Adjusting Maintenance Costs for Inflation

Time passes, seemingly more quickly as one ages, and one suddenly realizes that the cost numbers from a “recent” project that you have been using so freely are actually a couple of years old.

In the ideal world, what one would do in such a situation would be to revise the original calculations based on new information from vendors, contractors, industry contacts and other sources, just like you did when you created them the first time. Unfortunately, the time necessary to do this is not always available, either due to budget constraints or lack of foresight into the need to do the analysis.

In those situations, I often find myself taking the original number and adjusting it for inflation. This used to involve my sitting down with my HP calculator and compounding year by year, what I thought the inflation factor had been for the number of years in question;

1 “Enter” Mental note, O.K. there’s the starting year for my 2004 price

1.06 “Times” Mental note; O.K., that should get us to 2005

1.05 “Times” Mental note; there’s 2006 ; wait, maybe inflation was more like 7% that year now that I think about it

1.05 “Divide”

1.07 “Times” Mental confusion;  wait a minute, what year am I on now?

“Clear X”

You get the idea; not very precise and prone to error on a number of fronts with my brain being high on the list.

Fortunately, the internet provides a tool that makes this a bit easier and ties your assessment to a credible resource if you have to defend your numbers. Specifically, the U.S. Department of Labor and Statistics has an inflation calculator on their web site.

inflation-calculator-1954.jpg

Its simple to use and goes back to 1913, which is way longer than I’ve been alive and if you haven’t updated your original cost projection since then, you probably should take the time to refresh things a bit anyway.

So, take a minute to bookmark the web page. It could come in handy some time when you realize the number you are about to give a client is not as current as it seems in your aging memory.


David Sellers
Senior Engineer – Facility Dynamics Engineering

Click here for an index to previous posts

This entry was posted in Operations and Maintenance. Bookmark the permalink.

One Response to Adjusting Maintenance Costs for Inflation

  1. Ah – the good old days of Reverse Polish Notation… Thanks for the tip, David.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s