15.2 Cost-Benefit Analysis of SHM Implementation

Cost-benefit analysis is a crucial tool for evaluating structural health monitoring systems. It helps determine if the benefits outweigh the costs by estimating and comparing all potential expenses and advantages in monetary terms.

The process involves identifying direct and indirect costs, quantifying benefits like improved safety and reduced maintenance, and calculating financial viability. Key metrics include net present value and benefit-cost ratio, which help decision-makers assess the long-term value of SHM implementation.

Principles and Methods of Cost-Benefit Analysis

Principles of cost-benefit analysis

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• Cost-benefit analysis (CBA) systematically estimates the strengths and weaknesses of alternatives used to determine options that provide the best approach to achieving benefits while preserving savings
• CBA principles involve identifying all potential costs and benefits, quantifying them in monetary terms, applying discount rates to account for the time value of money, and calculating net present value (NPV) or benefit-cost ratio (BCR)
• Methods of conducting CBA for SHM implementation define the scope and objectives of the SHM system, identify and quantify all relevant costs and benefits, determine the analysis period and discount rate, and calculate NPV or BCR to assess the financial viability of the SHM system

Costs of SHM implementation

• Direct costs of implementing an SHM system include hardware and software acquisition, installation and calibration, data transmission and storage, and maintenance and repair
• Indirect costs encompass training and education for personnel, data analysis and interpretation, and potential downtime during installation or maintenance
• Quantifying costs involves obtaining quotes from suppliers and contractors, estimating labor hours and rates for installation and maintenance, and considering the lifespan of the SHM components and replacement costs

Benefits of SHM systems

• SHM improves safety through early detection of structural damage or deterioration, reduced risk of catastrophic failure, and enhanced emergency response planning
• Condition-based maintenance instead of time-based maintenance, targeted repairs based on SHM data, and reduced manual inspection requirements lead to reduced maintenance costs
• SHM extends structure lifespan by enabling timely interventions to prevent further deterioration, optimizing repair and rehabilitation strategies, and delaying the need for costly replacements or decommissioning

Financial viability of SHM

• Determining the analysis period for evaluating the long-term financial viability of an SHM system considers the expected lifespan of the structure and SHM system and accounts for potential future upgrades or expansions
• Applying an appropriate discount rate accounts for the time value of money, inflation, and the opportunity cost of capital
• Calculating NPV involves estimating the present value of all future costs and benefits, subtracting the present value of costs from the present value of benefits (a positive NPV indicates a financially viable SHM system)
• Calculating BCR divides the present value of benefits by the present value of costs (a BCR greater than 1 indicates a financially viable SHM system)
• Sensitivity analysis assesses the impact of changes in key variables (discount rate, costs, benefits) and identifies the most critical factors affecting the financial viability of the SHM system