CONSTRUCTION EQUIPMENT MANAGEMENT NOTES 09

NOTES - 09

EQUIPMENT MANAGEMENT TIPS FOR THE CONSTRUCTION ENGINEERS 

AND PLANT & MACHINERY ENGINEERS

AN INTRODUCTION TO CONSTRUCTION PLANT AND EQUIPMENT

EQUIPMENT OWNERSHIP AND OPERATING COST

THINGS WE SHOULD DO

 Part - II

I. Any item of equipment will have some resale value at the end of its useful life. If machines are traded earlier for tax incentive purposes, resale value is bound to be higher than the turnover position, and becomes a significant f actor in purchasing decisions, since this is a means of reducing the investment they must recover through depreciation charges. The high resale value of machines having some well-known brand names can reduce the hourly depreciation charges as well as total ownership and operating costs and improve the owner's competitive position.

However, in any given equipment market, factors which have greatest influence on resale value are the number of hour on the machine at the time of sale, the type of job and the operating conditions in which it worked and the physical condition of the machine. Once a realistic resale value is established it is deducted from the delivered price to arrive at a net figure for depreciation purpose. Tyres are considered as consumable items and as such they are not depreciated. Instead, the tyre replacement cost to the owner is deducted from the delivered prices of the machine to arrive at the depreciable value of the machine. In other words, tyres are treated as part of operating cost rather than ownership cost.

Thus the depreciable cost of any item of machine shall be worked out as follows:

1. The cost of a new machine including attachments and delivery - less tyre replacement cost - less resale value is the net value for depreciation

II. Interest, insurance and taxes

Many owners charge these expenses as part of hourly ownership and operation costs while others prefer to consider them as general overheads in their overall operation. All three items are usually based on the owners’ average yearly investment per unit so that they can be considered together.

Interest is considered to be the cost of using capital. The interest on capital expended for a machine purchase must be considered, whether the machine is purchased outright or financed.

Taxes refer to property or use which can be allocated to the specific machine. Such taxes may vary depending on the place of use and as such, sometimes an average value is used for calculation purposes. In respect of the insurance, the actual charge by the Insurance Company has to be considered for arriving at the ownership cost.

In order to simplify the calculations, the following alternative method is also often used when interest on

Investment x % (depending on the source of funds)

Taxes 1 %

Insurance 1 %

-------------

Total: x + 2 %

III. Operating Cost

Fuel and lubricants

The consumption of fuel and lubricants can normally be closely measured in the field. However, if such feedback data is not available, approximate consumption figures can be predicted based on particular application. Application determines engine load factor which in turn controls the engine fuel consumption. An engine continuously obtaining full rated horse power is operated at a load factor of one. Earthmoving machines reach such a load factor only intermittently and do not operate at this level for tended period of time. Periods spent at dozer and push travel and reverse, all units traveling empty, close maneuvering and operating downhill are examples of conditions which reduce the load factor. Similarly in the case of cranes, the machines

Operate only intermittently and an appropriate load factor of less than one is more common. Since the use of each type of machine varies, the appropriate load factor for each type of machine has to be separately evaluated. To estimate hourly fuel cost, the load factor is estimated first. Then hourly fuel cost equals hourly consumption multiplied by unit price of fuel.

While operating under standard conditions, petrol engines will consume approx. 0.3 liters of fuel per flywheel horse power. The corresponding figure for a engine will be about 0.2 liters.

However it must be a appreciated that the horse power ratings specified in the various manufacturers' literature are not determined under the same operating conditions. For instance, the specified power may be the maximum that the bare engine can develop or it may be the flywheel power with all accessories attached to the engine. These factors are required to be taken into account while assessing the flywheel power.

Lubricating oil

The quantity of lubricating oil used by an engine will vary with the size of the engine, capacity of the crankcase, the conditions of the piston rings and the number of hours between oil changes.

It is common practice to change the oil every 100 to 200 hours, though in extreme cases where the machines operate in desert conditions, oil change at every 50 hours or less may be warranted. The quantity of oil consumed by a engine per change will include the amount of oil added during the change less the make-up oil between changes.

The formula approach is also available for estimating the quantity of lubricating oil. However it is realized that considering the variations involved use of such formulae is not really warranted. The more usual practice is to assess the cost of lubricating oil as a percentage of the cost of fuel. Under typical working conditions in India, this may be assumed at between 15 and 25%.

The various air and oil filters are also required to be changed at regular intervals. Hourly cost of filters would also be esteemed and added to the operation cost.

IV. Tyres

The cost of tyres is an important part of the hourly cost of any wheel machine. The best estimate of this item is obtained when tyre machine owner actually pays for the replacement of the tyres. In case actual feedback data is not available, the estimated tyre service life figures furnished by the tyre manufacturers may be used. However, such values recommended by the manufacturers may be used. However, such values recommended by the manufacturers are to be treated with due caution, as there is no completely accurate full-proof method of forecasting the tyre life. As such, the manufacturers figures may treated as rough value only.

Various operating factors are also taken into account while determining the life of the tyres. These include the following:

1. The degree of maintenance

2. The speed of travel

3. Surface conditions of the roads of which the machines travel

4. Wheel position such as trailing front end etc.

5. Load conditions including any over-loading if applicable

6. Curvature of haul roads

7. Road gradients

8. Other miscellaneous common factors.

The average life of different types of tyres as recommended by one of the manufacturers is given below:

1. Standard belted tyres ... 2500 hours

40000 hours

2. Extra tread ... 3500 hours

56000 hours

3. Radial extra tread ... 4200 hours

... 65000 hours

These are base average life. The appropriate factor for each of the above conditions must be evaluated and applied to obtain approximate estimated life of the final product.

If the tyre life on a given project is considered less than satisfactory, an analysis of the above factors may lead to corrective action to improve the tyre life. Retreading is often resorted to reduce the hourly cost.

V. Repairs and spares

Considering the large variations involved in the system of maintenance and operating conditions, it is very important to keep accurate records of maintenance, spares and repair costs for use in compilation of operating cost.

Repairs and spares constitute the single largest item of operating cost and include all spare parts and direct labor except operators wages chargeable to the machine. Hourly repair cost for any machine normally follows an upward stair step pattern since major expenditure for repairs usually come in spurts. However when broad averages are considered the same becomes a smooth upward curve. Since the hourly repair cost curve starts low and gradually rises for the life of the machine, hourly operating cost much be constantly adjusted upwards as the age of the machine increases. Alternately an average repair cost can be used to provide a straight-line hourly operating cost. Most owners prefer the average method. Since repair cost is slow initially and rises gradually, average income provides extra funds initially which are reserved to cover the increased cost expenditure later. Machine applications, actual feedback data on similar works provide the best basis. If such data is not available, information published by various authorities may be used.

The Plant and Machinery Committee of the Government of India (1974) have recommended the life of the equipment as well as provision for repairs and spares. For summary, see Appendix I:

VI. Special items

All costs for high-wear items such as cutting edges, repair tips, bucket teeth, body liners etc. and welding bars should be included as special items. These costs will vary widely depending upon the conditions of use, materials and operating techniques.

VII. Operators' wages

The wages should be based on those obtaining under local conditions and should include all direct and indirect fringe benefits. The basic wages allowances as well as fringe benefits are generally governed by the concerned labor laws enacted by the Central Government as well as the various State Governments. In addition, the market force of supply and demand may also dictate payment of rate of wages higher than those stipulated by the various statutory enactments.

Apart from Basic wages, a number of benefits are involved. These include benefits due to compliance of labor laws, accommodation, traveling expenses etc. A typical working of hourly cost for an operator with a basic wage of Rs.20/- per day is given below:

Operator cost per hour

Basic wage rate Say Rs.20/- p.d.

Weekly holiday

Annual holidays

Leave 25%

Overtime

Sickness

Inclement weather

Traveling expenses

Accommodation 20%

P.F. Gratuity 8%

Retrenchment notice period 12%

Medical facilities 5%

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70%

Gross wage: 20 x 1.7 = 34 p.d. or 4.25 p.h.

Working period/year

Total 365 days

Less: Weekly rest 52 days

Annual holidays 10 days

Annual leave 20 days

Inclement weather 23 days

Sick leave 10 days 115 days

---------

250 days

Cost of operator/hr. = 4.25 X 365

--- = 6.20 p.h.

250

Appendix I

Life and repair provision of equipment

Sr. No.	EQUIPMENT		LIFE OF EQUIPMENT		Repair | % cost of equipment
	Category	Capacity	Year	Hours
1	2	3	4	5	6
	Excavators Shovels	Upto 1.5 cyd (1.15 cum) 1.5 to 3.0 (1.15 to 2.3 cms)	10	12000	150
		(Diesel)	12	15000	150
		2.5 to 4 cyd (1.91 to 3.06 cms)(Electric)	15	25000	150
		4 cyd (3.06 cms) and above (Electric)	20	40000	150
	Walking draglines		20	30000	150
	Bucket wheel exca vators		20	40000	150
	Dragger in fresh	Hull	25	-	60
	Water	Machine	10		60
	Barges	Hull	16		60
		Machine	10		60
		Hull	16		60
	Tuges	Machine	10		60
2	Dumpers Bottom dumper	Upto 20-ton (18 tonne)	8	1000	140
		20-ton to 50 ton	10	1600	140
		08 tonne to (45.3 tonne)
		Above 50-ton (45.35 tonne)	12	2000	140
	Rear Dumper	Upto 15-ton (13.6 tonne)	8	1000	140
		15-ton to 35-ton (13.6 to 31.7 tonne)	10	1200	140
		Above 35-tonne upto 50-tonne (31.7 to 45.4 tonne)	12	2500	140
		Above 50-tonne (4.4 tonne)	15	2000	140
	Highway dumpers		8	1000	140
3	Scrapers A. Motorised push loaded	Upto 10cyd 7.65 cum Above 10 cyd 7.65 cum	8 10	9000 1000	150 150
	Elevating and self loading		10	1000	150
	B. Towed		12	15000	75
4	Tractors Crawlers	Upto 100 h.p. (101 metric h.p.) (74.6 kw)	8 10	9000	200 60
		Above 100 and upto 300 h.p. (101 to 305 metric h.p .)( 74.6 to 2244 kw)	10	12000	240
		Above 300 h.p (305 metric h.p. (224 kw)	12	16000	240
	Wheeled	Upto 75 h.p. (76 metric h.p.) (224 kw)	10	15000	150
	Grader	(18 tonne)	10	12000	150
6	Loader
	Crawler Wheeled Belt loader Reclaimers and Stackers		10 10 16 20	12000 15000 20000 30000	200 150 70 70
7	Capacitors		20	30000	70
	Self-propelled sheepsfoot rollers Drawn sheepsfoot rollers Vibratory rollers Smooth drum rollers Smooth drum vibratory rollers Pneumatic tyres rollers High speed capacitors		10 8 8 8 8 8 10	12000 10000 8000 8000 8000 8000 16000	80 70 150 80 150 150 100
8	Water sprinklers		10	16000	100
9	Canal trimmer and lining equipment above 200 cyd/hr. (153 cum/hr)		10	1000	150
10	Drill
	Blast hole drill Core drills Wagon drills Tricon rotary drills		10 8 8 10	10000 8000 8000 10000	80 80 80 80
11	Capacitors
	A.       Diesel compressors i.Portable upto 300 cfm (8.5 cum/min) ii.Portable above 300 cfm (8.5 cum/min) Electric compressor i.Portable upto 300 cfm (8.5 cum/min) ii.Portable upto 300 cfm (8.5 cum/min) iii. Stationary		8 10 10 12 20	8000 12000 16000 2000 40000	80 100 80 80 75
12	Blowers		12		80
13	Cooling Plants i.Aggregate cooling plant ii.Ice plant		20 20	40000 40000	75 75
14	Batching & Mixing
	i.Cement handling batching & mixing plant ii.Transit mixer Agitating cars iii.Portable concrete		10 10 5	3000 10000 6000	75 120 80
15	Pumps
	i.Diesel engine driven above 10 h.p. (10.14 metric h.p. (7.46 kw) ii.Electrical lining equipment		8 12	10000 20000	100 70