Optimal maintenance policy considering maintenance errors for systems operating under performance-based contracts

In recent years, performance-based contracts (PBCs) have been extensively adopted in both manufacturing and service industries. However, maintenance strategies under PBCs are not often addressed. This paper considers a novel maintenance policy for a single-component system operating under a PBC. Failures of this system may either be hard or soft, but can only be revealed by periodic inspection. Imperfect repair (subject to the virtual age model) is used to fix a soft failure. However, imperfect repair actions may be ineffective and could cause a catastrophic failure (maintenance error) that ultimately leads to replacement. In the model proposed in this paper, we consider maintenance error, and the system is replaced upon a hard failure, a maintenance error, or preventively replaced at the nth soft failure. The objective of this model is to maximize the expected net revenue of the supplier operating under a PBC. Moreover, we compare the properties of the optimal maintenance policy under three different failure rate functions and show that, with different parameters, our model reduces to several classic maintenance models. Finally, a case study on a wind turbine system is provided to illustrate the application of the maintenance model.