van den Boomen, M; Leontaris, G and Wolfert, A R M (2019) Replacement optimization of ageing infrastructure under differential inflation. Construction Management and Economics, 37(11), pp. 659-674. ISSN 01446193
Abstract
Ageing public infrastructure assets necessitate economic replacement analysis. A common replacement problem concerns an existing asset challenged by a replacement option. Classic techniques obtained from the domain of engineering economics are the mainstream approach to replacement optimization in practice. However, the validity of these classic techniques is built on the assumption that life cycle cash flows of a replacement option are repetitive. Differential inflation undermines this assumption and therefore more advanced replacement optimization techniques are required under these circumstances. These techniques are found in the domain of operations research and require linear or dynamic programming (LP/DP). Since LP/DP techniques are complex and time-consuming, the current study develops an alternative model for replacement optimizations under differential inflation. This approach builds on the classic capitalized equivalent replacement technique. The alternative model is validated by comparison with a DP model showing to be equally accurate for a case with characteristics that apply to many infrastructure assets.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | asset management; differential inflation; optimization; public infrastructure assets; replacement decisions |
| Index terms: | inflation, optimization technique, asset management, public infrastructure, life cycle, replacement, dynamic programming, validity, engineering economics, operations research, cash flow, option |
| Subjects: | design methods, value management, financial analysis, asset management, financial management, economic analysis, materials science, algorithms, evaluation and assessment methods, infrastructure and transport systems, decision analysis |
| Topics: | Design Practice, Engineering Principles, Digital Applications, Business Strategy, Risk Management, Research Practice, Project Management, Cost Management |
| Descriptive scope: | 4 PCTA |
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