Using the cumulative cost model to forecast equipment repair costs: Two different methodologies

Professionals in the construction industry must be able to accurately forecast costs. Doing so not only helps assure reasonable profits for companies, but it can also help ensure that projects are delivered within budget for clients. Forecasting of equipment repair costs is one element of the larger problem of predicting overall costs. The cumulative cost model can provide construction engineers with a valuable tool for better understanding the nature of repair costs as they relate to production fleets. Data that are being collected (or that could be collected) can assist in the determination of the rate of accumulation of repair costs for a machine for a given period of use or the estimation of fleet repair budgets for a job or period. There are two different methodologies for constructing the repair cost portion of the cumulative cost model: life-to-date (LTD) repair costs and the period-cost-based (PCB) model. This paper will provide the steps and background for each of these two methodologies and compare them using a practical example.