Executive Summary

NACE International initiated the International Measures of Prevention, Application, and Economics of Corrosion Technologies (IMPACT) study to examine the current role of corrosion management in industry and government and to establish best practices.

The most significant outcome of this study is that by reducing what continues to be an astoundingly high cost of corrosion requires a change in how corrosion decisions are made. While important to continue investment in technology for corrosion control, putting this technology into an organizational management system context and justifying corrosion control actions by business impact is required. The community that will require the greatest adaptation to this change is the corrosion profession. This profession must become fluent in the language of management systems and adopt financial and risk tools used by those that make financial decisions. Ultimately, making organizational or industry-wide impact requires commitment to this common way of working by all levels in organizations.

The Global Impact of Corrosion

The global cost of corrosion is estimated to be US$2.5 trillion, which is equivalent to 3.4% of the global Gross Domestic Product (GDP) (2013). By using available corrosion control practices, it is estimated that savings of between 15 and 35% of the cost of corrosion could be realized; i.e., between US$375 and $875 billion annually on a global basis, an astronomical savings. In addition, these costs typically do not include individual safety or environmental consequences. The high cost of corrosion has been known for years; Uhlig performed a comprehensive study in 1949 that revealed a cost of corrosion equivalent to 2.5% of the U.S. GDP.

The fact that corrosion control provides a cost benefit is a lesson learned over and over again by industry, often too late and following catastrophic events (e.g., accidents, failures, and loss of production). To achieve the full extent of potential savings, it is the conclusion of this study that implementing a Corrosion Management System (CMS) and its integration into an organization’s overall management system is mandatory.

A challenge in promoting corrosion management is that cost savings from corrosion control are difficult to measure; i.e., (i) maintenance costs slowly decrease; (ii) monitoring or inspection costs decrease or inspection intervals increase; (iii) fewer failures save lost production time and/or lost product, decrease injuries, decrease property damage, decrease environmental releases, and improve public relations; and (iv) life extension of the asset can go directly to the bottom line and/or postpone capital expenditures. All of these can be included in the business case for enhanced corrosion management.

One corrosion management success story is the change in corrosion management strategy and application of innovative technology in the automotive industry globally. Since 1975, the manufacturers have created a coordinated and balanced effort between advances in design, materials, and processing. This was not a quick turnaround, but one of continuous improvement over a relatively long time period of all aspects of corrosion-related design and processing decisions. The transformation in corrosion management strategy by the automotive industry was a decision at the highest levels of an organization, resulting in lower corrosion-related manufacturing costs, lower corrosion-related operating costs, and longer life of automobiles for the buying public.

Corrosion Management System

A CMS is a set of policies, processes, and procedures for planning, executing, and continually improving the ability of an organization to manage the threat of corrosion for existing and future assets. In most cases, this includes 1) optimizing corrosion control actions and minimizing lifecycle corrosion costs, and 2) meeting safety and environmental goals.

Substantially reducing corrosion costs (both direct and indirect) requires more than technology; it requires integrating corrosion decisions into an organizational management system. A CMS framework and guideline is provided on how to integrate corrosion management elements into an organizational management system; alternatively, it can be used to develop a standalone CMS. This CMS framework is considered a core deliverable of this study. This innovative approach is of greatest value in institutionalizing corrosion management within an organization.

Most corrosion professionals currently work within an environment of Procedures and Working Practices, which are in the language of technical contributors (i.e., not financial or operational decision-makers). In some cases, corrosion is included within operating plans (e.g., asset integrity management plans), which integrate corrosion with other structural integrity threats. However, only a few organizations link these technical activities and plans to broader organizational management systems elements (e.g., Policy, Strategy, Enablers, Controls, and Measures). Without this link, systemically effective and efficient business decisions are unlikely.

Incorporating Corrosion Management throughout the Asset Lifecycle

Maximizing the effectiveness of corrosion management requires its application over the entire asset lifecycle: (i) design, (ii) manufacturing/construction, (iii) operation/maintenance, and (iv) abandonment, decommissioning, and mothballing (ADM). In many organizations, there is a separation between the design/construction group and the operation group. In certain industries (e.g., construction industry, pipelines) the design/construction group is rewarded for building the asset with a focus on meeting or beating schedule and budget; and the operations group is left with an asset requiring significant corrosion maintenance activity after it is commissioned for service. Often, the operations group is not consulted for corrosion design considerations. The operations group often has valuable input for the long-term cost effectiveness of an asset because they see the problems, but this input is not always heard and can conflict with the management objectives of the project team. In effect, valuable lessons learned are not learned throughout the organization.

A common characteristic of top corrosion management performers, as identified from a survey conducted as part of the IMPACT study, is that corrosion management is an integral part of a formal management of change (MOC) process. Lessons learned (near misses, failures, inspection reports, etc.) are important to formally institutionalize, such that the information is available to those involved in capital projects, operations, as well as top decision makers. This is only possible through a robust MOC process.

Top performers in the survey were nearly twice as likely to measure the cost of corrosion in the design and manufacturing/construction phases. These organizations realize that (i) designing for corrosion control and (ii) quality management in the construction/manufacturing phase are critical to the operation and overall life of an asset. A significant gap was identified as only about half of the total respondents stated that their asset design strategy addresses the following with respect to corrosion: regulations; health, safety, and the environment (HSE); the intended life of the asset; and the functional requirements. So although the top performers consider corrosion in the design phase, there are a significant number of survey respondents where their design strategies do not include corrosion considerations.

The survey revealed that in many cases the operations phase receives the most attention when it comes to corrosion management, because corrosion problems tend to surface during the operating life of an asset. In fact, many of the corrosion problems experienced during operation often find their origin in poor design or quality issues during construction/manufacturing.

The survey further indicated that most corrosion management programs do not address ADM. It was found that the petroleum/oil/gas and pipelines industries provide the most consideration for this phase of the asset lifecycle, realizing that ADM can pose a significant organizational risk (based on the asset involved) when considering HSE and financial considerations.

Performance Measures and Return on Investment

Based on the survey, the performance measures element of corrosion management consistently provided the lowest score; i.e., measuring corrosion performance indicators was performed less than 50% of the time based on all but the top 10 performers of the survey respondents (243 respondents). Based on industry discussions, a specific economic indicator such as ROI is not common, which is a major gap in a corrosion management practice.

To meet the corrosion management objectives, different financial tools are available to calculate the cost of corrosion ROI, or net present value (NPV) over part of an equipment’s or asset’s lifetime or over the entire life cycle. These tools include cost-adding, life-cycle costing, constraint optimization, and maintenance optimization. All of these attempt to answer the question of whether corrosion control or corrosion management is an investment, and not merely a cost.

Most financial tools that are currently used consider only the financial aspect of investing in corrosion control and corrosion management, with little attention given to safety, environmental, and reputational impact. Case studies of a U.S. Department of Defense (DoD) project have demonstrated that ROIs of up to 50 were achieved by using common and improved corrosion control technologies.

However, ROIs that provide a total picture of the cost benefit of a project can only be accomplished when considering and monetizing increased safety, minimized impact on the environment, and enhanced reputation.

Buy-In from Top to Bottom

The maximum savings from the impact of corrosion will only be realized by the incorporation of sound corrosion management practices throughout an organization. The organization as a whole must commit to ownership of the CMS systems and processes. The adoption of a CMS into an organization’s management system requires buy-in from top to bottom. The technical manager (corrosion/integrity/risk/maintenance), part of middle management, is the likely promoter for a CMS.

Without buy-in at the top, initiatives with corporate-wide impact have little chance of getting off the ground. Buy-in with senior management is necessary to get approval to move forward and garner resources. To ensure the message is effective, organizations require a business case that includes a clear statement of the problem, outlines its impact on the organization, lists the required resources, and includes the outcome in terms of cost reductions, increased productivity, or improved quality.

The management system pyramid developed in this report has different elements. The top three elements are Policy, Strategy, and Objectives. This is the very top of an organization and to institutionalize corrosion management at this level requires full support of senior management; i.e., the organization must commit to ownership of the CMS and its processes. The U.S. DoD has been addressing corrosion control since the mid-1800s (cathodic protection of naval ships was one of the first applications of corrosion control). Although the expenditure for corrosion mitigation in all DoD services was already significant, it took the realization of the cost of corrosion (estimated to be US$20 billion annually in the 2002 Federal Highway Administration [FHWA] study, “Corrosion Cost and Preventive Strategies in the United States”) combined with the interest of senior DoD management (the Under Secretary of Defense for Acquisition, Technology and Logistics) to affect a cultural change and a commitment to innovation that permitted corrosion management practices to be institutionalized into an organization the size and diversity DoD. Industries and governments worldwide will benefit by studying and implementing this model of success.