Construction Equipment Management

Planning and Selection of Equipment

• Introduction• Advantages and Disadvantages of

Equipments• Factors affecting extent of mechanization• Equipment planning• Equipment selection

Advantages of construction equipments

• Capable of handling tough work.• Machine is dependable source.• Effectively used where large quantity of material is to be

hauled over a long distance or greater height.• Performance can be assessed correctly.• Increases the technical know how and skilled workmen

which may become asset to the country in technical development.

• Use if indigenous machine will improve industrialization.

Disadvantages of construction equipments

• Sometimes they are required to import from other countries.

• Dependence on foreign manufacturers is required for spare parts and specialized services.

• Delay caused in procurement, mobilization, operation may cause delay in execution.

• Disposal of machine or its spare parts after its life period may become a problem.

• It may create problem of unemployment in case work can be done by labours.

Extent of mechanization• Manpower• Completion period• Nature of work• Availability of money• Availability of indigenous equipment• Social object of the project• Labour relations• Overseas projects• Quality and performance• Development of industries

Equipment planning

• Equipment selection• Working shifts • Number and size of equipment• Matching unit• Equipment operational planning• Manpower planning

Factors affecting equipment selection

• Suitability for job condition

• Size of the equipment• Standardization• Availability in the market• Availability of spare parts• Versatility• Availability of know how• Service support

• Economical aspect• Operating requirement• Past performance• Reputation of manufacturer• Warranty or Guarantee

offered by the manufacturer• Prime mover used and its

power

BuyPoints in Favour of Buying

• When the equipment used for most of the construction period and likely to complete almost its full life, while working on project.

• It is remain available for use whenever it is needed.

• It is basically owned equipment and hence it is kept in better mechanical condition and is more reliable.

Points which are against Buying• When the equipment can not be used

for its full life, then owning may be more expensive than hiring.

• The purchaser is required to do huge investment initially, which otherwise he may need for other purpose.

• Contractor may have to face the danger of obsolescence.

Procurement process1. Calling Enquiries2. Technical and Financial Evaluation3. Ordering4. Contract making/Purchasing5. Transporting6. Assembling and Installation7. Operation/Commissioning

Renting

• It is basically a short term alternative to the direct ownership.

• Company can pick a machine which is exactly suitable for job.

• Used when the job is of short duration and there is no continuous need of the equipment.

• Only limited machines are available on rent.

• No assurance of availability of equipment at required time.

• Renter is responsible for Fuel and lubrication of machine

• Renter is responsible for repair of machine.

• Rent rates are based on per day (8 hr), per week (40 hr), or per month basis (176 hr).

• Quipo Infrastructure Equipment Bank-Formed in 2002 By SREI Infrastructure Finance Ltd and CIDC. IFC Washington, FMO Netherlands, Sweadfund International AB, Sweden and an international equipment manufacturer, Ingersoll Rand, together hold more than 54 % of Quipo stake.

• At present, Quipo has branches one each in Gurgaon, Neemrana, Ahmedabad, Mumbai, Bangalore, Hyderabad, Kolkata, Chennai, Guwahati, Ranchi, Raipur, Cochin, Lucknow, Chandigarh Patna, Bhopal, and Bhubaneswar.

• Gives equipment on rent.• Offers value added services like supplying

of skilled manpower, repair and maintenance etc.

• It provides information about equipment and allows for depositing the idle equipments form contractors.

• It helps equipment manufacturers for finding out new customers and and conduct equipment demos and application tests.

Lease

• Lease is basically long term agreement to use the equipment.

• In this contract Lessor will always hold the ownership rights. Lessee will give the payments to Lessor in return for providing machine.

• Lease contracts are binding legal documents and non cancelable by either party.

• In most of the lease agreements user is responsible for fuel, lubricants, repair and maintenance.

Advantages of this method1. Working capital is not tied up

in equipment.2. Lessee gains a tax deduction

because lease payments are treated as an expense.

Disadvantages of this method1. Only limited machines are

available on lease.2. No assurance of availability

of equipment at required time.

Working Shifts

• Working Shifts Depends upon nature of work, Area in which work is spread etc.

• It is always good practice that working shifts should be decided in such a way that equipment must be utilize of its whole life on one particular project.

• Yearly utilization of equipment under average working conditionsSingle shift operation- 1500 hrsDouble shift operation- 2500 hrsTriple shift operation- 3200 hrs

Experience has shown that the standby provision should be as below

(i) For equipment used in single shifts 10 % standby

(ii) For equipment used indouble shifts 20 % standby

(iii) For equipment used in tripleshifts 30 % standby

Number and Size of Equipment

Factors affecting number and size of equipment are

1. Quantum of work2. Working Days

available3. Number of shifts

plannedSize of the equipment should be such that it should not be too big or too small

• Number of matching units must be calculated considering the output of both the equipments.

Equipment Operation Planning

• Equipments must work in coordination, especially when they are required to work in a team.

• Proper maintenance of service road.• Planning required for repair and

maintenance.

Hourly Working Rate

Cost of Equipment

Owning Cost Operating Cost

(A) Investment cost(B) Depreciation(C) Major repair cost

(A) Cost of Fuel(B) Cost of Lubricants(C) Cost of Servicing, maintenance

and Field Repair(D) Cost of labour (E) Cost of Overheads

Investment cost

• Interest on money invested in Purchasing the equipment

• Various taxes on the equipment

• Insurance expenses• Storage cost

Generally this cost is 10 to 15 % of total cost where total cost consists of

• Price of the equipment with allattachments and accessories

• Insurance and freight charges• Expenses on unloading, clearance

and custom duty• Cost of transportation to the job

site including loading andunloading

• Erection and commissioningcharges

Depreciation

Depreciation

Due to Physical Condition

Due to Functional condition

Wear and Tear

Physical decay

Accidental Deferred maintenance and neglect

Inadequacy Obsolescence

Methods of calculating Depreciation

• Straight line method• Sum of years method• Declining balance method

Straight line method

C -S D = in R u p eesN

C = In itia l co s t o f m ach in eS = S c rap v a lu e N = N u m b er o f yea rs o f life o f m ach in eD = D ep rec ia tio n am o u n t p e r yea r

Declining Balance Method

1

S P = 1 - C

W h e reS = S c ra p v a lu e / S a lv a g e v a lu eC = In i t ia l c o s t o f e q u ip m e n tn = U s e fu l li fe o f e q u ip m e n t

n⎛ ⎞⎜ ⎟⎝ ⎠

Major Repair Cost

It is defined by many ways as

1. Cost incurred by base workshop

2. Any repairs requiring more than 24 hours

3. Jobs costing more than 1 % of the value of equipments etc.

It depends upon• Type of equipment• Working conditions• Extent of care taken in its

maintenance and servicing• Price of spare parts and

labour.Major repair cost is generally taken as 80 to 240 % of straight line depreciation cost depending upon type of equipment.

Major repair cost

Equipment Type % of cost of depreciation

Crawler tractor/ Dozer 240

Wheeled tractor/ Dozer 200

Shovels/ Draglines, Hydraulic Excavators, Vibratory compactors, Wheeled loaders, Motorized scrapers

150

Dumpers, Tractor tailors 140

Crawler and Mobile cranes, Transit mixers 120

Air compressors and Water pumps with diesel engine 100

Air compressors with electric motors, Wagon drills, Concrete mixers

80

Batching and mixing plants, Towed scrapers 75

Cost of Fuel

Load factor corrections Cranes – 30 to 50 %Clamshells and draglines – 40 to 60 %Shovels and Backhoes- 50 to 70 %

Fuel ConsumptionDiesel Engine: -Fuel consumption per metric H.P. per hour = 0.15 litreFuel consumption per Kilowatt per hour = 0.205 litre

Cost of Lubricants

• Engine oil • Air Filter oil• Transmission oil• Hydraulic oil• GreaseIt depends upon • Machine condition• Capacity of crankcase• Condition of piston ring• Number of hours between oil

changes

Cost of lubricants is normally taken as 30 % of Fuel cost in case of diesel engines.

H.P.× f × 0.006 × 4.5 CQ = + 7.4 t

WhereQ = Quantity of oil consumed in Lit/hr H.P. = Rated horse power of the enginef = Operating factorC = Capacity of crankcase, in Litt = Number of hours between oil changes

Cost of field repair and servicing

Servicing cost include • Cost of checking up and

servicing of Fuel and oil supply systems of machines

• Cost to take care of tyres and tubes

• Cost to take care of batteries and electrical equipments

• Cost of providing various services like supply of water, transportations system, compressed air, electricity etc

• Salaries of servicing personnel

Field repair cost includes • Cost for replacing of minor

parts such as fan belts, spark plugs, small bearings, filters, wire ropes etc.

• Cost of stores as well as cost of personnel required for Field repair

• It is normally taken as 30 % to 50 % of depreciation cost on this account.

Cost of LabourIt includes salaries of operators, helpers, mechanics etc.

Cost of OverheadIt includes payment of Watchmen, Uniform of operators, Supply of drinking water at site, tools, services of stores etc.It is normally taken as 2 % of the ownership cost of machine.