Reducing Compliance Debt Caused by Deferred Maintenance

Maintaining a facility, pipeline, or process is essential to operate safely. A key component of this is to choose the right maintenance projects that will produce the best outcomes for the organization. Many companies use a simple ranking system to prioritize which projects to approve and which ones will be deferred until some time in the future. This strategy can result in important (perhaps strategic) projects not being funded which can increase compliance debt and future risk.

It is common to rank projects using a set of parameters such as: value (or benefit), cost, and risk. Projects are ranked by benefit first followed by those with the lowest project risk. The cost of these projects are added up until the maintenance budget has been reached. The following chart illustrates this process showing that Project A and Project B have been selected:

Project Selection by Value

Highly regulated companies often prioritize projects by their compliance risk which is a measure of compliance threat or benefit. Understanding, that in this example, risk is used in a different manner than the previous scenario, the following diagram shows that Projects C, F and G have been selected:

Projects with low compliance risk (even with high value) are often deferred until their risk becomes great enough to bubble up to the top of the priority line. This is where the rub is when using single criteria ranking. Project value and risk are more nuanced making simple ranking less effective.

There are other factors that contribute to a poor (or less optimal) selection of maintenance projects:

  • Project value tends to be limited to benefits in a given year (i.e. within the planning cycle) and often does not consider technical debt caused by deferred maintenance.

  • Risk is more complicated than just project risk. For example, there are other kinds of risk such as: PSM risk, compliance risk, environmental risk, and complexity risk. Each of these will influence the selection in different ways.

  • Project selection using single criteria ranking can only prioritize one factor and therefore cannot produce a balanced investment across programs, processes, and areas across the business.

  • Deferred projects can result in increased risk, higher costs, and delayed benefits.

  • Selecting and approving once a year using the entire maintenance budget leaves no contingency to address changes throughout the year. This can result in excessive re-planning which adds risk and cost when new projects are introduced.

Selecting maintenance projects is analogous to managing a project portfolio which is typically monitored and adjusted on a periodic basis. Portfolio management introduces tools and techniques that can help select more optimal sets of projects by using multi criteria decision analysis (MCDA). Project selection can incorporate multiple project parameters such as: complexity, integrity, reliability, safety, technical debt, compliance risk, and so on, to help determine the best or at least better maintenance outcomes.

Here are seven steps to achieving an optimal maintenance portfolio:

  1. Define what a balanced maintenance investment (portfolio) looks like.

  2. Decide on an appropriate MCDA method such as: analytic hierarchical process (AHP), multi-attribute additive model, real options, etc.

  3. Identify the project parameters needed to support the selected method

  4. Test and calibrate the optimization process.

  5. Use optimization results to generate candidate portfolios

  6. Select portfolio that produces a balanced investment

  7. Regenerate portfolio candidates as projects are completed and as new ones are added throughout the planning cycle to keep the investment balanced.

Using multi criteria decision analysis techniques will take a little longer but will result in a more balanced maintenance investment, improved consideration of compliance debt, and reduced costs associated with excessive re-planning.

Plan-Do-Check-Act Questions:

  1. How is compliance currently considered during maintenance project selection?

  2. What benefits would result from having a more balanced portfolio for maintenance projects?

  3. What would need to happen to improve the project selection process within your organization ?

  4. What step can you take to reduce compliance debt?

#compliancedebt #deferredmaintenance #projectselection

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