EBME Forums Forums Maintenance Technical Assistance Whats a Life?

Are we mixing up two different lives here?
There is a life where the equipment actually functions, which given a source of spare parts and technical help is indefinite, and a functional life where the functionality of the machine is obsolete.
A plain ECG monitor many have a life of many years on a generall ward but it might be a lot shorter on an intensive care where they want the latest new parameter to measure.
This is where the battle really happens. The accountants want a long life out of the equipment the clinicians want the latest gadgets.
Don't you find a lot of the "replacement" budget going on a new toy for a consultant who has just seen it at an exhibition and his colleague (rival) down the road has one?
On a couple of occasions I have seen million pound toys sitting in the corridor unused a few months later as they did not live up to expectations.
Is it the accountants or the clinicians who are the problem?
Both I would say - not enough money and spent on the wrong things.
Robert

Yes, Robert, two lives are being looked at here. The one I am talking about is the point at which further maintenance expenditure becomes unjustifiable. That is, I am a defender of equipment and careful with public money.

The other life is the one at which egotists, career-builders, and proponents of emotional blackmail et al, simply declare that the life of perfectly serviceable equipment is at an end! That is, those who are indifferent to any notion of propriety, and are simply squanderers of public funds!

So, how is it that such people don’t get called to account about those “million pound toys sitting in the corridor…”, whilst I get challenged every time I want to purchase a new battery or resistor (or, for that matter, ask to be paid for all the extra hours put in trying to “maintain assets”)?

They do not get called to account because they are consultants and you have to justify every penny of expenditure as you are not.
I think it is also down to perception, people can relate to normal sums of money but when the figures get large it just becomes numbers.
There are also the "normal" areas for saving money. How many people try to save 0.1p per litre on petrol then go down a local when the Whetherspoons sells beer cheaper, or spend totally over the odds on cheap house wine with a meal?
It still does not answer why the consultants get away with the new toys, except that life is unjust.
"It's the rich what gets the pleasure,
It's the poor what gets the blame.
It's the same the whole world over.
Ain't it all a bleedin' shame."
Robert

Let’s say that the forecast date of interest is the date at which the BER level will be reached (based upon maintenance expenditure to date)

1) BER% (arguably 60%) is BER level as % of replacement cost
2) life so far = (today's date) - (initial inventory date)
3) replacement level = (replacement cost x BER%)
4) days left is a forecast based upon the amount of maintenance expenditure so far
5) days left = (replace level)/((accum maint cost)/(life so far))

For those of a technical bent (?), the algorithm I have been using may be set out in pseudo code as:-

if maint cost .not. zero
forecast BER date is:-
(inventory date) + (days left)
else
forecast BER date is:-
retirement date
endif

6) Note that retirement date is inventory date + planned life (ie, simply an estimated period, of, say, 20 years)
7) In my experiments, the forecast BER date has always been beyond the planned retirement date (ie, equipment that is properly and cost-effectively maintained can be expected to carry on more or less “for ever”)! QED

We normally set it at 5 years, as John points out we are subject to 6% (could be 3% now) tax on the value of depreciated asset. Therefore the longer you set its life the more tax you pay back to the treasury. It's a farce you are being taxed on the tax payers money, only public sector bodies pay capital tax and you also pay VAT which the private sector doesn't.

The capital manual doesn't specify a period for when equipment should replaced, it is when the residual value falls to zero and therefore no tax is payable i.e. 6% capital charge on an asset worth £0 equals zero tax to the tax man.

I.e. for £100,000 U/S scanner with 5 year life

Year 1 you pay £6,000 capital charges
Year 2 you pay £4,800 capital charges
Year 3 you pay £3,600 caoital charges
Year 4 you pay £2,400 capital charges
Year 5 you pay £1,200 capital charges
From Year 6 you pay zero as asset has depreiciated to zero. Total capital charges to tax man is £18,800

For a 7 year life
Year 1 you pay £6,000 capital charges
Year 2 you pay £5,143 capital charges
Year 3 you pay £4,286 caoital charges
Year 4 you pay £3,428 capital charges
Year 5 you pay £2,571 capital charges
Year 6 you pay £1,713 capital charges
Year 7 you pay £858 capital charges
From Year 8 you pay zero as asset has depreiciated to zero. Total capital charges to tax man is £24,000

This is one reason why Leasing is being preferred as you don't pay VAT and you don't pay capital charges as the Trust doesn't own the asset.

To take this one step further, if you set the life to 1 year you only pay one lot of capital charges. Why do people/Trusts not do this? After that year there is nothing stopping you using the equipment. It is only a paper life, no-one is going to force you to replce it.
Or are they wise to this? Is there a minimum time you can set as the life of the equipment? Why not set everything to that to reduce capital charge to the minimum?
Robert

That's a good point Robert, I'm sure some pin striped suited pen pusher at the Audit Commission has a full time job trying to catch out trusts who use this loop hole.

Nothing to do with technical reality, then? The condition of the equipment doesn’t matter? What’s the point in doing maintenance at all, I wonder? Time I got out of this game altogether, I reckon. It used to be enjoyable, with a sense of “doing a bit of good”, but no longer (not for me, at least – anybody else feeling the same way)?

The condition of the equipment will always be important for us in the field. The concept of specifying life expectancy within the NHS is a financial one so that Capital charges can be calculated based on the depreciated value of an asset. Capital charges apply to all capital investments (inc buildings.

It still baffles me why we should get charged tax on spending money generated by taxes.

The reason for Capital Charges is to give the private sector a chance to make in-roads to the NHS.
If a private company was to get money to buy a large bit of kit (equipment, building etc), it would borrow the money then pay it back with interest over several years. To make the NHS "equal", Capital Charges were introduced so the NHS had to pay the extra over and above the purchase price to simulate these interest costs.
This is the same reason behind lease purchases being VAT free and capital purchases - the usual NHS option - having to pay VAT.
These are all ways to make the NHS "less efficient" so that the private sector can compete on a level playing field.
But if you have to bias something to make it equal does that not tell you something about the relative starting positions?
Robert

Politics, politics, Mrs. Thatch..glittery suit