Optimal maintenance service contract involving discrete preventive maintenance using principal agent theory

Maintenance subcontracting has been widely implemented. The owner of equipment hires an agent to perform maintenance actions with a predetermined availability target to be met. The traditional payment scheme such as a fixed price, a cost reimbursement is effective only to ensure the achievement of the availability target. However, there are circumstances where pushing the agent to exceed the target will be rewarding, especially in high operational revenue such as in mining industry. To get this reward, a new payment scheme is needed. This research aims to study maintenance contract payment schemes that would motivate an agent to achieve a higher performance which is beyond the target. A principal agent theory is used as it allows to model the owner's and the agent's decision making process simultaneously.