Pump overhaul versus replacement: economics, verification, and a conflict of interest
A municipal water utility's 250 kW vertical-turbine raw-water pump is 15 years old and its measured efficiency has fallen from 85 % to 78 %. Duty is 0.50 m³/s at 60 m head, 6,000 h/yr, with electricity at USD 0.11/kWh. Two options are on the table. Option A: a local contractor overhauls the existing pump for USD 260,000, restoring efficiency to about 83 %, with an expected life of 8 years. Option B: a new pump for USD 900,000 at 86 % efficiency with a 25-year life. The contractor for Option A is owned by the brother-in-law of the engineer preparing the evaluation. The operations manager wants the engineer to sign a statement that the overhauled unit is 'equivalent to new', to satisfy a capacity guarantee held with a regulator, and asks for the decision by Friday. A post-overhaul performance test costs USD 15,000 and the contractor's quotation excludes it.
1. Evaluate both options with an annualised cost comparison. Which do you recommend, and how sensitive is the answer?
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Hydraulic power. P_h = ρgQH = 998 × 9.81 × 0.50 × 60 = 293.7 kW.
Annual energy at each efficiency (6,000 h, USD 0.11/kWh):
- 78 % (present): 376.5 kW → 2.259 GWh → USD 248,500/yr
- 83 % (overhaul): 353.9 kW → 2.123 GWh → USD 233,600/yr
- 86 % (new): 341.5 kW → 2.049 GWh → USD 225,400/yr
Incremental comparison. The new pump saves only 233,600 − 225,400 = USD 8,200/yr of energy for an extra USD 640,000 of capital - a simple payback of about 78 years. Energy alone never justifies Option B.
Capital recovery comparison (5 % discount). CRF(8 yr) = 0.1547; Option A annual cost = 260,000 × 0.1547 + 233,600 = USD 273,800/yr. CRF(25 yr) = 0.0710; Option B = 900,000 × 0.0710 + 225,400 = USD 289,300/yr. Option A is cheaper by about USD 15,500/yr on a lifecycle basis.
Sensitivity. At 8,000 h/yr and USD 0.20/kWh the efficiency gap is worth about USD 19,800/yr, still a 30+ year payback on the extra capital. The answer only flips if electricity price or run hours roughly double again, or if the new unit avoids a forced outage cost that the overhaul cannot.
Recommendation: Option A, conditional on a measured performance test, a defined scope of work including the bowl assembly and wear rings, and verification that the 83 % claim is achievable given casing erosion.
2. Identify the ethical issues and state exactly what you would and would not sign, and to whom you would disclose what.
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Conflict of interest. A close family member owns the recommended supplier. This must be disclosed in writing to the operations manager, procurement and the relevant professional/executive authority before the recommendation is finalised. Options: recuse from the final selection, or continue with a documented independent review of the evaluation by a colleague who has no relationship with the contractor. Preparing the analysis while silent is not acceptable, even if the conclusion would be the same.
The 'equivalent to new' statement. This cannot be signed. It is factually wrong: an overhauled unit with an 83 % efficiency, an 8-year expected life and a reused casing is not equivalent to a new 86 % unit with a 25-year life. Signing it to satisfy a regulator's capacity guarantee would mislead a third party and could expose the engineer and the utility to fraud allegations.
What I would sign. A factual statement limited to verified data: the measured efficiency at the guarantee point before and after overhaul, the test standard and grade used, the scope of work, the expected life and the conditions of the recommendation. State the assumptions in the report, including that the 83 % figure is the contractor's claim until tested.
Process. Put the recommendation and the conflict disclosure in writing before Friday, note the USD 15,000 performance test and the exclusion from the quotation, and record that the deadline is not a reason to sign an unverified statement. If pressure continues, escalate to the engineering manager or the professional body's ethics process, keeping the file complete and contemporaneous.
3. Define the verification and contract terms needed before the overhaul result can be accepted.
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Baseline before dismantling. Measure present efficiency using calibrated flow, head and power instruments (or the thermodynamic method), with as-found efficiency recorded and signed by both parties. This baseline anchors any savings claim and guards against accepting a value inflated by a low measurement starting point.
Scope and materials. Specify what is renewed (impeller, bowl, wear rings, shaft, bearings, seals) versus reused (casing, column, discharge head), with materials and clearances, and require a condition report with photographs on casing erosion and corrosion. Agree what happens if the reused casing cannot support the 83 % target - a price and schedule adjustment, not a renegotiation after the fact.
Acceptance test. A witnessed efficiency test at the guarantee point, tolerances stated per an agreed pump acceptance standard (ISO 9906 grade), plus NPSHr verification, vibration limits (ISO 10816-3 zone boundaries), bearing temperature, and a 200 h reliability run. The USD 15,000 test cost must be in the contract, not an extra.
Commercial terms. 10–15 % retention released only after the acceptance test, a 24-month warranty on parts and performance, spare parts list and delivery times, and liquidated damages for a missed efficiency or availability target. Record the decision, the assumptions and the residual risk in the project file so that the recommendation is auditable if the regulator or audit office asks.