The Role of Uncertainty in Asset Management

The solution to the asset management problem is discussed. The asset management problem is formulated as an optimal control problem under uncertainty that seeks a least cost solution. A methodology for solving the asset management problem is given. The methodology has been applied to several classes of assets. Analysis of uncertainty is essential to asset management. Three fundamental uncertainties are discussed: asset failure, asset condition, and test results. It is shown that if these uncertainties are not treated correctly, costly errors in management policy occur. The effect of uncertainties on asset replacement policy is presented. It is also shown that the level of risk accepted under suboptimal asset management policies is almost certainly far greater than is currently appreciated.