What is capital maintenance expenditure (capmanex) and how is it different from operation and maintenance (opex)? When does each type of expenditure take place? Are there any examples for water and sanitation?
Operating and minor maintenance expenditure (OpEx)
There is a requirement for recurrent (regular, ongoing) expenditure on labour, fuel, chemicals, materials, and purchases of any bulk water. Most cost estimates assume OpEx runs at between 5% and 20% of capital investments. Minor maintenance is routine. It is maintenance needed to keep systems running at design performance, but does not include major repairs or renewals which are recognised as not recurrent. Sometimes the distinction between these categories is less than clear. OpEx also includes ‘household coping costs’ by which households spend money to achieve a satisfactory level of service; i.e. cleaning products for sanitary facilities, energy costs, etc.
Capital maintenance expenditure (CapManEx)
Expenditure on asset renewal, replacement and rehabilitation (CapManEx) covers the work that goes beyond routine maintenance to repair and replace equipment, in order to keep systems running. The costs may be estimated based upon serviceability and risk criteria related to service degradation and failure. Accounting rules may guide or govern what is included under capital maintenance and the extent to which ‘broad equivalence’ is achieved between accounting charges for depreciation (designed to build up a reserve for renewal) and actual expenditure on capital maintenance. Capital maintenance expenditures and potential revenue streams to pay those costs are critical to avoid the failures represented by haphazard, and almost always late, system rehabilitation.