatively straightforward. However, projecting operating and maintenance costs is
far more complex.
Operating costs can vary significantly based on an organization's policies,
processes, and standard practices. Additionally, considering all relevant factors can
complicate cost estimates, especially since operational conditions may change over
an asset's lifecycle. Similarly, maintenance requirements can evolve depending on
how the asset is used in real-world conditions.
To improve cost estimates during the acquisition phase, you can reference
manufacturer reliability data and their recommended maintenance activities. This
information can help create a more accurate projection of long-term costs. However,
it’s unclear whether manufacturers or suppliers would provide reliability test data
and maintenance manuals before a purchase is finalized. To address this, you may
consider including a requirement for such data in the Request for Proposal (RFP) to
ensure better-informed decision-making.
How are those in procurement measured for success - is it
just keeping the capital/procurement budget low? Is there
no oversight as to the life cycle costs? Does operations
and maintenance give feedback to procurement as to
what they find - higher than expected maintenance and
operational costs - what are expected costs based on?
Single source supplier often leads to them increasing
costs - do you carry out a comparison to ensure they stay
in line?

Based on my limited knowledge and access to some documents, I believe our

organization measures procurement success mainly by keeping capital and
procurement costs low. The focus is mostly on upfront costs because they align with
budget limits and political expectations. There seems to be little formal oversight of
lifecycle costs, and procurement is rarely held responsible for the long-term
financial impact of an asset.
Operations and maintenance teams do provide feedback when they face higher-
than-expected maintenance and operational costs. However, this feedback often
does not affect future procurement decisions, as procurement's role is usually seen
as ending once the asset is purchased. Even when concerns about long-term costs
are raised, the priority remains on short-term savings rather than long-term value.
For single-source suppliers, rising costs are a common problem. While procurement
does conduct some cost comparisons, it often has limited options to move away
from single suppliers. This is usually due to contractual obligations or the need for
custom-made parts and equipment that few suppliers are willing to provide. I also
believe there is no structured process to ensure that single-source suppliers stay
competitive. Without a strong focus on lifecycle costs or cost-control measures,
procurement decisions often lead to higher operational expenses over time.
Changing this approach is difficult because procurement policies are rigid, and cost-
cutting is often prioritized over total cost of ownership. The best way to improve this
situation would be to raise awareness and integrate lifecycle cost analysis into
decision-making. However, this would require a shift in mindset at both the
leadership and policy levels.