CONSTRUCTION EQUIPMENTS

NECESSITY TO MECHANIZE. Why use construction equipment?

Some of the factors in favour of mechanization are listed below:

• The size and complexity of projects is on the increase,

• There is shortage of skilled and trained manpower,

• Quality of work is improved with mechanization,
• It is possible to achieve stringent schedules if construction equipment is used in lieu of
manual operations,
• It is economical if the quantity of work involved is more,
• Effect of climate and topography is not significant when mechanization is adopted as
compared to manual labour,
• In respect of revenue yielding projects, faster completion and commissioning of project will
result in economy,
• Supervision and control is easy since managing men is limited to equipment operators only
in lieu of several skilled, semiskilled and unskilled labour.

OPTIONS TO PROCURE EQUIPMENT-

The method of procurement of equipment should be carefully evaluated since-
 They are the most crucial and critical resource for a construction company.
 one of the most capital intensive long terms investments that a construction company
makes
 Construction equipment should ideally pay for themselves by helping the owner earn
more than it costs to own, operate, maintain, store and use the machine.

The most common options to procure equipment are-

Purchase of new equipment-
Advantages- if standard equipment are purchased they can be used for other projects as well. Also
for multiple uses.
Disadvantages- Huge initial investment, bearing the cost of ownership and storage of equipment,
uncertainty in utilization of equipment after the project is over.
Purchase of old (used) equipment
Advantage-involves lesser initial investment.
However, residual life, operating costs, and availability of spares are relevant factors to be
considered while deciding to buy old equipment.

Hiring of equipment
Hiring of equipment is a better option if the usage of equipment is for a shorter period and there
is no certainty of its usage on completion of project work.
Employment of operators on a long term basis is avoided.
Works well if hire charges are limited to days of actual utilization of the equipment.
 SELECTION OF CONSTRUCTION EQUIPMENTS

The choice of construction equipment for a job site is a key factor to be considered for timely
completion of the project within the stipulated budget. It is crucial that the construction
equipment managers thoroughly understand the tasks that need to be completed, the machines
that need to be used, the budget and time constraints for the same for flawless execution of the
construction project.

Here is a list of factors that affect the selection of Construction Equipment-

Economic factors: cost of owning, operating and maintenance. Also the salvage or the resale
value of the equipment.

Suitability for Job Conditions: Suitable for the kind of job it is required to do in the given site
conditions. For example, the soil and overall terrain at the jobsite and nearby surroundings define
which CE should be used. At the same time, climatic conditions such as the presence of strong
winds, visibility level etc., also affect the decision process.

Size of Equipment:
Size of equipment should be such that it must be able to be used with other matching units.
If the equipment selected is of larger size, that will remain idle for most of the time or shall
work on part loads, which means production cost will be more.
On other hand, if equipment is of smaller size than desired, the equipment will not be able to
work with the matching equipments and hence other equipments will have to remain idle or to
be allowed to work on part loads, which shall again be uneconomic.
Past Performance:
If the equipment being purchased is of new make and models, it is desirable to enquire about
its performance from other users, who are using this make and models.
Operating Requirements:
The equipments selected should be easy to operate and maintain, acceptable to the operator
and should have lesser fuel consumption.
Reliability of Equipment:
Equipment selected for the project must be reliable one.
Economical Aspects:
While selecting the equipment, it should be considered that cost of unit production should be
minimum.
Service Support:
Service Support should be available in the area of project where the equipment shall be used.
Service after sales are major criteria for selection of equipment.
Use in Future Projects:
When equipment completes only a part of their useful life in a project, it should be kept in view
that the equipment can be used in future project and may not become obsolete.
Availability of Know-How:
The equipment selected should be satisfactorily handled by available operators. Sophisticated
equipment may give excellent performance but it may be difficult to handle and maintain.
Multipurpose Equipment (Versatility):
There are certain types of equipments which are not utilized fully. Therefore if possible, they
must be capable of performing more than one function for example, excavator with wheel
loader bucket arrangement or with rock breaker attachments.
Standardization:
It is better to have same type and size of equipment in project. It means lesser spare parts
reserve more interchangeability of parts if required, easy for the operators to understand it ,
mechanics will be aside to maintain and repair better as they become expert by handling similar
type of equipment.
Availability of Spare Parts:
While selecting a particular type or make of equipments,it should be ensured that the spare
parts will be available at reasonable price throughout the working life of equipment. It should
also be ensured that the downtime of the equipment for want for spare parts may not be more
.
Availability of Equipment:
The Equipment which is easily available in the market should be purchased. It should also be
ensured that the equipment is of repute and is likely to be continued to be manufactured in
future also. This is necessary for future standardization and ensuring spare parts supply. It is
easy to dispose off such equipments after completion of project.
Management of construction equipment- key roles of the manager

1. The choice of construction equipment and the number in which each of the equipment is
required for a certain project or projects.

2. Whether it makes more sense to own, lease or rent the equipment and its effect on the bottom
line of the balance sheet.

3. Planning which equipment will be working on which job site at what time and for how long.

4. Considering the transportation and operating costs when dealing with multiple projects and
their time lines.

5. How to make the most of the construction equipment at hand.

6. Another major aspect of effective construction equipment management is preventive

maintenance of the construction equipment which can help save a lot of down time, money and
reduce delays in the project.

ECONOMIC LIFE OF A CONSTRUCTION EQUIPMENT

Construction equipment has two types of life estimates-the economic life and physical life.
A machine can be rendered usable for long period of time through expensive maintenance and
repair cost.
An equipment may have smaller economic life during which it gives more rate of return.
The economic life may be defined as the age in years (of replacement)that maximize the
profit return from the equipments. It is the Optimal replacement time of the machine

If the owner replace the equipment very soon, he will have unnecessary loss whereas he waits
very long, The equipment will have exhausted its periods of economic operations.
During the serving period of the equipment, a stage reaches when cost of operation exceeds
profit.
At that time , it is better to dispose of the equipment for whatever salvage value it may pitch.
Factors deciding the economic life DUMP TRUCK 2.5 TO 3 LAKH KM
of an equipment-
TRACTOR 1.5 LAKH KM
1. Initial investment cost.
2. Depreciation Cost MOBILE CRANE 12,000 HOURS
3. Operation cost of
Equipment. DG SET 12,000 HOURS
4. Maintenance and repair CONCRETE VIBRATOR 5,000 HOURS
charges.
5. Obsolescence cost- whether LIGHT MOTAR VEHICLE 1.0 LAKH KM
the machine is becoming
outdated 300 HP DOZER 12,000 HOURS
6. Downtime cost- whether
the machine is sitting idle. TOWER CRANE 30,000 HOURS

Economic life of typical equipment-

OPERATION COST OF THE EQUIPMENT to be charged for a project

For construction firms, it is important to accurately estimate the equipment cost as part of the total
cost of the construction project. Inaccurate estimation of construction equipment cost may adversely
affect the profit margin of the firms especially engaged in projects with more involvement of different
types of construction equipment.

The total cost of a piece of construction equipment consists of two components namely-OWNERSHIP
COST AND OPERATING COST. The details about equipment ownership cost and operating cost are
presented below.

OWNERSHIP COST

Ownership cost is the total cost associated with the construction equipment for owning it irrespective
of the equipment is employed or not in the project. The ownership cost consists of the following;

a) Annual depreciation cost(calculated based on initial cost and salvage cost), b) Interest cost or cost
of capital investment, c) Taxes, d) Insurance cost, and e) Storage cost

1) Initial cost

Initial cost is the capital investment required to own the equipment. It includes purchase cost, sales
tax, transportation cost (or freight charges) to bring the equipment to company's storage yard or
construction site and cost of assembly and installation of the equipment.
2) Salvage value(resale value)

Salvage value represents expected cash inflow that will be received by disposing of equipment at the
end of its useful life.

a) Annual depreciation cost= Initial cost- Depreciation cost

Economic life or ownership period in years

b) Yearly Interest cost or cost of capital investment

It is the annual cost of interest charged on the borrowed money or that of capital investment to
acquire the ownership of the equipment. If the equipment is purchased by borrowing money from a
lender, then interest cost is the interest charged (at interest rate charged by lender) on the borrowed
amount. On the other hand if the equipment is purchased using construction firm's own funds, then
cost of capital investment is the interest charged on capital investment at interest rate equal to
construction firm's rate of return. Even though the construction firm uses its own funds to purchase
the equipment, cost of capital investment is charged as part of the ownership cost because the
construction firm could have invested the funds elsewhere to earn the return instead of purchasing
the equipment.

c) Storage cost calculated yearly

It is the cost of keeping the equipment in storage yards when it is not operating at the work site.
Storage cost includes the rental and maintenance charge for storage yards, wages of security guards
and wages of workers employed for bringing in and out of the storage yards. It is around 0.5 to 1.5%
of the average annual investment or book value of equipment.

d and e) Tax and insurance cost-

Total annual ownership cost of the construction equipment= sum of ( a+b+c+d+e)

Hourly cost of ownership=annual ownership cost/ no. of operating hours annually

OPERATING COST

Operating cost is incurred only when the equipment is operated. The operating cost of the equipment
is influenced by various parameters namely number of operating hours, location of job site, operating
conditions, category of equipment etc. The operating cost consists of the following;

a) Repair and maintenance cost, b) Fuel cost, c) Cost of lubricating oil, filter and grease, d) Tire cost
e) Equipment operator wages, f) Cost of replacing high-wear items and g) Cost of mobilization,
demobilization and assembly.

a) Repair and maintenance cost

Repair and maintenance cost is incurred as the construction equipment is subjected to wear and tear
due to the operations it performs. The repair and maintenance cost includes the cost of replacement
parts, labor charges and the cost of setting up and operating facilities to carry out major repair and
maintenance operations. The repair and maintenance cost varies from one year to another over the
service life of the equipment, however it increases with age of the equipment.

b) Fuel cost

The hourly fuel cost can be calculated by multiplying the hourly fuel consumption by its unit price.

c) Cost of lubricating oil, filter and grease

The quantity of lubricating oil, filter and grease required depends on operating hours, frequency of
changes, engine characteristics and working conditions at the job site. The equipment manufacturer
guidelines or past data from experience of similar equipment in similar working conditions can be used
to estimate of time period between the changes.

e) Equipment operator wages

The operator cost includes the hourly wages and benefits paid by the company to the operators. It
includes normal wages, workmen's compensation insurance premium, fringe benefits, bonus etc

f) Cost of replacing high-wear items

It represents the cost of high-wears items and these items have a shorter life as compared to the
service life of the equipment. The high-wear items include blades, cutting edges, drill bits, bucket
teeth etc.

g) Cost of mobilization, assembly and demobilization

This cost includes transportation charges from one project site to another, cost required for getting
road permits, unloading charges, cost of assembly at the project site etc.

Total annual operation cost of the construction equipment= sum of the above.

Hourly cost of operation=annual operation cost/ no. of operating hours annually