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Department of Business and Management Science, Norwegian School of Economics (NHH) Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)

No 2014/36:
Optimal maintenance scheduling of local public purpose buildings

Arnt O. Hopland () and Sturla F. Kvamsdal ()

Abstract: We formulate the maintenance scheduling decision as a dynamic optimization problem, subject to an accelerating decay. This approach offers a formal, yet intuitive, weighting of the trade-offs involved when deciding a maintenance schedule. The optimal maintenance schedule reflects the trade-off between the interest rate and the rate at which the decay accelerates. The prior reflects the alternative cost, since the money spent on maintenance could be saved and earn interests, while the latter reflects the cost of postponing maintenance. Importantly, it turns out that it is sub-optimal to have a cyclical maintenance schedule where the building is allowed to decay and then be intensively maintained before decaying again. Rather, local governments should focus the maintenance either early in the building’s life span and eventually let it decay towards replacement/abandonment or first let it decay to a target level and then keep it there until replacement/abandonment. Which of the two is optimal depends on the trade-off between the alternative cost and the cost of postponing maintenance.

Keywords: Maintenance; local governments; policy; public sector; (follow links to similar papers)

JEL-Codes: C00; C60; C61; (follow links to similar papers)

23 pages, November 14, 2014

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