Allocating Scarce Resources

The confidence level approach helps identify the activities that will have the greatest effect on improving the project's confidence level.

For instance, the confidence level validations may have shown that it is not necessary to complete a more thorough condition assessment, to fully identify the residual life.

Understanding the costs of the improvement gaps, it is relatively easy for the organization to understand the relative value of these activities, using the improved confidence level gains as benefits for the dollar that needs to be invested.

The organization can then easily rank these activities according to cost per % gained.

With a restricted budget the organization can carry out those works that offer the greatest value.

The CIP validation gap needs to represent a balanced score card.

For instance, it is not helpful to have a high quality consequence of failure assessment if our understanding of condition, and therefore probability of failure, is very weak.

As can be seen in the above figure, the cost of condition assessment is significant, however it still represents less than 33% of the savings we will make on the OCC alone, if we can defer the work for only one year.

It is often the case that these high cost items will be deferred due to their lower benefit / cost ratios such as:

• A detailed condition assessment and associated finite analysis activities to determine accurately the safe residual life of the asset
• The development of accurate (structured) maintenance plans and budgets for life cycle costing analysis
• The number of scenarios that need to be assessed in respect to options analysis.

Note: Organizations may only undertake the cheaper activities because they have inadequate funds to do the detailed analysis or R&D that is warranted.

Therefore, it is important to look at the issues relating to R&D/Analysis Budgeting. If these funds are made available at the most appropriate time, then it is relatively easy for the organization to complete the necessary analysis and derive a balanced scorecard as they move the project through to final approval and commencement of design construction.

In some cases, a distortion will have occurred because the review team has not adopted an appropriate 'weighting factor' for the 15 quality elements. For example, the group may have misjudged the weighting for the timing of the failure, so the condition assessment or prediction of failure will not have shown its true cost / benefit.

Therefore, it is vital that all of these analytical processes are exposed to some form of peer review.