The value of flexibility and sequential decision-making in maintenance strategies of infrastructure systems

Abstract

The operation of infrastructure systems is a long-lasting managerial endeavour in which decision makers need to adapt to a changing environment and new events that result from an uncertain future. One of the essential aspects of infrastructure operation is maintenance, which guarantees acceptable operation standards for this kind of projects, which are normally subjected to several deterioration mechanisms. This paper discusses the concept of flexibility in maintenance planning for infrastructure systems and presents a model that allows to capture the value of flexible decisions in the context of sequential maintenance decisions. First, it presents an approach for addressing the sequential decision-making process of maintenance in infrastructure through an application of stochastic programming. Then, it describes and formulates the valuation of maintained systems under uncertainty through Real Options. Finally, the proposed methodology is studied through an illustrative example that shows the advantages of the proposed approach and highlights the role of flexibility in maintenance planning.