Reporting on Options
Staff preparing CIP proposals must present them in a way that management and reviewers can easily assess the conclusions reached.
The writer is seeking to obtain approval, and should include:
- Business drivers and goals for the proposal
- Options considered, including non-asset solutions
- Associated costs and benefits, (both direct and indirect costs and benefits) for each option
- Life cycle costs for each option
- Economic evaluation of all options
- Preferred option
- Reasons for recommending preferred option.
Where a single option stands out, it should be recommended.
However, where several options offer similar NPVs or returns, then the option that has the most beneficial impact on the organization as a whole should be adopted.
Senior management may need to review the options against business strategies.
Risk issues that should be considered include:
- High capital low operation expenditure and small risk
- Low capital high operating cost and a medium risk
- No capital higher operating expenditure and higher risk exposure.
In the future the organization will need to review these strategies in the light of:
- Actual maintenance costs
- Revised indirect risk cost allowances
- Actual failure histories
- Actual condition decays
- Better probabilities of failure
- Changes in objectives.
It is therefore important to record assumptions and derive outputs so these issues can be addressed in the future.