Replacement simulation model: A framework for building portfolio decisions

This paper presents a simple and robust replacement simulation model of potential value to organizations that possess a large building stock or portfolio. The basis of the model's conceptual framework is the recognition that facility renewal cycles are predictable. These cycles can be used to forecast the process of replacement by means of a rudimentary simulation procedure. The model allows for the sensitivity analysis of replacement expenditures to alternative maintenance scenarios. The better the maintenance programme, the longer the replacement cycles, and the lower the replacement costs per unit of time. These savings represent the upper bound on economically justifiable maintenance expenditures. The model also addresses the long-term fluctuations of replacement costs, which can be smoothed out by a suitable distinction between deferrable and non-deferrable replacement expenditures.