Why must all eight conditions pass before a value is calculated?

A financial claim for an avoided failure only holds if the failure would plausibly have happened. If any link in the chain from finding to consequence is unsupported, the chain is broken and the monetary figure has no technical basis. The check is deliberately binary so a weak link cannot be averaged away by strong ones.

What is the difference between risk-adjusted value and potential cost avoidance?

Potential cost avoidance is the full consequence cost minus the intervention cost, assuming the failure would certainly have occurred. Risk-adjusted value multiplies the consequence cost by the probability of failure within the chosen horizon before subtracting the intervention cost. The risk-adjusted figure is the defensible one for reporting; the potential figure is an upper bound, not a confirmed saving.

Should HSE or environmental consequences be included?

Only if your organization has an agreed policy for monetizing them. Many do not, and inserting an unofficial number can undermine an otherwise sound assessment. The field stays disabled here until you confirm that monetization is permitted.

How should probability of failure be estimated?

From the degradation mechanism, its observed rate of change, the remaining margin to functional failure and the operating exposure during the horizon. It is an engineering estimate, so record the basis alongside the number rather than presenting it as a measurement.

PdM Value Validator

Test whether a predictive maintenance finding has a credible failure path before any avoided-failure value is claimed. If the path is not complete, no financial figure is produced.

Step 1 — Finding

Equipment name / tag

Equipment type

PdM technology

Identified failure mode

Finding description

Degradation mechanism

Expected functional failure

Expected consequence

Failure path

Finding
—
Failure mode
—
Degradation mechanism
—
Functional failure
—
Consequence
—

Step 2 — Credible failure path

All eight conditions must be YES. The check is binary: there is no partial credit, no weighting and no confidence rating.

1. Valid finding
Is there objective evidence confirming an abnormal equipment condition?
2. Specific failure mode
Has a specific physical failure mode been identified?
3. Physical failure mechanism
Is there a technically recognized mechanism connecting the finding to the failure mode?
4. Continuous failure path
Can the degradation reasonably progress from the observed condition to functional failure without unsupported assumptions?
5. Existing barriers considered
Have alarms, trips, protection systems, operator intervention, redundancy, standby equipment and existing maintenance been considered?
6. Consequence linkage
Is the claimed consequence directly linked to this specific failure path?
7. Operating exposure
Will actual or planned operating conditions allow the degradation mechanism to continue?
8. Technical evidence
Is the finding and failure path sufficiently documented for independent technical review?

0 of 8 conditions answered.

Steps 3–5 — Financial assessment

Locked until all eight credible failure path conditions are answered YES.

Results

Complete the credible failure path checklist and the cost inputs to produce a result.

Formulas

C_failure = Repair + Production loss + Secondary damage + Other + permitted HSE cost

Risk-adjusted PdM value = Pf × C_failure − C_intervention

Potential cost avoidance = C_failure − C_intervention

Why the path is validated first

A predictive finding only carries financial value if the equipment would otherwise have failed in a way that produced the consequence being claimed. The chain runs from finding to failure mode, through a recognized degradation mechanism, to a functional failure, and only then to a consequence. Break any link and the money attached to the far end of the chain is unsupported.

Treating the check as binary is deliberate. Scoring schemes let a strong mechanism argument compensate for a missing consequence link, which is exactly the substitution that produces unreviewable savings claims.

Worked example

A vibration route identifies rising outer-race defect frequencies on a centrifugal pump. All eight conditions pass. Probability of progression to functional failure within 30 days is assessed at 60%. Consequence cost totals 400,000 (repair 90,000, production loss 280,000, secondary damage 30,000). Planned intervention costs 45,000.

Expected avoided failure cost is 0.60 × 400,000 = 240,000. Risk-adjusted PdM value is 240,000 − 45,000 = 195,000. Potential cost avoidance, assuming failure was certain, is 400,000 − 45,000 = 355,000 — a number worth showing beside the risk-adjusted figure, never instead of it.

Common mistakes

Reporting potential cost avoidance as a realized saving.
Claiming the full production loss when a standby unit would have carried the duty.
Assigning probability without stating a horizon, which makes the number meaningless.
Recording a value of zero when the path fails, instead of marking it not eligible.

Frequently asked questions

Why must all eight conditions pass before a value is calculated?: A financial claim for an avoided failure only holds if the failure would plausibly have happened. If any link in the chain from finding to consequence is unsupported, the chain is broken and the monetary figure has no technical basis. The check is deliberately binary so a weak link cannot be averaged away by strong ones.
What is the difference between risk-adjusted value and potential cost avoidance?: Potential cost avoidance is the full consequence cost minus the intervention cost, assuming the failure would certainly have occurred. Risk-adjusted value multiplies the consequence cost by the probability of failure within the chosen horizon before subtracting the intervention cost. The risk-adjusted figure is the defensible one for reporting; the potential figure is an upper bound, not a confirmed saving.
Should HSE or environmental consequences be included?: Only if your organization has an agreed policy for monetizing them. Many do not, and inserting an unofficial number can undermine an otherwise sound assessment. The field stays disabled here until you confirm that monetization is permitted.
How should probability of failure be estimated?: From the degradation mechanism, its observed rate of change, the remaining margin to functional failure and the operating exposure during the horizon. It is an engineering estimate, so record the basis alongside the number rather than presenting it as a measurement.